Theories Relating to Consumer Behaviour and Decision Making - Case Study Example

Analysis of Consumer Decision-Making and Behaviour Introduction The manner in which consumers make decisions about the products in the market is critical to how the manufacturers of such products perform. Consumer behaviour determines how consumers make decisions about the way they purchase goods or services. Hoyer and Macinnis (2008) define consumer behaviour as the totality of consumers’ decisions as regards the acquisition, consumption, and disposition of goods and services, time and ideas by human decision-making units over time. Simply put, consumer behaviour refers to the study of how a person buys products, but this has to be with respect to the other phenomena mentioned in the previous definition. Consumer behaviour is not just about tangible goods such as automobiles; it also includes consumers’ utilisation of activities, services, experiences and ideas, such as taking a car for after sales service, and so forth. It is inarguable that an automobile company that offers additional services apart from the initial product (the car) stands a better position to attract more customers to buy its products. As mentioned above, consumer behaviour is more than mere buying. Companies have to study the manner in which consumers buy as this is critical to their operations. Nevertheless, they also have to study other aspects such as acquiring, using the product and its disposition. Acquisition includes ways of obtaining the goods and services, such as leasing, sharing or trading. It also entails the decisions made about time and money. Additionally, how consumers use the services they acquire is also a core element of consumer behaviour. Whether and why consumers use certain products can symbolize something about who they are, what they value, and what they believe. More importantly, marketers have to pay attention to when consumers are likely to use a product, whether they find it effective, and how they react after using the product. For instance, marketers have to determine whether buyers spread positive or negative word-of-mouth analyses, and so forth. Further, companies (especially those dealing in goods that require detailed disposal procedures such as automobiles) must understand how consumers get rid of the offering they have previously acquired. This has serious implications as eco-minded consumers usually seek products that are eco-friendly or those whose parts can be recycled. In view of the facts above, this paper seeks to analyse the marketing strategies employed by two companies, Nissan and Toyota in marketing their products, Nissan Maxima and Toyota Camry. The paper focuses on the customer relationship approaches taken by Nissan Motor Company and Toyota’s resource advantage approach. Nissan Maxima: Focus on relationship marketing The concept of relationship marketing attempts to achieve involvement and integration of suppliers and consumers, resulting in an intimate and interactive relationship with them. One of the fundamentals aspects of relationship marketing is to increase productivity by realising higher effectiveness and efficiency (Zeidler, 2009). There are several factors that support the achievement of a higher efficiency, a higher magnitude of customer retention, more efficient consumer service and insight on consumer behaviour based on buying histories that allow analysis of frequency of purchase, preference of products and supporting segmentation. Using this information as a background, individualised marketing and adoption of mass customisation processes becomes possible and sellers can better handle the needs of each individual customer, making marketing more effective (Zeidler, 2009). How Nissan Camry’s brand strategy conforms to the relationship marketing theory The relationship marketing concept implies that consumers get into relational exchanges with companies when they deem that the gains derived from doing so exceed the costs involved (Hunt, Arnett & Madhavaram, 2006, p. 92). In other words, it is a strategy based on creating a mutually beneficial exchange between business partners (Sorce, 2002, p.5). Some of the perceived benefits include (1) the belief that a particular partner can be trusted to reliably, proficiently, an non-opportunistically provide quality market offerings, (2) the belief that the partnering firms share values with the consumer, (3) the customer experiences decreases in search costs, (4) the customer has a feeling that the risk associated with the market offering is decreased, (5) the exchange is consistent with moral obligation, and (6) the exchange facilitates customization that results in better satisfying the consumer’s wants, needs, tastes and preferences (Kleinaltenkamp & Ehret, 2006, p.83). Any company that aspires to build a strong relationship that is mutually benefitting with its customers must of course produce goods that match what consumers want. This objective is pegged on creating customer fulfilment by offering products and services of superior quality. The firm must also build brand equity, which refers to the sum of the intangible assets of any given brand. In order to build effective brand equity, a number of factors have to be considered, which include name awareness, brand loyalty, the associations consumers have towards the brand, packaging, trademarks, and marketing channel presence (Sorce, 2002, p.7). All these factors contribute to an assurance of repeat purchase, insulation from price increases, and increased responsiveness to marketing communications by consumers. In marketing Nissan Maxima, Nissan has relied on a number of factors. First is Nissan’s mission, which is to create attractive designs for the joy of customer’s every day life (Nissan, 2010). The company has a powerful message that “power comes from inside” and that companies do not create products nor deliver services or solve problems, but people do. This is the first point in ensuring that the company is close to consumers through its employees. Nissan Maxima has been in the market since the 1990s but has undergone a lot of changes to match consumers’ ever-changing needs. Although most sedans from Japan and the United States were regarded efficient for use but rather feckless in reference to generating exhilaration or pride of ownership, Nissan Maxima proved to be a model to reckon with. The model in the 1990s was a powerful V6 that had a fashionable interior and an attractive four-door look. The Nissan Maxima model came as relief to consumers, who could now afford a sports car comparable to the out-of reach-models manufactured in Europe. Nissan has built relationship with customers since then (Nissan, 2010). The current model of Nissan Maxima represents the automobile’s seventh generation, and debuted in 2009. Nissan Motor Company has focused on enhancing the car’s features to match consumers’ needs. There are two key models of Nissan Maxima: 3.5 SV and 3.5 S. 3.5 S is the base model, which is well equipped with standard features that include amenities such as ignition, dual-zone automatic ambience control, and a wide range of safety measures. SV models are designed to contain other luxury features such as leather upholstery and a first-class nine-speaker Bose stereo. These features vary within models, but consumers have the opportunity to upgrade their products with additional such as voice-activated navigational systems, rear-view cameras and iPod integration (Nissan 2010). The Nissan maxima design is one of the most captivating features in Nissan’s marketing strategy. It is a move aimed at influencing the consumer’s decision-making process as the features of the models dictate. As noted by Kim and Michell (1999), a key aspect of relationship marketing is building a brand and the relationship with consumers on an ongoing basis. Further, the more the suppliers and consumers share information, the more their decisions about the product in questions are changed. Hence, the consumer and the manufacturer are able to engage in relation-specific investments as has been the case in building the Nissan Maxima since the 1990s. Other features of relationship marketing include facilitating cost reduction (so that consumers can purchase more), improving quality, and improving trust-based relationships to minimize transaction costs. Although establishing and maintaining this kind of relationship may be a costly venture, the relationship is considered an important way to reduce a consumer’s ability to switch away from any given supplier (Kim & Michell, 1999). It is therefore no wonder that Nissan Maxima has remained a popular model since the 1990s and even in the present day when there is stiff competition from other automakers such as Toyota, Honda and Mitsubishi, to enlist but a few. The downside of Nissan Maxima’s luxury features is its high cost. This means that the model is exposed to high competition from other luxury-branded models. But Nissan has also relied on the neoclassical decision-making theory to ensure that the brand stays at the top of the market. According to this theory, the decision-maker considers all probable alternatives; identifies the complete set of attributes that could impact on the success of choosing any of the available alternatives; assigns a relative importance to each quality; calculates an overall value for each alternative based on the effect of feature and relative weight; and selects the alternative that has the best value (Zellman, Kaye-Blake & Abell, p. 272). Additionally, the decision-maker integrates all the information available about all alternatives before making a final decision. Going by this theory, one would realize that a brand such as Nissan maxima would be threatened by competition due to its relatively higher price. Nevertheless, there are many alternatives for Nissan Maxima buyers in that low-end users can go for used models. These models are refurbished to give the looks of new automobiles. But even with this option, Nissan Maxima has not stayed clear of competition. Many automakers have realized the lucrative nature of the used car market, and along this line, brands such as Volkswagen Passat and Acura TSX are forces to reckon with. In view of the above analysis, it can be noted that the strategy to maintain Nissan Maxima as a popular brand needs to be dynamic with respect to the changing needs of the market. Nissan, as it has also done before, should embrace the fact that customer value is determined by customers’ perceptions rather than suppliers’ assumptions as noted by (Khalifa, 2004). In this regard, it is important to note that value is defined by the customers in the market rather than the supplier in the factory. In essence, value is not what the producer puts in; it is what the customer gets out of a product. Definitions of customer value can be put forward in relation to the customers’ behaviour and how they make decisions. Hence, there is need to value component models, utilitarian or cost benefits and cost ratio models, as well as means-end models (Khalifa, 2004, p. 647). Nissan’s strategy in marketing the Nissan Maxima model has been based on an understanding of consumers in these various perspectives. To this end, there are product offerings in terms of Nissan Maxima 3.5 S, 3.5 SV, 3.5 SV with Sport Package, and 3.5 SV with Premium Package (Nissan, 2010). This means that consumers have a wide variety of products to choose from, and gives the company the benefits of products diversity. Toyota: Focus on resource advantage (R-A) theory Resource advantage theory is an evolutionary, process theory of competition that was first highlighted by Hunt and Morgan (1995). The theory has since then been reviewed, and Hunt (2000) and Hunt and Morgan (2005) offer the latest reviews (cited by Hunt & Madhavaram, 2006, p. 97). It is a general theory of competition that describes the theory of competition, which in this perspective is the desire by firms to influence consumer behaviour and decisions. The R-A theory is premised on three major aspects: resources, market position and financial performance. Firms have to organize their resources to ensure that they have a competitive position in the market and are able to influence their decisions while also maintaining a reasonable financial position. In view of this, competition is a disequilibrating, continuous activity that encompasses constant fight among firms for a relative benefit in resources that will lead to a market position of competitive advantage. Firms learn from the decisions made by customers as a result of the feedback they get about their products in the market, and from relative financial performance, which in turn signals relative resources. R-A emphasizes the significance of (1) marketplace segments, (2) dissimilar firm resources, (3) comparative advantage and disadvantage in resources, and (4) marketplace position of competitive advantage and disadvantage; which is determined by several factors, including customers’ tastes and preferences (Hunt & Madhavaram, 2006, p. 97). R-A also places great emphasis on innovation, both reactive and proactive. This means that firms have to learn in many ways – through formal market research, dissecting competitors’ products, seeking out competitive intelligence, test marketing and benchmarking. Toyota has grown rapidly due to its diverse marketing strategies. Toyota Camry is just one of the many brands that been the cause of this growth. This leaves a begging question, just how does Toyota do it? R-A is a about achieving a high equity brand, which is the reason why companies are in business. It is about triggering favourable associations among targeted consumers, and adding value to the market offering so as to put the product in the right market position. In view of this and in relation to the R-A theory, a brand may be considered to be a relational resource because brand equity is an embodiment of a firm’s relationship with consumers. Toyota Camry is an epitome of Toyota’s relationship with customers (Hunt, 2010, p. 424). Like all other models, it is sold in the context of relationship marketing but for purposes of differentiating the operating mechanisms of various theories, this paper focuses on the R-A approach. As mentioned above, based on the R-A theory, firms have to do a lot to achieve a competitive advantage. Among other things, they have to dissect their competitors to understand their weaknesses and gauge the areas on which they can capitalize. Toyota’s website has a page that features comparisons of three cars: Toyota Camry, 2010 Honda Accord Sedan and 2011 Hyundai Sonata. The essence of this comparison is to show that Toyota Camry has an advantage over one or both vehicles based on various features and specifications of the cars. According to the website, Toyota Camry is more cost effective as compared to 2010 Honda Accord Sedan: the former goes for $20, 355 while the latter costs $21, 805. Other features that make Toyota Camry to have an advantage over 2010 Honda Accord Sedan include torque and fuel economy (Toyota 2010). It is the perceived benefits of one product or service over another that dictate consumers’ decisions during purchase. Any potential buyer visiting the Toyota website, and who is rational in buying will definitely go for the cheaper and more reliable automobile, which in this case is Toyota Camry over 2010 Honda Accord Sedan as per the comparison. This is in line with the viewpoint posited by Peng (2008) that gaining a competitive over a competitor requires a combination of organizational attributes and skills in utilizing the organization’s resources. Toyota is also building on the reputation earned from previous models that made it famous around the globe to market the Toyota Camry. As noted by Kleinaltenkamp and Ehret (2006), R-A is also related to relationship marketing because it increases their firms’ competitiveness. In other words, firms such as Toyota utilize their resources to build their relationship with customers because they are cognizant of the fact that they are able to efficiently and effectively produce product offerings that have value for some market segments. This implies that they do so when relationships become resources. Relational resources have the capability to improve a firm’s marketplace position, and ultimately its financial performance (Kleinaltenkamp & Ehret, 2006, p.84). Along this line, it can be argued that Toyota is building on its past relationship with customers to market the Toyota Camry. Toyota Camry’s market is segmented, mostly targeting the United States. The model’s main competitors in addition to Honda Accord and Hyundai Sonata are Nissan Altima and Mazda 6. Toyota Camry’s position in the market is also attributed to its long existence in the market since 1980, and has undergone upgrades over the years. The Camry also has popular markets in Australia and several countries in Asia, particularly in Cambodia. In spite of its perceived success around the world, the model has not experienced major sales Japan and Europe (Toyota, 2010). The R-A theory assumes that consumers have imperfect information regarding products or services (Peng, 2008), and this is the case with Toyota Camry, since the models sold in various regions have varied features. This is in line with the point that products can be viewed as bundles of attributes. To be competitive, firms that are not in a so good position have to innovate by imitating those in favourable positions, finding similar resources or creating superior resources. In this context, a superior implies that the innovating firm’s new resource enables it to surpass the previously advantaged competitor both in terms of relative costs and relative value (Hunt & Madhavaram, 2006, p.97). This is the strategy that has largely been adopted in upgrading and ensuring continued presence of the Toyota Camry in the market since the 1980s. As noted by Hunt and Madhavaram, firms in positions of competitive advantage can continue influencing consumers’ decisions if they continue to reinvest in the resources that contributed to the position and if their rivals’ innovation and acquisition efforts fail. There is no proof that efforts by Camry’s competitors have failed, but there is every pointer that a lot of investment has been put in upgrading the Camry to maintain its highly competitive market position in the United States and several countries in Asia. Conclusion This paper has reviewed two major theories that relate to consumer behaviour and decision-making with reference to marketing of two models of cars, Nissan Maxima and Toyota Camry. It has been noted that manufacturers need to understand consumers’ attributes such as how they acquire the goods or services they need, how they use them as well as the products’ disposition. Nissan and Toyota have diverse marketing strategies, but both are closely linked to relationship marketing. Both Nissan Camry and Toyota Camry have survived competition due to their new features that come with upgrading to match consumers’ changing needs as well as other technological dynamics of the market. Both products are marketed in relation to market segments, in which different product offering are provided as per the needs of the particular market segment. The discussion about Nissan Maxima has focused on the relationships formed between manufacturers and consumers, with a major point that the focus should be on what consumers derive out of products or services rather than what manufacturers invest in the same. On the other hand, resource advantage, which has been the focal point of Toyota Camry, is about utilizing a firm’s resources tactically so that the end result may have a significant impact on consumers’ decisions and behaviour, which are reflected in increased purchases. References Hoyer, W. D. & Macinnis, D. J. (2008) Consumer Behaviour (5th edition), Cengage Learning, New York. Hunt S. D. (2010) Marketing Theory: Foundations, Controversy, Strategy, and Resource - Advantage Theory. New York: M.E. Sharpe. Hunt, S.D. & Madhavaram, S. (2006), Teaching Marketing Strategy: Using Resource-Advantage Theory as an Integrative Theoretical Foundation, Journal of Marketing Education,28(2), available fromhttp://sdh.ba.ttu.edu/JME06%20-%20Teaching%20Marketing%20Strategy.pdf (11 August 2010). Hunt, S.D., Arnett D. B. & Madhavaram, S. (2006) “For dynamic relationship marketing theory: a reply to Rese,” Journal of Business & Industrial Marketing, 21(2): 92–93. Khalifa, A. S. 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