Factors Influencing Consumer Behavior - Term Paper Example

 Factors Influencing Consumer Behavior Consumer Behavior This document is concentrated on the consumer behavior topics. It briefly summarizes the impact of digital revolution of 1980s on the consumer behavior, how market segmentation is done for online consumers and the factors on which consumer motivation for high-tech products depend. This document also discusses the influence of culture on consumer behavior with reference to Hofstede’s (1980) cultural model, and the adult consumer’s decision-making process. Impact of Digital Revolution on Consumer Behavior Digital revolution means the massive change brought by the digital electronics and information and communication technology particularly since the second half of the 20th century and continues to this day. Digital revolution is sometimes also referred to as the third industrial revolution. It began with the invention of transistor in 1947 which led to the creation of more advanced and powerful digital computers. First personal computers eventually appeared in 1970s. During 1980s these computers became more familiar with the government and general public of developed nations and by the late 80s computers became a necessity of many businesses around the world. World Wide Web was released to public by 1992 and soon enough many corporations started to quote their websites in their ads. Cell phones became very common in 2000 and 3 billion people use cell phones worldwide by the end of the decade. Tablet computers and smart phones have now appeared and are expected to exceed the number of personal computers by the end of 2015. Digital revolution has made drastic changes to the overall business environment around the world. It has influenced the way consumers around the world think about the products and the way they search for the products that cater to their needs. In short the digital revolution has changed the consumer behavior to a great extent. The revolution has also promoted competition among the global firms. These changes can be seen as follows: Through internet, particularly through the websites of corporations and their products, consumers now have easy access to more information than ever before. Consumers have more choice and more power than before. The way buy and sell transaction and handled and recorded have significantly changed. Marketers can now offer better quality and greater quantity of their products and services to individual buyers. Communication between the marketers and consumers is faster and vivid which enables relationship building, exchange of ideas and negotiation. The great use of digital tools and information and communication technology is the essence of digital revolution and it continues with every new invention that supports the human life. At present day technologies like smart phones, GPS device (Global Positioning System), Notebooks and tablet PCs, social networking etc. have changed our lifestyles by how we communicate, stay up-to-date and interact with each other. Internet has made communication is faster than before and the information is on our finger tips even on the go. All these changes and innovations have had a major impact on both the consumer behavior and marketing. Through the use of latest technology in e-commerce it’s now possible for corporations to showcase their products online at their websites and the customers have the ability to purchase their required products online through credit cards. For example, it’s now possible to order a tailor-made Toyota from a Tokyo car showroom and have the car delivered to you within a short time period. Handheld devices with internet capabilities have made the tasks of end-user buying and selling quite easier. By accessing GPS they can know for sure where in the world their desired product or service is available and best suited to their requirements. Hence, the behavior of consumers has changed in a drastic manner by digital revolution. Through social networking sites like Facebook and Twitter; forums and blogs; and online shopping websites like eBay and Amazon have made a consumer’s searching tasks easier and better. Now consumers can know full details, including the user experience, of the product they are planning to purchase before even going to a nearby shop or testing that product. This has made easy for them to purchase exactly the kind of product or service they are looking for and customer satisfaction has therefore increased. With the positive impact of digital revolution in mind we must not forget that the technology has also caused negative impacts on consumer behavior. The most notable contribution is made by the cyber-crime through which users may lose their money while transacting online. Nevertheless, reasonable steps are being taken by the firms worldwide to safeguard their customers’ interests by employing different measures to address the privacy and security problems. Market Segmentation of Online Consumers Market Segmentation is recognized as an essential element of marketing in industrialized countries. It is not beneficial to produce and sell the goods considering customer needs and recognizing the heterogeneity of those needs (Wedel and Kamakura, 2001, p. 3). Segmentation of the market into homogenous buyer with similar needs is thus very important because responding to an entire undifferentiated market is neither practicable nor in the benefit of the marketers. To survive in today’s competitive global marketplace the products and services must satisfy the needs of consumers with different cultural and demographic contexts. A feasible market segment needs to be distinctive, substantial, measurable, approachable and has to be big enough. Traditionally consumers are segmented on various grounds such as geography, culture, preference for products, behavior and demographics. Segmentation is beneficial and helps the marketer better attend to the needs of their customers by being more responsive as it’s easier to respond to a small number of consumers sharing similar needs. Thus it helps in targeting marketing efforts to the right kind and class of customers. Today’s online marketers realize that to maximize online marketing efficiency and effectiveness, they need a fair knowledge of the target audience and online buyers. Therefore, through the use of this market and consumer knowledge, the online marketers try to relate their products and respective promotional content with specific consumer segments. Instead of assuming that the entire internet population can be prospective buyers for a particular product, online marketers should realize that only a certain portion of internet users represent their prospective buyers for the products they are promoting, and target those consumers. The process of market segmentation can be seen as a process of dividing a heterogeneous market into much smaller homogenous markets in order to precisely meet the differing wants (Smith 1956). The appropriate and most suitable number of segments thus depends on the variability within a given population of potential customers. Segmentation variables of Online Consumers A “flow” research by Hoffman and Novak (1996) suggests that the internet is a quite different medium requiring segmentation methods different from traditional market segmentation. Following are the specific segmentation variables for online consumers with respect to different criterion: Demographic Segmentation- Knowledge of the web, Visitor’s email address, Web browser and its version. Geographical Segmentation- Connection network, internet service provider and geographical location through IP address Psychological Segmentation- Consumer attitudes towards the security, delivery, payment plans, delays and problems in transaction etc. Segmentation according to behavior- Shopping behavior and likes/dislikes, method of accessing the websites, how often does the visitor visits the website and competitors’ website. Segmentation according to benefits sought- Consumer’s interest in obtaining more similar information, advantages of making online purchases and discounts offered etc. Consumer Motivation and High-Tech Products Companies making high-tech products work at an accelerated pace to issue new products and services. These companies need to make sure that their potential customers are fully aware of their latest products and services through their websites and online marketing. Companies like Sony, Intel and Motorola have a huge catalog of all their products that list in detail their features, individual design and how buyers will get benefit from their products. Such catalogs help consumers to become aware of what the product is capable of even before buying so that they’ll know whether the specific product will match to their individual needs and purpose. Besides websites and online catalogs, a number of other sources are also available that can provide an incentive to the prospective buyers to purchase high-tech products. These include discussion forums, review websites, online communities and social networking. Through these mediums high-tech corporations can communicate to their customers their latest products and how they have an edge over their competitors. It is also necessary for consumer motivation to keep the products up-to-date with new technology and latest software so that they’ll have an incentive to buy the latest models of the product. Online webpages usually hire experts who compare two similar products of two or more different companies to let the customers know which product is the best deal. Thus for a high-tech product to be commercially viable and successful, it needs to be competitive with its substitutes, so that customer motivation is high and at the same time they are happy and satisfied with their purchase. The Influence of Culture on Consumer Behavior Today’s global marketplace consists of many people with different backgrounds and cultural values and norms, to efficiently deal with people from different backgrounds it is crucial for marketers to understand effects of culture on consumer behavior. The importance of culture in the determination of consumer behavior has, therefore, led to a great research among different cultures (Sojka and Tansuhaj 1995). Wallace (1965) says culture is the broad field that determines personality, which in turn influences the consumer behaviors. Various cultural studies across the globe have found that the pattern of consumption is different among the people of different ethnic groups and geographical subgroups. In the following paragraphs, various aspects of the consumer behavior that can be influenced by the culture are identified using the Hofstede’ (1980) cultural model. Hofstede’s model identifies four main dimensions of national cultural variables. These are discussed as follows: Individualism-Collectivism This refers to the extent to which people prefer to live and work in individualist, or collectivist ways. This aspect of the cultural behavior identifies the behavior of people in groups and how they perceive to live among different people and their relationships with those around them. It can be said that those belonging to high individualism cultures are less like to engage themselves in groups and are therefore less likely to be influenced by the groups, prefer individual choice and emphasize autonomy. Uncertainty Avoidance Uncertainty avoidance refers to the extent people tolerate the unknown and unforeseen aspects of the future. This can influence the consumer behavior in situations of uncertainty. People from high uncertainty avoidance cultures prefer to have security, are brand loyal and seek to avoid risks that could jeopardize the satisfaction of their wants. Masculinity-Femininity This refers to the extent to which the social gender roles are distinct. Masculinity-femininity takes into account sex role differentiation & the dominance of either male or female values. Man is mostly in charge of household decisions in high masculinity cultures. Power Distance It means the extent to which unequal distribution of power is accepted. Opinion seeking is one aspect that is affected by power distance. Generally there will be a large number of opinion seekers in large power distance cultures. The Adult Consumer's Decision-Making People purchase products that they expect will satisfy their wants and needs at any particular time. This involves a decision making process that is influenced by internal as well as internal factors. Firstly, the people around us influence us in making buy or sell decision; these include family, friends and people we interact with in our daily lives. Furthermore, opinion seeking also influences the decision making. An opinion seeker is the person who looks out for new products and seeks information regarding them, whereas an opinion leader is the person who influences another person’s decision regarding a particular product. Advertising also affects the adult consumer’s decisions regarding products. In today’s digital age consumers stay in touch with different media in order to stay well informed regarding the latest market products. A study suggests advertising should be focused on products and ways that are save costs for the consumer (Creamer, 2008), so that the adult decision-makers will look at the advertisements as credible sources of information. Specific brand names can also attract to the adult consumer decision maker, and their past experiences can also have influence. Hence, the decision making process is how the consumers make consumption decisions and it is based on their pre-purchase search for the product to satisfy the need. References Anna-Lena M. (2001). Industrial Segmentation: A Review. Retrieved July 24, 2009, from the Åbo Akademi School of Business Web Site: http://web.abo.fi/fak/esf/fei/wrkpaper/ms208/memostencil208.pdf Challoner, J., & Gribbin, J. (2002). The digital revolution. (1st ed.). DK ADULT. Frank R., Massy W., Wind Y. (1972). Market Segmentation. Englewood Cliffs, Prentice-Hall. Hofstede, G. (1980), Culture’s Consequences: International Differences in Work-Related Values. Beverly Hills, CA: Sage. Jung, K., & Kau, K. (n.d.). Culture’s influence on consumer behaviors: Differences among ethnic groups in a multiracial Asian country. Retrieved from http://www.acrwebsite.org/volumes/v31/acr_vol31_16.pdf Mafé, C. R., & Navarré, C. L. (n.d.). Segmenting consumers by e-shopping behavior and online purchase intention. Retrieved from http://jib.debii.curtin.edu.au/iss03_mafe.pdf Read More