Consumer Decision-Making - External Factors - Coursework Example

Consumer Decision-Making: External Factors Name Institution Lecturer Course Date Table of Contents Table of Contents 2 Executive Summary 2 Consumer Decision-Making Process 3 External Factors Affecting Consumer Decision making 4 Reference groups 4 Family life cycle 6 Social class categories 7 Culture and core values 9 Relevance of sub cultural aspects of consumer behavior 10 Views on Consumer Decision Making 12 Relationship Marketing 13 Opinion Leaders 14 Innovativeness 14 Public Policy and Legislation 15 Advertising 16 Pricing 16 Ethics 17 Conclusion 17 References 18 Executive Summary Besides the internal or psychological factors that influence consumer behavior, there are several external factors that play a major role in consumer choices and this directly impacts the consumption of a particular good. External factors can be described as the external environment which affects consumer's purchasing behavior by influencing their decisions. The understanding of these factors along internal factors affecting consumer decision-making is important in ensuring that there are effective and appropriate marketing strategies aimed at increasing the consumption of coffee. As such, this paper discusses the external factors affecting coffee consumption behavior in line with the consumer decision-making process. Consumer Decision-Making Process In order to have a clear understanding of how external factors affect consumers’ purchasing decision-making and hence purchasing behavior, it is important to have a fundamental understanding of the consumer decision-making process. The process is comprised of three stages, the input, process and output stage (Okonkwo, 2007). During the input stage, the consumer gets the information required to initiate the process or to perform analysis. In the process stage, the consumer processes this information in order to make the purchasing decision whether to purchase the product or not to purchase it. Other decisions include when to purchase, how to purchase the product and where to purchase the product. The output stage is the actual decision (Okonkwo, 2007). External factors affect the consumer at different stages of the decision-making process. For example, reference groups might provide the consumer with information about available brands and then proceed to give the consumer the best brand, which affects the process stage. External Factors Affecting Consumer Decision making Reference groups These are groups of people who have great influence over an individual. An individual will always seek their opinion in their decision making process. Reference groups will always directly influence a consumer’s decision on purchasing a good (Loudon and Bitta, 2002). Consumers use these groups as sources of learning and knowledge and implement it in their life. There are several types of reference groups that could be classified into primary reference groups, secondary reference groups and opinion leaders (Loudon and Bitta, 2002). Primary reference groups include family and very close friends and due to the consistent and frequent interaction with an individual, they easily influence one’s decision when purchasing a product (Loudon and Bitta, 2002). Using coffee as the product, you will find that an individual is most likely to purchase coffee if most of their friends and family members enjoy the product but consumption will reduce if friends and family advises against the product or do not enjoy the product. Secondary reference groups include schoolmates, neighborhood friends, and colleagues among other acquaintances (Loudon and Bitta, 2002). For example, a student is most likely to purchase coffee if his/her classmates think that taking coffee is cool or coffee is the best beverage to take on a date. If most work meetings are discussed while sharing a cup of coffee, then it is easier for people working together to have a liking on a specific brand and this, therefore, influences their purchasing behavior. If a product seems to be acceptable in a reference group, then an individual purchasing pattern tends to show high purchasing power. There is also a group of people identified as opinion leaders. Most people look up to them and thus they greatly influence purchasing behavior (Loudon and Bitta, 2002). Opinion leaders could be musicians, actors, sportsmen, political or religious leaders and other important people in the society. If the opinion leader endorses a good or product then its purchase is likely to improve because consumer would want to be associated with the opinion leader in a particular way. Opinion leaders could also be referred to as spokespeople. Coffee marketers should strive to get opinion leaders so that they can endorse their brands in the aim of increasing the consumption of endorsed products. Thus reference groups is said to be an important external factor when it comes to influencing consumer decision making process and thus marketing companies should focus on making positive influence on different referenced groups and the effect will to be indicate by positive purchasing patterns from a wide range of consumers. Reference groups operate in the processing stage because they influence a person when processing information in order to make a purchasing decision. The impact of reference group is to align a person into a given direction and as such process in formation in favor of some products or against some products. Family life cycle Family is the most basic social structure an individual belongs to. In a family, every individual has got their own role to play but this keeps on changing because a family has a lifecycle that moves from one stage to another. There are important factors one needs to understand when it comes to marketing products for a family. It is important to note that the family unit makes most family decisions and thus family purchasing decisions could be as result of mixed family interactions and individual decision making process (Schiffman and Kanuk, 2004). A family goes through different stages and each stage has varied consumer demands. These stages are referred to as a family cycle. The first stage is the bachelor stage where an individual lives alone and thus buying a whole can of coffee is quite difficult because the bachelor will tend to eat out most of the time (Schiffman and Kanuk, 2004). Most people who love as bachelors will consume readymade coffee from restaurants and cafes. The second stage is the newly married without children consumption of coffee will slightly increase and thus this means that the purchasing pattern changes. The couple will probably want to prepare their own coffee at home and thus they will decide to buy their preferred brand from the market. This stage is followed by the full nest stage which is divided into three, starting with full nest I where the youngest child is below six years old, followed by full nest II where the youngest child is above six years old and finally full nest III where the couple is older and have dependent children (Schiffman and Kanuk, 2004). It is then followed with the empty nest where the children move out, a death of a spouse could occur or the couple could both retire (Schiffman and Kanuk, 2004). Through those stages, coffee needs of the family tend to go high during the full nest period and drops again during the empty nest (Schiffman and Kanuk, 2004). This is because of the change of population in the family. Since there are concerns about coffee consumption by children (KidsHealth, 2014), people with young children (full nest I) will avoid purchasing coffee in the bid to protect their children from the alleged health harms associated with coffee consumption. Thus when marketer are out trying to market and sell their products and brands, they should understand this cycle for their own future projections and they will be able to ensure that their consumer need are met appropriately. Husband-wife decision making process also influences consumer decision making because this means a couple will have to have a discussion and come up with an agreement on what product to buy. Social class categories Social class refers to the segmentation or divisions in a society that signifies social status. Usually it is equated with income indifferences but it could also be equated with level of education or type of employment (Peter and Olson, 2005). Social class directly impacts consumer purchasing patterns (Peter and Olson, 2005). In a society, you will find that people in the same social class tend to consume similar brands of a product because they feel they belong together or have great influence on each other (Peter and Olson, 2005). The social classes could be divided into upper class which comprises 3% of the country’s population and these include aristocrats. This is followed by the lower upper class which comprises 1.2% of the social elite, professionals and corporate elite. These are followed by the middle upper class which constitutes 12.5 % of the population and these include college graduates, managers and professionals (Peter and Olson, 2005). Middle class, which is 32% of the population, then follows and they get average pay. Then we have the working class and finally the lower class. By understanding the hierarchy of social classes, it would be easier for marketers to know what product goes to what market. Social class is said to be determinant in type of product consumed, quantity consumed and quality consumed (Peter and Olson, 2005). The hierarchy mentioned above could be used to conclude that those at highest upper class will tend to have a high purchasing power and thus their purchasing pattern will defer from that of the lower class. These could also be explained as consumer social classes where they are grouped into affluent consumers and non affluent consumers. Affluent consumers tend to focus more on savings and are willing to spend on luxurious products. They place importance on friendship ties and leisure, for instance, they could meet for coffee cup just to catch up, thus their purchasing power is high and this distinguishes their purchasing pattern from that of the no affluent consumers (Media Mark research Inc., 2004). The affluent consumers also give value to quality of a product no matter the price (Media Mark research Inc., 2004). Non affluent consumers include middle class and downscale consumers and their focus is on basic necessities; thus, luxury product is not a must have to them. For instance, they could classify a cup of coffee to be a secondary good and thus they can easily forego the product. Non affluent consumers are also said to be brand loyal because they fear the risk of making mistakes while trying out a different brand from the one they are used to (Peter and Olson, 2005). Therefore, if they decide to consume a given brand of coffee, they will most probably purchase the same brand in the future due to product loyalty. Culture and core values Culture is defined as traditions, taboos, beliefs, values and attitudes of a particular society. It is usually associated with a certain nationality or religion. Cultural norms and beliefs are learnt by an individual from the time they are born (Perner, 2010). In any given society, deviation from the norms would result to various consequences depending with each society's beliefs. Culture greatly affects consumption behavior because cultural norms revolve around food habits, dressing styles, communication styles among other activities (Perner, 2010). Culture of a given society also determines what product is acceptable for consumption and what is not. In most societies cultural values is to ensure the well being and good health of a people. Though theses cultural beliefs differ from one society to another, what is acceptable in one community could be inacceptable in another (Perner, 2010). The culture of a people will definitely affect what goods people buys, how the buy and when they buy the good. It is noted that different states would prefer their coffee in different forms. Some would want it in finer texture while others would want it grounded and thus that where the difference in purchasing patterns comes in (Perner, 2010). It is important for a marketer to have this information in order to be able to meet the diverse n needs of their consumers. Understanding the characteristics of culture is also important and will enable one to learn ways of managing it. Culture is said to be comprehensive, it is learned, it is manifested within b boundaries of acceptable behavior and most importantly it’s is dynamic, depending with the community acceptance to change (Perner, 2010). Culture could also be described as the lifestyle of a certain nation or group of people and thus different lifestyles will influence purchasing pattern either positively or negatively. For instance, a nation that has early riser and late night workers will tend to consume a lot of coffee to keep them awake at odd hours of work and thus it’s the work of the marketer to ensure that all its consumers’ needs are met. Relevance of sub cultural aspects of consumer behavior Consumers see themselves in the situation of their fashion and proceed to their surrounding based on the fashion circle. We are raised to pursue the beliefs, contexts, and practices of our community while trying to avoid behavior that is judged as not acceptable or seen as a traditional practice. Culture is a component of the external factors that affect the consumer. That is, it shows impacts put on a consumer by other people. Culture can be broken down into subcultures: A subculture can be defined as a clearly different or cultural body that while it keeps on practicing the indigenous cultural morals of the society, in general, it also owns some of its beliefs practices and values that draw them away from fellow society members. Sub cultural inquiry supports marketers to fulfill certain consumer wants, motivations, views, and attitudes communal in a specific sub cultural community (Batra and Kazimi, 2004). A subculture is a different group that in form of its existence it can be an easily identifiable crew among a large group, more complicated community (Freeman, 1999). People who belong to a given sub culture have beliefs, morals, and practices that set a difference with members of sub culture. The major sub cultural divisions include nationality, religious beliefs, physical location, sex and age. Sub cultural beliefs in the society influence the decision to purchase coffee although coffee is usually a product that consumers purchase out of choice. In terms of age, for example, children especially preschoolers in Canada are not allowed to consume too much coffee because coffee consumption is believed to affect the behavior of children (KidsHealth, 2014). Children, in general are not allowed to take a lot of caffeine and since coffee contains caffeine, it is believed that children should not be given too much coffee due to health issues. Accordingly, age is a determinant of the consumption habits of an individual. Children who are forcefully denied the chance to take coffee may develop a negative altitude about coffee, which may prevent them from talking coffee even in their later stages of life. Another sub culture is sex, which is a major external factor affecting the consumption behavior of a product. Some products are considered for women while others are considered best for men. However, in the case of coffee, sex appears not to have any impact since coffee consumption is well distributed between men and women (Fujiwara, 2008). In the United States, the coffee marketers need to know the target age in the market. The marketers in the U.S should mostly target baby boomers, generation X and generation Y people. This is so because coffee consumption among adults is not considered harmful; in fact, adult people are highly encouraged to consume coffee because it is deemed to have numerous health benefits (Fujiwara, 2008). In addition, people aged between 35 and 64 years have been recorded as the main consumers of coffee making over 70% of coffee consumption (Fujiwara, 2008). Needs and desires also differ with age, a change in a population age wise will have an effect on the coffee market. Teenagers, who have the desire of identity establishment, are the future consumers and have a growing impact on family verdicts. The somewhat undecided generation X is made of smart and derisive consumers who can foresee definite marketing trials. Baby boomers were raised in unstable and fast changing surroundings and this has had various impacts on their morals for oneness and choice (Hatkevich, 2008). The fifty and above group can be broken down in two groups: young again and dusty market. Both groups neither want to be branded as old (Hatkevich, 2008). By understanding the coffee market, marketers will be at a good position to understand on the major point to target. Teenagers cannot be left out although no much concentration need to be put on them since in the near future, they will become the main coffee consumers. They need to be convinced that coffee is not a bad product after all. Marketers need to work hard on their coffee marketing strategies so that any individual from all the segments has at least a reason of choosing coffee as their product of choice. Views on Consumer Decision Making Understanding consumer behavior is established as the foundation of a prosperous marketing plan (Schiffman, 2004). In relation to consumer behavior decision making, there are four major perspectives. To begin with is the economical view, which argues that customers are faced with the problem of imperfect competition and at all times expected to make aberrant decision based on the assumptions that they have sufficient information of the products in the market (Schiffman, 2004). They can outline the pros and cons of every option they have got and they can point the most accurate option (Schiffman, 2004). Coffee consumers are usually faced by this predicament since in the market there are many coffee brands and it is up to the consumer to identify the best option. Producers are left with the important part of making quality coffee such that their brand is all time favorite for the consumers. The other factor affecting consumer decision making behavior is referred to as the passive factor (Schiffman, 2004). This view is the general reverse of economical view; it tries to explain that consumers are absurd and indecisive as they submit to the established marketers’ desires and are all time under the influence of marketing strategies (Schiffman, 2004). The third one is referred to as emotional view; it is connected to view the customer’s decision making on the basis of emotional relation of the attitude towards certain products and relevance (Schiffman, 2004). In this concept, if the major coffee product in the market gets scarce, the marketers will not affect the consumer but instead the individual weighs the available options and, therefore, picks coffee product close to his/her favorite taste. The last one is cognitive view whereby consumers are seen as quick problem solvers amendable and are active in search of goods and services that can perfectly meet their wants (Schiffman, 2004). In this context, what determines the consumers’ decision making is the availability of information concerning product of interest. Accordingly, before getting to the market, coffee consumers gather the information they require and later settle on the product to choose. As such, coffee marketers need to put adequate information at the consumer’s disposal through advertisements and this way, way consumers will have enough information to help them make a decision concerning coffee as a popular product in the market. Despite receiving a number of critiques, it can be seen as a strong argument, that the four types of decision making process do exist and offer coffee marketers adequate information to help them analyse the consumer appropriately. Relationship Marketing Relationship marketing is of importance since it makes the consumer know, like and have trust factor on the product or a service. This means the consumers need to learn the existence of a product in order to have their opinions and if they like it, then they try it out. Secondly, it helps to make business opportunities when person-to-person skills in marketing are built; this opens doors to more opportunities in business. Relationship marketing helps in making one to remain on top of his/her congregation wants; following a person one-on-one is likely to be of great success. Opinion Leaders Opinion leaders in coffee production and sales have a role to play in the coffee market. Coffee is a product that is used globally by different individuals from different countries. Their opinion or perspective concerning the product (coffee) will always affect the consumer decision making behavior since according to the leaders, the most crucial thing for any firm to survive and take a leading position is to understand the consumer’s wants. However, knowing the coffee consumers wants is not enough as coffee producers need to produce quality coffee for these consumers. Improving the product quality will also elevate its position in the market. Opinion leaders are of relevance since they can help an organisation to point out its weak points and work on them. This means that it is through opinions from leaders that a company can know its strong points or the weak area that need improvements. Argued this way, opinion leaders have minimal impact on the purchasing behavior of coffee. However, opinion leaders are available among consumers, whose role is to make opinions regarding the consumption of a given product. For example, a teacher may be an opinion leader because his students will most likely follow the teacher’s opinion because of his age and expert power. As such, if an opinion leader indicates that a certain coffee brand is the best, this may influence followers to select such brands. Innovativeness Innovativeness can be explained as the concept of coming up with new ideas. Including new marketing strategies and new products. However, innovativeness does not appear to have any impact on the consumption of coffee. Innovativeness could affect technological products where users will usually focus on the innovativeness element in the product. Public Policy and Legislation Public policy plays an important role in marketing since it explains the intention of the state government. With the absence of policies, governance cannot exist. To rule, there is need to set a list of guidelines. The central point of public policy in connection with marketing researches mostly focuses on the regulations on businesses, consumers, and community imposed by the government (Hall and Pacula, 2003). Public policy is of importance since it ensures that no group in the markets is oppressed (Hall and Pacula, 2003). For example, in cases where markets are monopolistic, the government can come up with policies to make sure that consumers are not harassed by buying goods and services at a high price. Although there are concerns about coffee consumption by some groups, such as children and pregnant women (Silva, 2011), not a single country in the world has coffee consumption-related policies (Silva, 2011). Legislation, on the other hand, serves to ensure that businesses are operating from a legal perspective. Every country has its own legislation regarding business operations and coffee business is an exemption. However, legislation often affects business operations but not consumer purchasing behavior unless the consumption or use of the product has associated legislation. An example is beer consumption, which is often restricted for sale to persons under 18 years of age. The consumption of coffee does not have any legislation. As such, policies and legislation will not affect coffee consumption. If they existed, however, their net impact would most probably be reduction in coffee consumption, as consumers tend to adhere to these policies and legislations. Advertising Advertising forms the most favorable form of communication between consumers and the marketers. Through advertising, customers acquire information concerning a certain product trending in the market and the various kinds of products that are of use to them. Advertising does not seclude anyone; it is for everyone. It is done by use of different forms of media, using various methods and strategies that are most suitable. Advertising has got several goals. The main goal is brand switch, and this is the goal essentially for organisations whose intention is to draw consumers away from competitors (O’Guinn et al., 2012). In this context, advertisers strive to convince consumers to leave the good/service they are using currently to their brand in the market. Advertising purposely aims at influencing consumer purchasing decision-making process by providing them with all the important information that they use during the input and processing stages of the purchasing decision-making process (Okonkwo, 2007). Advertising will have a fundamental impact because it may prevent consumers from purchasing a certain coffee brand in the favor of a competing coffee brand whose marketers have provided attractive information. Advertising of supplementary products, such as tea, may divert customers from the consumption of coffee to tea. As such, coffee marketers have to be awake every time to counter attractive adverts placed by competitors. Pricing Pricing of a product is necessary since it plays a role in consumers’ purchasing decision making. Some customers are price sensitive, and they will, therefore, select products that are less expensive. Other customers believe that cheap products and services have low quality. Therefore, they would go for expensive products. As earlier mentioned, coffee consumption is aimed at communication the message of value and consumers will be ready to pay any price to consume coffee. However, some people will switch between products containing caffeine, such as coffee and tea, because their main aim is to quench the thirst. These customers will be largely affected by price and will most probably go for tea because tea is usually cheaper than coffee. Attracting these customers to consume coffee would require marketing efforts aimed at communicating the proven health benefits of coffee consumption. Ethics Consumer ethics is of importance in product marketing since it affects the world markets and habits of people in other locations of the global market. Of late, there has been great concern towards ethical business with customers preferring to purchase products from businesses that perform ethically (Nicholls and Opal, 2005). Coffee has been one of the products affected by this trend especially the purchase of Fairtrade products (Nicholls and Opal, 2005). As such, consumers will ponder if a certain company conducts ethically before deciding from whom to buy the product. Conclusion The paper has discussed various external factors and how they affect consumer decision-making accordance with the decision-making process. The paper shows that some factors are extremely important, which include reference groups, family life cycle, social class categories, culture and core values, sub cultural aspects, relationship marketing, opinion leaders, public policy and legislation, advertising, pricing and ethics. Others, such as innovativeness, were found to have minimal impact, if any. As such, coffee marketers should come up with marketing strategies that influence customers to purchase their brands by making use of the factors affecting consumer decision-making. References Batra, S. K. & Kazimi, S. H. H. (2004). 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