The Forces That Affect Consumer Decisions on Buying a Commodity or Accessing a Service - Term Paper Example

Consumer Behaviour Introduction Decision making is a mental cognitive process that results into the selection of a course of action or choice of an action among several alternatives (Dittmer, 2008, p. 1). Every decision making process should lead to a final choice. The final choice can be an action, an opinion or a selection. Consumers are faced with situations that require them to constantly make decisions in their everyday lives. Consumers and households make decisions on what goods to purchase and what services to access. Consumer decisions are characterised by various factors for example; price of goods, convenience and services that accompany the service or good among others. The consumer decision making process is explained in many theories as will be discussed in this essay and these theories can assist marketers to market their products. These theories are based on analysis of consumer behaviours. Consumer behaviour combines various elements such as psychology, sociology and others with the aim of understanding the decision making process of consumers (Dittmer, 2008, p. 67). It attempts to understand the needs of the consumer through studying their characteristics. Consumer behaviour is based on consumer buying behaviour and thus consumer decision can be determined. This is especially important to marketers as they need to understand the consumer in order to manipulate their decisions positively when purchasing commodities. Traditionally, it was difficult for marketers to understand the consumer. Recently, strategies have been developed to help marketers understand consumer behaviour as will be discussed in this essay. Consumer behaviour This is the study of people’s activities when they are deciding whether or not to buy a product (Hoyer & Macinnis, 2008, p. 58). Through studying individuals’ or even groups’ characteristics such as demographics and behavioural attitudes, it understands or rather tries to understand the consumer needs/wants. Consumer behaviour also attempts to understand the influences that a family, friends or the society have on a customer. Relationship marketing is an important asset for consumer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of marketing through the re-affirmation of the importance of the consumer (Buda & Zhang, 2000, p. 69). The consumer decision making process is a simple 5 step process as outlined by Olga (2012, p. 34). It includes the following steps: Problem recognition The decision making process starts when a consumer discovers that there is a problem. This step involves discovery that a problem exists and that the consumer has to fix the problem. The problem occurs when the consumer finds out that there is a difference between the actual state and the desired state. For example, a consumer who has a problem with a computer notices that his computer is not serving him to his desired state. Information search This second step involves the searching of facts and information that may help to solve the problem. By scanning the products or services that may solve his problem, the consumer gathers product information and thus, he or she becomes more aware of the brands present in the market. Like in the above example, the consumer will scan other computers that can satisfy him and this way, he will have more knowledge of the brands that he can purchase to solve the problem. Evaluation and selection of alternatives Under this level, the consumer tries to solve the problem by finally satisfying his needs/wants. The consumer will separate the benefits from the demerits of a product. This is done by looking for goods with specific attributes which can deliver the benefits that the consumer requires. The consumer views each commodity he wants to purchase as a bundle of attributes, each having a different level or ability to give him the benefits that will satisfy his need (Kotler, 2000, p. 47). The consumer above will finally make a decision; for example he may opt to buy another computer that better suits him Decision implementation Here, the consumer needs to decide where to buy the products he/she has settled for. Decisions can be made at once. Consumers can also consider buying item first, outlet second or vice versa. In the above scenario, if the consumer opts to purchase the computer, he will have to choose the brands according to the both their technical features and availability. Finally, he will decide on where to buy the computer. However, in most scenarios, the consumer purchases the product simultaneously. Post purchase evaluation Post-purchase evaluation is dependent on the data and research findings that the consumer collected (Kotler, 2000, p. 47). They are determined by the extent to which the consumer searched for information. Here, the consumer decides if he made the right choice or not and usually there consequences/effects. Levels of decision making Everyone makes decisions. In the context of marketing, decisions can be on whether to make a purchase or not. Decisions made by the consumer are on three levels i.e. extensive problem solving, limited problem solving and routinised response behaviour. Extensive problem solving requires great deal of information that will enable set a criteria and standards for evaluating the brands to be chosen from (Schiffman et al, 2011). The large pool of information is necessary for decision making as the consumer acquires the required facts to assist in decision making. Limited problem solving occurs when a consumer has already set the standards and criteria of evaluation (Schiffman et al, 2011). The consumer however has not yet set the preferences he desires. The additional information he gathers will assist him or her to set the desired preferences. In routinised response behaviour, the consumer usually has a lot of experience in the product (Schiffman et al, 2011). The consumer thus does not necessarily require any additional information as he is well informed. There are four perspectives that a consumer has when making a decision: economic, passive, cognitive and emotional (Schiffman et al, 2011). In economic view, the consumer is viewed as a rational buyer. He operates in a perfect competitive state and usually has all the information needed to make a decision. The passive view considers the consumer as a passive decision maker who can fall for self serving interest and the marketers’ efforts. The cognitive view assumes the consumer as a problem solver. The consumer in this view revises all the information he has to yield preferences that will eventually lead to the buying decision. Lastly is the emotional view which refers to the consumer decision making that follows a desire to buy a product. The emotional view is usually associated with impulse buying (Schiffman et al, 2011). Consumers’ decisions to buy a product or access a service are in most cases an important moment for most marketers. Marketers can identify if the strategy they applied in marketing was good and appropriate or not. Theories of decision making Theories of consumer decision making depend on various factors. For example, the theories depend on a researcher’s assumptions about humankind nature. The consumer decision making process uses the concepts of psychology and culture. The decision making model has three variables i.e. the input variables, process variables and the output variables (Mitchell, 1999, p. 79). Commercial marketing efforts and non-commercial efforts are the input variables used in decision making. Non-commercial efforts arise from the consumer’s sociocultural surroundings. The process variables are derived from the consumer’s psychological field (Mitchell, 1999, p. 80). Over the years, there have been theories that have been developed by researchers and which have helped marketers in implementing their marketing strategies. These theories include the prospect theory, the utility theory and the satisfactory theory as noted by Tuck (1976, p. 45). They are described below: The utility theory The utility theory argues that the consumer’s decisions are influenced by the expected outcomes that will arise from the decisions made. This theory assumes that the consumer is rational and likely to determine the future outcomes associated with the decisions that are made. The theory states that decisions are dependent on the utility of the result of the decision making process. This theory has its shortcomings as the consumer cannot be fully rational, and hence he or she cannot be able to predict the exact future effects/results of his/her decisions. The utility theory assumes that the consumer is rational and capable of identifying or estimating the probabilistic outcomes of uncertain decisions and from the list of the alternatives, the consumer can select an alternative that can maximise his/her well-being. For example, a consumer who predicts that by purchasing a car, he may be comfortable in running his errands will have to buy a car to meet this want of being comfortable. This theory did not play major role in helping the marketers to improve their marketing strategies as the marketers did not have a way by which they could predict and determine the consumer behaviour. The satisfactory theory The satisfactory theory argues that consumers get to a point where they become exhausted with pursuing more and thus become satisfied and stop the decision making process. This theory can be referred to as the settling for the good enough theory. An example of this model put into a practical scenario is when a consumer is searching for a place to live. In searching for an apartment, the consumer evaluates apartments in an estate that is just close to him or her. In making the decision, the consumer will not be able to evaluate all the houses and thus will stop at a point although he will not have scanned all the apartments. This theory accommodated most of the shortcomings of the utility theory but it did not fully encompass all the shortcomings. It left significant room for improvement especially in the context of prediction. It was still difficult for marketers to determine the consumer behaviour. The prospect theory Prospect theory was developed to help the marketers better understand the behaviour of the consumer when making decisions. The prospect theory expanded on the utility and the satisfactory theories as it somewhat solved many problems that the two could not solve. The prospect theory highlights the elements of value and endowment (Laury & Holt, 2000, p. 237). Value was used as a point of reference where gains and losses could be determined. Endowment emphasised on the fact that owning a product was better than if someone else owned the same product. According to the prospect theory, consumers will under-weigh the outcomes that can arise from a decision in comparison to the outcomes that are obtained when the consumer is certain. The prospect theory postulates that outcomes of decision implementation under conditions of benefits or losses should not be constant because a times the consumer makes irrational decisions. This theory allows the marketer to know how consumers make decisions as it helps them to know how to frame a message in an advertisement. The marketers can also know how to position a new product being introduced in the market. In addition, the marketers can know how to price their products relative to the competition and good pricing will eventually attract the customers. The marketers also know the premium that a consumer is able to pay and in which markets their products will be accepted best. Prospect theory is classified in four categories (Laury & Holt, 2000, p. 245) i.e.: The editing process - This is where the decision making process is made simpler by use of short cuts called heuristics e.g. the representative, availability anchoring and analogies. The coding process - Coding is a complex process that involves use of some known or desired reference point to which the outcome can be measured (Kotler, 2000, p. 67). A marketer can use the status quo of most consumers as a reference point to determine the consumer behaviours. For example, a consumer who is shopping for a car will look for a car on the perception of an acceptable price which will be depend on the amount that the consumer paid for his last/previous car i.e. past experiences and the price he has seen are searched for in the information search. The coding process applies cancellation where the decisions that result to the same outcome are forgone. Segregation is a where the consumer separates the riskless decisions from the risky ones for evaluation. Combination in the coding process is where the consumer will put together the same outcomes. Value function - Consumers will value a sure gain more than a gain that they are not sure of even if the uncertain gain is of higher value. This thinking of the consumer is opposite in the losses scenario. Marketers need to know and understand the decision making process of the consumer in order to position the products they are selling in a way that the decision making process will result to consumers selecting them. According to Kotler (2000, p. 156), various strategies have been set by the marketers to allow them achieve maximum sales: Equal weight strategy - In this strategy, the consumer tries to compensate one product’s shortcomings with another product’s advantages. Consumers can allow a higher value of a product attribute to counter for a lesser value of another attribute. For example, a consumer who wants to purchase a car would opt to buy a car with a high value in leather seating and a lower value in gas mileage as the higher value in leather seating would compensate for the low value in gas mileage of the same car. This strategy will result to a marketer focusing on the value of the leather seating rather than the gas mileage. Weighted additive strategy - Under this strategy, the consumer places a higher value on specific attributes of a product. An example is when a consumer wants to buy a computer. If the consumer values the memory capacity attribute over every other attribute, the computer that has the largest memory capacity will be bought. Thus by understanding this behaviour of the consumer, the marketers will be concerned with computers that have large memory capacities. Elimination by aspects - This strategy sets a value which will be used to determine the most important attribute of a product. All the products that meet this value will go further to the next attribute in the decision making processes while the products that do not meet the cut-off value will be dropped. Lexicographic - This strategy tries to identify the most important attribute of products and the most superior product is preferred by the consumers. After identifying the most important attribute and the most superior product has been identified. The decision making process stops. Frequency of bad and good features - This strategy views all the attributes of a product as important and does not rely on one attribute. Here, the consumer evaluates all the important attributes and compares them. The chosen product is the one which has the most average features. Factors that affect consumer behaviour Consumer behaviour is greatly influenced by sociocultural factors as these factors determine the decision making process of the consumers. Every marketer should know these factors as they can assist the marketer to understand the consumer well. Consumer behaviour refers to the selection and purchase of goods and services that the consumers find to satisfy their wants. There are many factors that determine and influence consumer behaviour such as cultural factors, personal, social and psychological factors. Some of these are discussed below. Cultural and social factors The consumer decision making process is largely affected by the cultural factors such as social the class of the consumer, the subculture of the consumer and the buyer culture. Culture - This varies from one buyer/consumer to another and from state to state. Culture is part of every society and is an important determinant of a person’s wants and behaviour (Hoyer & Macinnis, 2008, p. 67). Culture refers to the values, ideas and attitudes accepted in a given society. Culture determines the goods and services that are acceptable to be advertised and sold in a society. It also determines the kind of products that people eat, wear and so on. Culture thus has a great influence on the consumer decision making process. Consumer wants are also influenced by various social factors such as opinion of leaders, family, reference groups and others as discussed below. Opinion of leaders - People in a society who have great influence on the other people can influence their decisions. The consumer decision making process is dependent on the opinion leaders in a society. Marketers can use these opinion leaders to market their products. Family - This being the most basic group that anyone can belong to, has a great influence on the consumer behaviour. Decisions that a family member makes should not conflict with his family and this also applies in the products one purchases. Marketers should understand that consumer behaviour starts from the family unit and that family purchasing roles are a mixture of family interactions and decisions made by an individual. Reference groups - These are the groups that an individual associates with to the extent that he/she adapts and takes on the behaviours of that group. Marketers should make sure that these groups approve the kind of products that they are selling. An individual’s decision will be influenced by the reference group depending on his involvement with the group. Social class - Every person is in a social class that determines his buying behaviour. Depending on their income, consumers will categorise themselves in different classes. Marketers should take note of these classes and know what kind of products they prefer and tailor their marketing activities to fit the social classes. Roles and status - Everyone belongs to a certain status and each individual has a role that he or she performs in an organisation, family, club and so on. One’s roles and social status will greatly influence the product he buys. Role and status greatly affect consumer behaviour. The occupation of a person will affect his buying behaviour. A manager will buy suits and not jeans and other casual wears as suits are within his line of work. A subordinate worker, for example a sanitary cleaner will buy rugged clothes. Age and lifecycles have an impact on consumer behaviour. With time, people will change the kind of products they purchase in accordance with life cycles. For instance, young singles and married couples will change the products they buy to develop appropriate goods that fit their current stages. Personal factors Personal factors include one’s lifestyle, age, economic situation and so on which affect the consumer behaviour. For example, a consumer earning an annual income of $8000 will not purchase a car that would strain his economic status. Moreover, a rich person will not buy a car that does not fit his lifestyle. All these are related to personal decisions. Psychological factors Psychological factors determine the kind of products a consumer will buy as well. The psychological factors that affect the consumer decision making process are motivation, perception, and others outlined below. Motivation - This is the drive to satisfy a need (Botha, Strydom, Brink, 2005, p. 40). Some of the consumer motivations are learned while most others are unconsciously acquired. Motives like wanting to be married are learned while motives like wanting to eat are unconsciously acquired. These motives affect consumers’ everyday behaviours. Theories that explain the consumers’ behaviour have been developed; for example the Maslow’s theory of motivation and the Fraud’s theory of motivation. Fraud’s theory argues that consumers are affected by the psychological factors that shape their behaviours. Fraud in his theory sees the consumer as a growing up figure that has urges which can never be fully satisfied (Lingard & Rowlinson, 2005, p, 367). Maslow goes further to explain why consumers are driven by certain needs at different times. Maslow explained that consumer needs are in a hierarchical manner and they vary from one person to another (Lingard & Rowlinson, 2005, p, 367). Additionally, consumers have needs that can be biological and these needs become motives when they are aroused to a significant extent. A motive is thus a need that is pressing to a consumer and the consumer has an intense urge to satisfy the need. This is usually psychological and marketers should be aware of these urges and avail the products that will satisfy these intense needs. Perception - This is concerned with how consumers perceive a product. Perception is a process by which consumers select, categorise and interpret information to form a picture in their minds (De Mooij, 2010, p. 228). It is concerned with the way a person’s acts are influenced by his opinion or judgment. Two consumers with the same motivation and in the same situation will buy different commodities if they have different perceptions. How consumers perceive a product will determine whether they will buy the product or not. Learning - This is the change in behaviour of consumers resulting from past experiences and it occurs through stimuli, cues, drives, reinforcements and responses interplay. Marketers can generate demand for a given product or service by relating it with strong drives using appealing cues, and offering positive reinforcement (Lamb, Hair & McDaniel, 2011, p. 84). After perceiving a product, consumers will acquire information about it. If they gain a positive experience with the product, they will continue using the commodity. Beliefs and attitudes - Consumer beliefs and attitudes towards a product will determine if purchasing a product is a good idea or not. When a consumer believes that a certain good is not appropriate for his use, he will have a negative attitude towards the product. He will therefore not buy the commodity. This is especially important to marketers as the beliefs of consumers build an image of a product that will ultimately affect the consumer. Marketers should ensure that consumers maintain a good attitude towards their product as this will generate favourable feelings, evaluations and tendencies towards their products. Usually, consumers’ attitudes are hard to change and once a consumer has a negative attitude for a good, it will be difficult to change them. Through advertising and other forms of marketing products, marketers can increase the consumers’ beliefs in a product. Conclusion This essay outlines the forces that affect consumer decisions on buying a commodity or accessing a service. It is evident that a consumer’s choice to purchase a good depends on various factors and marketers should learn how these factors interact with each other in order to understand consumer behaviour and in turn, increase their sales. Many of the factors that affect the decision making process are out of control of the marketer especially the psychological factors but these factors provide a means of gathering information on the potential buyers and on how to design a product to fit the consumer desires. A number of theories have been advanced to understand the consumer decision making process and these theories have greatly helped the marketers to increase their sales. By understanding consumer behaviour, marketers can make strategies that will see them achieve their sales targets. Most marketers were challenged with the problem of how to influence consumers to purchase their products. Marketers’ success depends on how they influence consumer purchasing behaviour and thus, they need to understand the consumer decision making process. They need to know how consumers gather information and they should also understand the specific needs that different consumers are aiming to satisfy. Marketers should be aware of the different classes and groups that consumers belong to. Consumer behaviour determines the decisions that buyers make. Psychological factors such as motivation, perception and beliefs all have a large influence on the consumer decision making process. Through understanding these psychological factors, marketers can develop strategies that will help them to increase the ability to market their products. In addition, there are also sociocultural inputs that influence consumer behaviour. Inputs like culture, roles, personal factors and social class should all be in the marketers’ mind when they are marketing their products. Marketers should also aim at establishing good relationships with employees in order to create relationship marketing. Through ways like equal weight and weighted additive strategies, marketers can now be able to understand the consumer effectively. References Botha, J., Strydom, J. & Brink, A. (2005). Introduction to Marketing (3rd edition). Johannesburg: Juta and Company Ltd. Buda, R. & Zhang, L. (2000). “Consumer product evaluation: the interactive effect of message framing, presentation order, and source credibility.” The Journal of Product and Brand Management, 9(14): 229-242. De Mooij, M. (ed) (2010). Consumer Behavior and Culture: Consequences for Global Marketing and Advertising (2nd edition). London: SAGE. Dittmer, E. (2008). Quick Ideas for Delegating and Decision Making. New York: Springer. Hoyer, W. D. & Macinnis, D. J. 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