Types of Decision Making - Assignment Example

Consumer Behaviour Contents Contents 2 Introduction 3 Understanding of psychological drivers 4 Understanding of sociological drivers 8 Understanding of the decision making process 10 Types of decision making 11 Conclusion 13 References 14 Introduction Marketing is an effort made by companies to identify wants and needs of potential customers. The success of a company depends on identifying as well as satisfying hidden needs of customers. These factors are taken into consideration by a company while structuring a marketing plan. All the controllable factors available in an organization are essential for designing marketing mix of a particular brand. There are four tools which are generally utilized by a marketing manager in order to structure a marketing plan such as product, place, promotion and price. The consumer brand to be focused on in this particular study is Rolex SA, and this brand belongs to the watch manufacturing industry. Rolex SA was founded in 1905 by Alfred Davis and Hans Wilsdorf. As per Forbes 2012 list, Rolex is one of the most popular global brands. Rolex manufactures about 2000 watches in a day and is the largest consumer brand of single luxury watches. Rolex had set out most enabling emblem in the industry with the tagline of “Can Do” by offering wide base of modes through which clients can work, communicate and play. The decision making process of the company was remarkable as it shifted from pocket watches to designing high quality and fashionable wristwatches. Even in its branding activities, the company did not implement a complex design as brand image but preferred to use a crown which defines its uniqueness and superiority. However marketing mix of a brand needs to be aligned with consumer behaviour. The success of a brand depends on the convincing power of its marketing mix. Consumers needs to be convinced that a particular brand will satisfy their needs and wants more effectively in comparison to other brands. Rolex has been able to do so from the past many decades as it is able to align its marketing mix with consumer behaviour. In this particular category of watches most of purchasing decisions are made on the basis of either word of mouth or extensive research. Understanding of psychological drivers Consumer buying behaviour to a great extent is influenced by various psychological drivers. These drivers are interdisciplinary approaches that combine attention and perception, motivational determinants of buying behaviours of consumers, information processing, change and formation of attitude, and impact of advertisement. Psychological drivers comprise of segmentation as this helps to identify the target market for the brand. Segmentation is categorized into two parts, one is demographic segmentation and the other is based on value perception, self perception and product perception. As per the chosen consumer brand Rolex, the target group is males belonging to age group of 21 to 35 years. This brand majorly focuses on wealthy customers who are inclined toward exclusivity and high quality. Hence the brand has set its image high in the market place as it has a specific target segment. On the other hand, the positioning of this brand is even aligned with the demographic segment. It has been positioned as a high end luxury brand, a fashionable alternative for target group and a means of status symbol. Positioning represents the feelings, impression and perception about a product that occupies mind of customers in relation to other brands. Perception is a mechanism through which a person interprets, organizes and selects information to make some sensible decision. This is the area mostly focused on by companies as perception about a brand defines its success or failure. There are three processes for perception mechanism such as selective attention, selective distortion and selective retention. Selective attention is when an individual focuses on few stimulus or details to which a person is subjected. For brands it is a major challenge to retain customer’s attention. Like, internet ad banners do not hold importance in present scenario as individual mostly skip these kinds of ads. This is even called as ad blindness or rather banner blindness. On the other hand, individuals are often more attentive to those advertisements which are closely related to their needs. For example, people who wish to purchase a new car will be more attentive to ads given by car manufacturers. Brands can even draw attention of consumers by making innovative advertisements or conveying a unique marketing message. This is done by many brands such as Nestle, Coca-Cola, Nike, Cadbury, Heinz, etc. Rolex even advertises its range of wristwatches in unique manner either by celebrity endorsements or conveying a simple message that their watches are high end luxury brands for customers who has unique taste. Selective distortion states that a brand’s message is bound to be interpreted differently by two individuals. These perceptions are based on state of mind, beliefs, attitudes and experience (Schiffman and Kanuk, 2009). For instance, an individual may perceive Rolex brand to be a luxury product that redefines status symbol. On the contrary, another person viewing the same advertisement might not consider the product to be a better substitute for cell phones. This difference in perception affects the brand and forms its major threat. With the growth of cell phone industry, sales of such luxury wristwatches have become limited. Selective retention states that an individual do not retain all information to which it is been exposed. Those information are normally retained that is aligned with perceptions and existing beliefs. For example customers retain those aspects of brand information they like or highlight benefits or features of the product. This can be considered as one of the psychological drivers that governs the entire consumer behaviour. Being focused towards selective retention helps a product to become “top of mind” brand in minds of customers. Learning is another component of psychological factors influencing consumer behaviour. Action basically facilitates learning. It rather indicates a behavioural change resulting from any experience. Behaviour of an individual is rapidly changed through learning as an individual acquires experience and information. Learning theories can be linked with success or failure of a brand. On the contrary, these theories can even be utilized during brand marketing. Operant conditioning theory is ideal in this context as it states that high demand of a product can be associated with positive reinforcement. For instance, Rolex gives more importance to positive reinforcement by linking its range of wristwatches with superior quality and status symbol. The innovative designs of the brand enables a customer to develop an image that such designs cannot be imitated by other players. Beliefs and attitudes are other elements of consumer psychology. A belief can be treated as a conviction possessed by an individual on something. Experience acquired by individual, external influences such as family, friends, etc., and learning, influences buying behaviour of an individual. On the other hand, attitude is a feeling, assessment of an idea, or predisposition to act towards an object in a particular way. Attitudes and beliefs are well anchored within mind of individuals and cannot be changed easily. Personality of an individual rests on these attitudes and beliefs (Blackwell, 2005). Brand positioning often needs to be restructured by an organization in order to change brand perception. Rolex possesses a brand perception of a luxury brand of wristwatches, purchased by wealthy people, represents status symbol of males and offers innovative and superior quality products. This kind of perception positively influences certain segment of target market that is status conscious but simultaneously it is not effective for that target group of customers who demands value for money. On the contrary, this brand is closely related to personality of an individual, as it forms a symbol of exclusivity and quality. Motivation is another psychological driver that enables customer to take buying decision. When a need becomes extremely important to a customer there is a tendency to satisfy it. It usually works at a subconscious level which is not possible to measure. Motivation is linked with consumer needs that occur in every stage of decision making process. Organizations need to link product with target customers so that needs are effectively identified and appropriate solutions are developed. Maslow’s hierarchy of needs as stated in figure1 represents the various needs of a consumer. Figure 1: Maslows Hierarchy of Needs (Source: Schiffman, 2007) Esteem needs is recognition and self confidence from societal members. Social needs represent being more comfortable, sense of belonging and deriving more attraction. Safety needs and physiological needs are the basic needs of an individual that highlight health, employment, family, food, water, shelter and sleep. However consumer brand Rolex is aligned with the self esteem needs of an individual. Consumers purchasing this brand have desires to express their achievements, and have a need for individuality. This need is well catered by this luxury brand as it targets young males who have a fascination towards branded products. Understanding of sociological drivers Reference groups are one of the main sociological drivers in consumer decision making process. These groups are those that provide a clear comparison in terms of lifestyle, behaviour, consumer habits or desires. They tend to influence the image of an individual. On the other hand, membership groups are those to which a person belongs such as its social origin, residential place, hobbies, work, etc. Influence level varies depending on groups and individuals but common consumption patterns are usually observed across a particular group. Lifestyle, values and mindset are essential parameters which need to be identified appropriately by companies to better develop their advertising message. For instance, a teenager will want to purchase a Smartphone or shoe brand that is used by some of the popular groups in a school in order to get close to this group. This factor is taken into consideration by Rolex as its product positioning is for a particular target market. The product’s benefit is highlighted by this brand that influences many consumers. Reference group for this brand’s marketing mix represent those individuals who belong to upper section of the society and are status conscious. Often consumers buying such high end luxury brand tend to be influenced by their colleagues in workplace or other group members (Kotler, 2007). There are different roles within a reference group such as initiator, influencer, decision maker and buyer. Influencer or initiator is usually individuals whom consumer look up to for branded or fashionable items in this context. Family is a strong influencer as people are witnessed to show similar purchasing habits as acquired by their family members. This either positively affects a brand image by enhancing customer loyalty or appears to be a major challenge. Rolex is counted as the topmost brands across the globe since it has uniquely positioned its products. Those individuals who purchase such branded wristwatches are either influenced by reference groups, friends or family. The advertisements of this brand not only persuades target group to purchase such products but even influence grandparents to gift these innovative wristwatches to their closed ones. A proper marketing mix in terms of product design and place support this form of sociological driver. It can even be stated that product convenience due to ecommerce platform has facilitated growth of the brand (Lankarani, 2009). Social role or status even influences decision making process of consumers. An individual’s position within workplace, family, friends group, country club, etc., can be termed as social status or role. Social role is attitude possessed by an individual as per workplace position, family position, gender, expectations of surrounding people, etc. On the other hand, social status represents importance of role and rank in society. These factors influence consumer decision making process to a great extent and specifically for those products that are visible in front of others. For instance, Porsche or Ferrari is purchased by consumers not only for quality but even for external signs of social success. This factor is highly taken into consideration by the Rolex brand as it places its product line in big outlets in malls, position its product well, and even set high prices for innovative product line. This is majorly done for young adult males who has secured high position in workplace or owns high societal standard. Social classes comprise of three sections such as lower class, middle class and upper class. Each of these classes possesses a specific set of likes and dislikes. For instance middle class segment often do not opt for luxury brands in comparison to upper class. Through all its advertisement, Rolex represents this upper class segment inclined towards exclusive designs or innovative products. Cultural trends also affect consumer behaviour to a large extent (Wong, 2011). This is observed with the growth of social media as young adult prefer to use this platform in comparison to older generation. In similar context, teenagers do not prefer Rolex watches as they consider smart phones to be better option but young adults belonging to age group of 21 to 35 years prefer these products more. However Rolex has been able to align its marketing mix with such influential forces through appropriate product features, positioning and pricing. Understanding of the decision making process The consumer decision making model states that there are five important steps undertaken by consumers while purchasing a product as stated in figure 2. Figure 2: Consumer Decision Making Model (Source: Solomon, 2007) Need recognition is linked with stimulus that motivates an individual to purchase a product. Information search is highly dependent on the level of involvement and risk associated with the buying decision. Evaluation of alternatives is a thorough analysis about different players belonging to the same industry. Purchase decision is a result of psychological and sociological influences. Post-purchase behaviour can be defined as the level of satisfaction of customers. However for Rolex as a brand it was important to relate the product with hidden needs of customers. This brand has satisfied the hidden need of customers by offering a product that represents high quality and success. Often success cannot be represented well by customers but this product gains competitive advantage through delivering innovative product line in wide range. This decision making model is adopted by most consumers purchasing this brand (Haig, 2004). The brand represents a high end product with moderate levels of involvement. The company influence customers in alternative evaluation step through proper distribution networks, effective pricing strategy, unique product promotion and innovative product features. Types of decision making In human psychology heuristics are simple and automatic. This psychological aspect are often being used by the consumers before making any purchase decision. In this type of decision process consumers often focus towards a particular aspect of highly complex matter and ignore all the other complexities related with the matter (Bouyssou, Dubois, Prade and Pirlot, 2013). In most of the cases this decision making theory is highly successful but the theory has some limitations related with logical aspect. Heuristics decision making are generally being done on the basis of routine thinking. This consumer decision making process is quicker than any other decision making process. Due to its quick nature sometimes the decision makings are inaccurate. According to the framework of this theory satisfactory decisions are being made quickly and without any problem. Cognitive biases are also highly common in heuristics decision making (Grünig, Kühn, Clark, ODea and Montani, 2013). Rolex over the years have given significant importance towards the various features which are significantly important for their customers. It has impacted heuristics decision making process of the customers. Customers of the Rolex over the years have significant satisfaction from the products of the organization. It has impacted heuristics decision making process uniquely. The impact is so strong that consumers do not take too much time before making any decision related with product purchase. Being a luxury category product prices of the Rolex products are on the higher side. Prices of product are an important factor for the consumers. But marketing mix of Rolex have provided enough stimuli to consumer and making heuristics decision making is an automatic process. In this process consumers give significant focuses towards the quality and feature of the Rolex products and during those processes high prices of the products are ignored by the customers. With the help of attractive promotional techniques the organization has encouraged cognitive biases in the consumer behaviours. It has increased customer loyalty for the brand. All the above discussions are clearly indicating that with the help of marketing mix the organization has significantly impacted the heuristics decision making process of the customers. Over the years the customers have able to relate them psychologically with the Rolex products. Customers’ expectation out of the products and real perceptions after using those products are significantly important for measuring the satisfaction levels of the customers. The marketing mix of the organization over the years has created high expectations related with the Rolex products among the customers. Due to their world class products customers’ perceptions related with the Rolex product is also high. Existing consumers of the Rolex have high regards for the products they use. It has reduced the gap between customer expectations and customer perception. It has led to high level of consumer satisfaction for their products. All the above discussion are clearly indicating that the organization has given significant important towards the satisfaction of consumers and they have designed their marketing mix according to that only. Conclusion As per the study, success of a brand depends upon marketing strategy formulation. Consumer behaviour has a strong relationship with brand development. It is often stated that there are various factors which influence decision making process of consumers. These factors are known as sociological and psychological drivers. A customer is bound to get influenced by environmental factors and this form of influences draw negative or positive image regarding a brand. Rolex over the years has been able to set high standards in the industry through its superior quality and exclusive product line. There is a specific target group of this luxury brand and this group is represented in all its branding activities. On the other hand, marketing mix of this luxury brand is precise and well segmented. This serves as an advantage for the brand as customers are able to differentiate effectively amongst other players. Rolex brand believes in displaying its product at the right time in right place. Hence it is able to reach out to customers globally. The strong position of this luxury brand is not only because of its innovative product range but its ability to identify hidden needs of customers and satisfying it. In overall context, it is evident that various influential factors for purchase decision needs to be taken into consideration by a brand before framing its marketing mix. References Blackwell, R., 2005. Consumer Behaviour. 10th ed. Massachusetts: South-Western College Pub. Bouyssou, D., Dubois, D., Prade, H. and Pirlot, M. 2013. Decision Making Process: Concepts and Methods. New Jersey: John Wiley & Sons. Grünig, R., Kühn, R., Clark, A., ODea, C. and Montani, M. 2013. Successful Decision-Making: A Systematic Approach to Complex Problems. New York: Springer Science & Business Media. Haig, M., 2004. Brand Royalty. London, GBR: Kogan Page Ltd. Kotler, et al., 2007. Marketing. 7th ed. Australia: Pearson Prentice Hall. Lankarani, N., 2009. Special report: Watches. New York: New York Times Publishing. Schiffman, L. G. and Kanuk, L. L., 2009. Consumer Behaviour. 10th ed. New York: Pearson Prentice Hall. Schiffman, L. G., 2007. Consumer Behaviour. 9th ed. New Jersey: Prentice Hall. Solomon, M., 2007. Consumer Behaviour: A European perspective. 3rd ed. New York: Prentice Hall. Wong, H. Y. R., 2011. Building A Marketing Plan: A complete Guide. New York: Business Expert Press. Read More