Intrinsic and Extrinsic Factors that Influence Consumer Behavior - Essay Example

Topic: Lecturer: Presentation: Introduction Consumer behaviour is concerned with the processes that a person, group of people or organizations undergo in choosing and procuring a product or service to satisfy their needs. There are various factors that influence consumer behaviour, which are either intrinsic (from within the consumer) or extrinsic (external forces). To develop effective marketing strategies, organizations need to study consumer behaviour. The study allows marketers to understand the psychology of consumers’ reasoning and the factors that influence their preference between varying options. Several theories have been put forward to elucidate the basis of consumer behaviour. The economic theories are mainly focused on the action of buying. The utility perspective postulates that consumers make decisions on the basis of the likely outcome of their choices. The psychodynamic theory is based on instinctive drives that are entrenched in Id, ego and the superego. The behaviourist theory is based on the relationship between external stimuli and response while the cognitive approach is focused on information processing within an individual’s mind. The humanistic theory is focused on the internal feelings and the quest for self-actualization. Economic Theories Human beings are rational and make choices that are likely to maximize utility of what they purchase while minimizing the cost and effort of acquiring products. Consumers have a measurable level of satisfaction for every product they consume, which regarded as utility (Wood, 2007). It is a significant determinant of consumer behaviour and purchase decisions. The law of diminishing marginal utility suggests that the satisfaction that consumers derive through consumption of a particular commodity reduces as consumption increases (Williams, 2014). For example, the utility a consumer derives from taking the first cup of coffee is higher than that of subsequent cups. There is an optimum level of consumer satisfaction beyond which more consumption is not useful to the consumer. Because consumers need to be economical in their spending, they engage in information search to understand the available alternatives and analyse them. For this reason, they will buy because of the ability to identify the best possible course of action. Nevertheless, inadequacy of information among consumers hinders them from making rational decisions that benefit them economically (Peter & Olson, 2010). In an ideal situation, the customer buys because he/she recognizes a problem that can be addressed through acquiring a product (Amaldoss & Jain, 2005). He/she engages in information search on the commodities offered in the market that suit the particular need (Youn & Faber, 2000). The information search may be intrinsic or extrinsic. Intrinsic is based on the consumer’s memory having previous experience with the commodities or from external sources such as media or associates. Perception is a critical determinant of why the consumer acts with regards to purchasing plans. However, the nature of marketing influences perception with regards to selective exposure, retention and comprehension (Marieke, 2011). The indifference model also focuses on the economic perspective whereby consumers consider the nature of a combination of goods in their decision to purchase. The marginal utility of products determines the amount needed by consumers (Youn & Faber, 2000). For example, the amount of coffee and bread are related in that a consumer may not need bread or coffee alone but as a combination. There are different combinations of the two commodities that the consumer can choose from (Williams, 2014). However, a consumer will choose the combination that will offer the highest marginal utility. Consumer behaviour is also influenced by budget constraints as individuals will only purchase products up to the level that their disposable income allows. An increase in price of commodities without a change in income level will therefore result in a reduction in purchasing power and hence less will be consumed (Ordabayeva & Chandon, 2011). Psychodynamic Theory The psychodynamic theory developed by Sigmund Freud is based on biological stimuli that occur through unconscious pressures (Wood, 2007). One of the psychological factors is motivation, which is manifest by an internal pressure to acquire what a consumer needs. Maslow’s hierarchy of needs represents different levels of needs, with the basic needs being the first that people must satisfy before considering the secondary needs (Amaldoss & Jain, 2005). Consumers will ensure that they have accomplished their food, water and shelter needs before they can think of fashionable dressing. Basic needs are recurrent and must be maintained and hence consumers have no alternative but to prioritize them in their purchase decisions (Barden, 2013). Social needs also influence an individual’s consumption behaviour as they give him/her a sense of belonging to a particular social grouping (Amaldoss & Jain, 2005). For example, if Jack Wills brandis the trending fashion among university students, many in the various peer groups will need to be cladin the brand to satisfy the desires for self-esteem (Williams, 2014). The need for self-actualization is a sign of accomplishment and significantly influences consumer behaviour. Hyundai Motor Company took advantage of consumer’s needs for self-actualization to market the company’s vehicles during the 2008 global economic crisis. Customers needed to take car loans but did not want to be embarrassed for failure to service their loans owing to the deteriorating economic environment. The company offered the option of customers returning the vehicles without fines or being considered defaulters if they failed to service the loans (Nagel & Holden, 2002). Perception is a psychological aspect related to the manner in which an individual construes the immediate environment and creates logic of it in the mind. This is accomplished through the five common senses in humans and is based on how they are combined to bring about a difference. Some consumers combine the sense of smell and sight to create meaning in their mind regarding a particular product (Heath & Potter, 2004). For example, fragrant flowers with an attractive coloration will have a positive influence compared to attractive flowers with unpleasant odour. The latter will most likely be perceived as not appropriate. Selective exposure is a process through which the brain filters what information to be seen and what to ignore. Therefore, not all the information consumers are exposed to through the media that reaches the brain. Similarly, selective attention and selective retention only allows the relevant information to make sense in the brain and be retained (Williams, 2014). For this reason, marketers ensure intensive repetitive advertisements. Selective distortion on the other hand generates the notion that a consumer will develop qualities as portrayed in the advertisements. For example, energy drinks are associated with vigour and the adverts present people with super human qualities. This creates the wrong impression in the minds of consumers as they can never be like the people portrayed in the adverts (Mark & Reynolds, 2003). Learning is a psychological aspect that involves a change of behaviour based on past experience. A consumer may have bought a particular product that did not fulfil his/her expectations (Youn & Faber, 2000). It is difficult for such a consumer to buy the same product once again unless if he/she is convinced that the quality has been enhanced and that the failures will not re-cur. Learning can also be through other people’s experiences. Experienced consumers easily understand the messages from marketers compared to consumers who have never bought a product. Free samples are often used by companies to promote learning among potential customers (Amaldoss & Jain, 2005). Rewards are also used to generate the desire in consumers to make repeat purchases. Classical conditioning is a form of learning where an individual associates particular products with certain situations. For example a certain type of food in an exciting excursion may create the desire for the same type of food in repeat excursions (Amaldoss & Jain, 2005). Consumer attitudes significantly influence their purchase decisions. Attitudes are psychological dispositions, responsive feelings, positive or negative assessments and action propensities that consumers possess regarding products or ideas (Wood, 2007). They tend to be persistent and since they are founded on consumers’ ideals, they are difficult to change. Marketers must ensure that they generate positive feelings about their commodities to prevent negative attitudes from developing (Amaldoss & Jain, 2005). For example, the impression created by the media and healthcare campaigners regarding the relationship between fast foods, obesity and risk of heart disease has continued to generate a negative attitude among consumers. Fast food marketers are striving to convince consumers that their products are healthy through catch phrases such as ‘heart friendly’, ‘cholesterol free’ and ‘sugar free’ among others (Peck & Wiggins, 2006). Behaviourist Theory The behaviourist approach is based on the premise that consumer behaviour is influenced by external stimuli that could be an object, individual or circumstances. Learning occurs as a result of the relationship generated between a stimulus and reaction (Amaldoss & Jain, 2005). The consumer senses and becomes aware of a stimulus and reaction is his/her behaviour that occurs in response to the object, individual or circumstances. It is assumed that consumers learn to relate the stimulus and reaction after which they generalize the association across circumstances. Each time a stimulus occurs, a parallel response takes place. The occurrences in the consumers’ external environment influence learning (Nagel & Holden, 2002). Firms plan and process the marketing stimuli through the 4Ps of marketing (Product Price Place Promotion) while social factors generate environmental stimuli founded on financial, political and cultural state of affairs of the society. Consumer responses are determined by individual characteristics as well as the decision processes. Behavioural theory assumes that such responses are as a result of a conscious logical judgment process whereby the consumer is considered to be familiar with the problem. Nevertheless, consumers rarely make decisions in consciousness of an identified problem (Solomonm et al. 2003). Social factors have a significant influence on consumer behaviour as they are more extrinsic and mainly act upon consumers’ beliefs and their manner of doing things. These factors are dependent on the living environment and how it operates (Amaldoss & Jain, 2005). For example, culture is a lifestyle that is taken over by successive generations from their predecessors and is a major influence on consumer behaviour. It comprises a set of values, habits and behaviours that epitomize a society. Culture stipulates the way that people are expected to live and has a significant consequence on the things that they buy (Arnould & Thompson, 2005). For example, it is considered uncultured for a Muslim woman to wear clothes that expose parts of her body such as mini skirts while it is fashionable among western communities. Marketers may therefore find it difficult to promote clothes that do not adhere to Islamic law. Similarly, German culture does not encourage debt while it is part of the US lifestyle to own a credit card. It is therefore difficult for credit card firms such as American Express, Visa and MasterCard to market their products to Germans (Amaldoss & Jain, 2005). Cognitive Theory The cognitive approach is based on information processing by consumers. They continuously seek information with the aim of finding appropriate products that can satisfy their needs. The environment or social stimuli influence purchase decisions. Every stimulus is associated with a spontaneous response by the consumer (Youn & Faber, 2000). Cognitive dissonance is used to refer to the situation that occurs when an individual is faced with conflicting beliefs whereby a new viewpoint tries to replace an old perspective. It necessitates a change in some of the behaviours for the individual to get rid of the dissonance (Barden, 2013). The dissonance or inconsistency in beliefs provoke a person to synchronize the varying elements hence decrease emotional tension. Dissonance may result from an inconsistency between an individual’s attitude and his behaviours or when a powerfully entrenched expectation is renounced. Dissonance in consumer behaviour results from a situation whereby a conclusion has been made since before making a decision, a person has an option of aligning to any approach or behaviour which was thought to be right as per his/her choice. However, at the time of making a decision, the consumer has made a commitment to the seller and may not be in a position to change hence he/she has to maintain his/her decision. Cognitive dissonance is an important instrument for marketers to effectively analyse post purchase behaviour (Williams, 2014). Cultural and family values, customs and religious beliefs are some of the aspects that are integral in consumer circumstances and are the major sources of cognitive dissonance (Amaldoss & Jain, 2005). For example, a consumer who places high value to environmental integrity might discover that he/she has purchased a product from a company that is black listed for environmental pollution. Cognitive dissonance emerges since the decision has already been made but it conflicts with the deeply rooted belief in environmental conservation (Childers & Rao, 2002). Using the product in public might be associated with the notoriety of the company and hence the consumer must make a decision to resolve the existing conflict. Such a consumer will have to boldly discard the product and buy another from a different company that exercises environmental conservation. On the other hand, consumers evaluate their purchase decisions on the basis of pros and cons of their decision. A mounting strain in cognitive dissonance results in the cons exceeding the pros and consumers begin rethinking about the decision made. Marketers must ensure that cognitive dissonance in consumers is resolved in their favour and that the eventual outcome leads to repeated purchases rather than consumers seeking alternative purchases (Erasmus et al. 2001). Humanistic Theory The humanistic perspective is based on the presumption that a person’s behaviour is linked to his/her internal feelings and self-identity. Consumers exercise free will and determine their own destiny (Youn & Faber, 2000). Free will is exercised through personal agencies that involve the choices that individuals make in their daily lives, their actions and related consequences. Everyone needs to feel good and is always striving to feel better. There is a general and fundamental human motive focused on achieving personal development and fulfilment in life. Some purchases that individuals make have greater personal significance than others (Amaldoss & Jain, 2005). Apart from price, the level of enhancement of self-actualization by a particular product influences a consumer’s decision. Such products reflect a consumer’s self-image and are used to manage the manner in which other people perceive them (Wilcox et al. 2009). Different consumers have varying impressions that they would like to convey to observers and therefore marketers try to understand the different needs for self-actualization to help them align their marketing strategies consumer desires (Barden, 2013). The role of individuals in social settings can be a source of important information to marketers in their quest to predict consumer behaviour. Even though consumers are unique in behaviour and desires for self-actualization, there is usually a possibility of certain characteristics being universal with each other (Childers & Rao, 2002). Marketers use such characteristics founded on personalities to develop effective segmentation strategies (Amaldoss & Jain, 2005). Conclusion There are a number of theories that have been put forward to try and explain consumer behaviour and the reason why people buy. These include the economic theory that is focused on the need for consumers to maximize utility. The psychodynamic theory is founded on the existence of unconscious pressures that motivate consumers to make certain decisions. Behaviourist theory is based on external influences that act on an individual causing them to react in a particular way. Cognitive theories are based on continuous information search by consumers to determine the best combination of products that can satisfy their desires. Humanistic theory is focused on the desire for self-actualization by individuals. Marketers need to understand the theoretical explanations to effectively determine their audience and the most appropriate promotional strategies to apply. References Amaldoss, W. & Jain, S. 2005, ‘Conspicuous Consumption and Sophisticated Thinking’ Management Science, 51(10), 1449–1466. Arnould, E. J. & Thompson, C. J. 2005, ‘Consumer Culture Theory (CCT): Twenty Years of Research’ Journal of Consumer Research, 868-882. Barden, P. 2013, Decoded: The Science Behind Why We Buy, New York, NY: Wiley. Childers, T. L. & Rao, A. R. 2002, The Influence of Familial and Peer-based Reference Groups on Consumer Decisions, Journal of Consumer Research, 19, 198-211. Erasmus, A. C., Boshoff, E. & Rousseau, G.G. (2001), ‘Consumer decision-making models within the discipline of consumer science: a critical approach’ Journal of Family Ecology and Consumer Sciences 29, 82-90. Heath, J. & Potter, A. 2004, Nation of Rebels: Why Counterculture Became Consumer Culture, New York, NY: HarperBusiness. Marieke, M. 2011, Consumer behavior and culture : consequences for global marketing and advertising, Thousand Oaks, CA : SAGE Publications. Mark J. & Reynolds, K. 2003, ‘Hedonic Shop-ping Motivations’ Journal of Retailing, 79, 77–95. Nagel, T. & Holden, R. 2002, The Strategy and Tactics of Pricing. Upper Saddle River, NJ: Prentice Hall. Ordabayeva, N. & Chandon, P. 2011, ‘Getting Ahead of the Joneses: When Equality Increases Conspicuous Consumption among Bottom-Tier Consumers’ Journal of Consumer Research, 38, 27-41. Peck, J. & Wiggins, J. 2006, ‘It Just Feels Good: Customers’ Affective Response to Touch and Its Influence on Persuasion’ Journal of Marketing, 70, 56–69. Peter, P. & Olson, J. 2010, Consumer Behavior & Marketing Strategy, New York, NY: McGraw-Hill Higher Education. Solomonm, M. R., Bamossy, G., & Askegaard, S. 2013, Consumer Behaviour: A European Perspective, Pearson. Wilcox, K., Kim, H. M., & Sen, S. 2009, ‘Why Do Consumers Buy Counterfeit Luxury Brands?’ Journal of Marketing Research 29, 247–259. Williams, P. 2014, ‘Emotions and Consumer Behaviour’, Journal of Consumer Science, 1 (2), 117 - 127. Wood, L. 2007, “Functional and Symbolic Attributes of Product Selection”, British Food Journal, Vol. 109, No. 2, pp. 108-118.45. Youn, S. & Faber, R. J. 2000, “Impulsive Buying: Its Relation to Personality Traits and Cues”, Advances in Consumer Research, Vol. 27, No. 2, pp. 179-185. Read More