Analysing Online Consumer Shopping Motivations For Luxury Products - Research Paper Example

?Analysing Online Consumer Shopping Motivations for Luxury Products Table of Contents Literature Review 3 Introduction 3 Theory of Consumer Behaviour4 Consumer Behaviour on Online Shopping 6 Motivators of Online Shopping for Luxury Products 11 Summary 14 References 15 Bibliography 20 Literature Review Introduction In the present day context, online shopping has emerged to be regarded as one of the most significant avenues of business. As the number of internet users are increasing, more and more organisations are offering their products through the use of internet medium. According to Bagdoniene & Zemblyte (2009), in the year 2008, about one quarter of the global population used internet on a regular basis. Internet provides several advantages to the customers, for instance, easy availability of information, facility of product and price evaluations and convenient assessment of offerings among others. The number of customers purchasing through online and the amount being paid have been on the rise. Each day more and more people take the leap to purchase online. Several organisations desire to capitalise on the growing momentum of online revolution (Shafiq & et. al., 2011). According to Javadi & et. al., (2012), as compared to physical outlets, online stores possesses number of unmatched benefits. They are much expedient than physical outlets and allow customers to save time on travelling or waiting lines. Online stores remain accessible at any time and provide customers with rich information regarding different products and services offerings. In present days, online customers possess greater extent of control along with bargaining power in comparison with physical stores because online medium renders more interactivity between customers and product or service providers. Close & Kukar-Kinney (2010) stated that online shopping has shifted the balance of bargaining power in favour of the customers, because it has become quite convenient for them to make comparisons and assess different alternatives without being pressurized by the sales persons. Online shopping facilitates to minimise the transaction expenses along with providing benefits for both customers and suppliers. Theory of Consumer Behaviour Consumer behaviour is regarded as the dynamic collaboration of thought of persons and its affect. It is determined as the procedures and the activities people involve with while searching, purchasing and evaluating products. As stated by Perez-Schafer & et. al. (2007), there is three key domains which can define purchasing behaviour of consumers. Fig 1 depicts the three vital domains of consumer behaviour. Fig 1: Three Domains of Consumer Behaviour Source: (Perez-Schafer & et. al., 2007, p. 2) Consumer Affect and Cognition: Consumer affect denotes consumers’ feelings and emotions. Emotions are collaboration between thought and physiology. These emotions generate different feelings amid consumers such as fondness, disliking, satisfaction, pleasure and sadness among others. On the other hand, cognition commonly refers to the rationale of people. It is a mental process of understanding, assessing, planning, determining and thinking. These feelings, emotions and cognitions are related with each other and determine consumer behaviour by a considerable extent (Perez-Schafer & et. al., 2007). Consumer Behaviour: Consumer behaviour denotes physical activities of consumers which can be directly perceived and measured. Usually, different perceptions of people generate explicit behaviour amid consumers. The traditional model of purchasing procedure was usually followed by single explicit behaviour. However, in present days, the purchasing procedure involves multiple behaviours comprising interaction between thought and perception (Sukato & Elsey, 2007). Consumer Environment: Consumer environment signifies external constituents that affect purchasing behaviour. These constituents comprise physical objects such as products and outlets, longitudinal relationships such as store location and social comportments such as friends and families that have the ability to change consumers’ thoughts, feelings and activities (Perez-Schafer & et. al., 2007). Economic Man Theory of Consumer Behaviour The economic man theory perceives consumers to be highly sensible where they can adequately engage in financial transactions in a positive way for fulfilling the self-interests. According to this theory, the rational behaviour of consumers comprises being conscious about every substitute option and having information regarding the benefits and the drawbacks that are related with these options (Backhaus & et. al., 2007). Psychodynamic Theory of Consumer Behaviour Psychodynamic theory is largely based on intuitive forces and motivators. The underlying thought of psychodynamic theory is that consumer behaviour is influenced primarily by biological factors, rather than environmental inducements and individual perceptions. Freud (1923) had recognised three sides of psyche such as Id, ego along with superego that have a considerable influence on consumer behaviour (Backhaus & et. al., 2007). Behavioural Theory of Consumer Behaviour Behaviorism is a set of philosophies which can state that behaviour is elucidated by external events comprising activities, perceptions and feelings among others. The most influential proponents of behavioural theory are classical conditioning developed by Ivan Pavlov where he stated that certain stimuli can generate proper behaviour (Wiedmann & et. al., 2007). Consumer Behaviour on Online Shopping In online environment, the attraction and the retention of the customers are critical for gaining success. The goal of customers determines the strength of their purchasing intent through internet. Purchasing intent in this context signifies how an individual aims to purchase a product or service (Karbala & Wandebori, 2012). According to Bashir (2013), consumers react differently in online and offline components. Online customers expect different services at diverse phases. Bashir (2013) had categorised the purchasing decision of online customers into three aspects namely establishment of trust, online shopping experience and after purchase requirements. Furthermore, he had also stated that consumer decision making is impacted by several subjective and objective factors. Fig 2 demonstrates different subjective and objective factors that can influence the purchasing behaviour of online customers. Fig 2: Subjective and Objective Factors of Online Customer Behaviours Source: (Bashir, 2013, pp. 13-18) Individual Demands: Every consumer has certain individual demands (such as time effectiveness, status and flexibility among others), due to which they select online purchasing. Consumer Attitude: The attitude of consumers regarding online shopping also impact on their purchasing behaviour. Consumers are generally familiar with the risks that are inherent in online shopping such as technical failures, human made mistakes, financial risks and product related risks among others. The risks linked with online shopping are much greater than shopping through physical stores. Thus, consumers having the attitude to take the implied risks go for online shopping (Wolfinbarger, 2011). According to Thamizhvanan & Xavier (2009), consumer purchasing decisions are influenced by hedonic realisation. There are several people who prefer to shop online due to the derived benefits including enjoyment, exclusivity, positive sociality, better product match and better involvement with product class. Their motivation for online shopping is related with fun. Price: Consumers possess a variety of price expectations which they evaluate preferred products against the existing prices. The ‘upper price limit’ i.e. price of a product beyond certain figure can direct consumers to believe that item to be expensive. Conversely, ‘lower price limit’ which signifies that price of a product below a certain level, can make the consumers to believe that item to be of poor quality. Thus, the ‘acceptable price range’ can be determined as a figure which is between upper and lower price limits of certain products and services. Apart from price indecisions, the price consciousness of customers also determines the online purchasing behaviour (Man, 2012). Quality: Offered product or service quality can facilitate to ascertain enjoyable experience to a customer and is regarded as one of the key components of making online purchasing decisions. There are five methods through which consumers define quality of products and services such as transcendent method, product oriented method, user oriented method, manufacturing oriented method and value oriented method. Since online shopping does not permit consumers to physically review the product quality, they are required to rely on information provided on the websites and accordingly evaluate the product quality (Man, 2012). Trust: For any transaction, customers and sellers must develop a level of trust with each other. The sellers must have faith that they are capable of selecting proper products and services for customers. Then again, customers must have trust on sellers that they are able to provide required products and services. In online environment, customers can only see the pictures or images of products. Furthermore, it is quite tough for customers to take any legal actions against sellers in case of any kind of fraudulent activities (Topaloglu, 2012). Thus, trust is needed in the online environment for making a successful transaction. There are four aspects which can determine the trust of customers in online shopping namely transaction safety, website possessions, navigation functionality and individual variables. These aspects can have an impact on consumer decision making activities. There are three categories such as apparent features of internet, consumer specific characteristics and product features as vital factors that can influence online shopping behaviour. Bagdoniene & Zemblyte (2009) had illustrated three factors that can determine consumer behaviour in the online environment. Table 1 demonstrates the factors that can have a major impact on online shopping behaviour of consumers. Table 1: Different Factors Affecting Online Shopping Behaviour Perceived characteristics of internet Security/privacy Trust Sociality Usefulness Ease of use Convenience Effectiveness Enjoyment Information availability Product selection Product price value Trends Consumer characteristics Gender Age Education Income Family composition Recreation Socialization Convenience Use of internet Online purchase experience Compatibility Peer influence Product characteristics Customization Usability Brad name Product type Product quality Source: (Bagdoniene & Zemblyte, 2009, pp. 367-374) Motivators of Online Shopping for Luxury Products Oxford dictionary defines luxury as a condition of great comfort and exaggerated living experience. Luxury is longed by every individual as it is considered as a limited possession. Usually, luxury products are characterised by high prices which serve in the niche market segment. People purchase luxury products for several reasons such as for fulfilling self-reward requirements and for keeping abreast with the status of the neighbours among others (Tatt, 2010). The international luxury landscape and luxury consumers’ have grown intensely in recent years. The advent of e-commerce coupled with other technological innovations has changed the luxury market trends, from traditional media to online media platform. According to survey of Four Seasons, most of the luxury consumers prefer to read product reviews through internet and it influences their purchasing decisions. Besides, it has also been observed that overall traffic in luxury brands’ websites had increased by 10% from 2010 to 2011 and reached to about 30 million visits in a year (Four Seasons, 2012). According to the study of PM Digital (2012), five biggest luxury brands representing about 85% luxury brands have their own online outlets and they obtain about 98% of online traffic. According to the research of Bain & Company (2012), online environment is becoming a more relevant channel for customers every year. In the year 2008, online luxury shopping accounted for about 3 billion Euros which had increased to about 7 billion Euros by 2012. The following figure will demonstrate the online luxury spending of consumers from 2008 to 2012. Source: (Bain & Company, 2012) Due to the unique characteristics of luxury industry, the online shopping behaviour on luxury products is quite different from other products. In order to exploit the online luxury market, the target customers of luxury products must be identified carefully. The online shopping experience must be capable of motivating the customers in order to make purchase (Heine, 2007). Unlike other customers, luxury customers demonstrate five basic characteristics namely extremely prosperous, butterflies, luxury cocooners, aspirers, and mild pragmatists. Extremely prosperous is considered as those customers who spend a major proportion of their money on luxury items and luxury lifestyle in comparison with other customers. Butterflies are highly evolved customers who have arisen with the passion to recombine with the outside world. This type of customers is driven by the search for gaining significance and obtaining new experiences. They possess the least money-oriented alignment among other luxury customer segments. Luxury cocooners are those customers who concentrate mostly on health and home. Most of the spending of this customer segment is concentrated on home based products. Aspirers are considered as those customers who have not accomplished the level of luxury they desire. This type of customers is highly attuned towards luxury brands and believes that luxury can be best demonstrated by purchasing these brands. Ultimately, mild pragmatists are the newly appeared luxury customers who do not involve in maintaining luxury lifestyle. As the name suggests, they are considered as careful spenders on luxurious products (Unity Marketing, 2013). Perez-Schafer & et. al., (2007) had classified luxury customers into two groups i.e. approval seekers and inner motivational seekers. Approval seekers view luxury products as a method of interacting within the social context. Thus, factors such as emotional benefits and self-expression benefits act as key motivators for these types of customers in order purchase luxury products. Conversely, inner motivation seekers view luxury products as a method of fulfilling individual pleasures. Thus, apart from emotional and self-expression advantages, functional advantages also play a vital part for inspiring purchases (Perez-Schafer & et. al., 2007). According to the survey conducted by KPMG on online luxury customers, it can be observed that the feelings of self-reward and self-pampering are determined as vital motivators for purchasing. Besides, there are other factors that direct the purchasing decisions of luxury customers such as status, connoisseurship and individuality (KPMG, 2011). The following table demonstrates motivations for customers with respect to luxury consumptions. Table 2: Motivators for Online Shopping on Luxury Products Self-reward To reward myself To pamper myself Status For certain occasions For enjoying luxury lifestyle For reflecting different tastes and discernments For representing social status and wealth For enjoying ownership Connoisseurship To maintain value To maintain collection Individuality To become fashionable To reflect personality Source: (KPMG, 2011, p. 8) Summary Understanding customer behaviour is a vital element for developing marketing strategies for organisations. In present day’s business context with increasing amount of online shopping, it has become prevalent for marketers to understand the purchasing behaviours of consumers. There are several theories that describe how consumers can react in order to purchase products and services. Several factors have been identified that can create an impact on the purchasing decision making of individuals in the online environment such as subjective factors and objective factors. Besides, perceived characteristics of internet, individual characteristics of consumers and product characteristics also influence the behaviour of online customers. With respect to luxury products, aspects such as self-reward, status, connoisseurship and individuality have been found to create a profound impact on online consumer behaviour. References Backhaus, K. & et. al., 2007. Predicting Purchase Decision with Different Conjoint Analysis Methods. International Journal of Market Research, Vol. 49, No. 3, pp. 341-364. Bagdoniene, L. & Zemblyte, J., 2009. Online Shopping Motivation Factors And Their Effect On Lithuanian Consumers. Economics & Management, pp. 367-374. Bashir, A., 2013. Consumer Behavior towards Online Shopping Of Electronics in Pakistan. Seinajoki University of Applied Sciences. 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