Decision-Making Process Consumers Go through When They Buy Products and Services - Term Paper Example

Decision-making Process Consumers go through when they Buy Products and Services Table of Contents Introduction 2 Definition of terms 2 Consumer purchasing decision making process 3 The consumer purchasing decision making process models 4 The consumer information processing model 4 The hierarchy of effects model 7 Consumer decision-making Theories 10 The simple model of consumer decision making 11 Marketing inputs to consumer decision making process 12 Socio-cultural 'inputs' to consumer decision-making process 12 The 'psychological influences' on the decision-making process 14 The actual 'process' of decision-making itself 16 Conclusion 16 Introduction Consumers are among the most important stakeholders of an organization and institution since, the operations, systems and processes developed and implemented by the organizations are meant to ensure the needs, expectations, wants, tastes and preferences of consumers are effectively and efficiently met (Solomon, 2010). Without consumers, the work and efforts put in by organizations will be for nothing and lack of consumers means failure and death to businesses. Organizations are always in competition to ensure they are the best in terms of serving the customer base and thus, gain their loyalty and in so doing, increase the customer base. Since consumers form an integral part in the success of organizations, understanding their needs and more significantly establishing the processes they undergo while making the decisions on wether to buy or not to buy is crucial (Jullisson, et al., 2005). Schiffman et al. (2011) notes tat there are varied theories that have been generated about the decision-making process consumers go through when they buy products and services, which can assist marketers to successfully develop and market goods and services. For this reasons, this report seeks to critically analyse and apply some of these theories to demonstrate how they can be used in marketing. Definition of terms When consumers buy products and services they are faced with the task of making decisions. (Schiffman, et al., 2011) defines decision as selecting of an action from two or more varied choices which include decisions of if to or not to buy and the brands to purchase while consumers are defined as people who buy products and services from the market for individual consumption. Consumer purchasing decision making process According to Schiffman, there are three levels of consumer decision making which includes extensive problem solving where consumers have not determined criteria for assessing products and services and they are yet to narrow the number of brands they seek to take into consideration as part of induced set (Schiffman, et al., 2011). There is the limited problem solving where consumers have determined primary criteria for assessing product although they have not completely determined preferences. Finally the routinized response behaviour where consumers have partial experience with product offerings, they have well established form of criteria and they can seek small quantity of information or alternatively, may buy out of habit as discussed by (Schiffman, et al., 2011). In regards to the routinized response behaviour or habitual decision making, such purchases are usually related to low cost products, frequent purchases, low consumer engagement, familiar product brands and class and usually it involves little thinking. Information search and little time if allocated to the actual purchase, among products that fall under the routinized response behaviour includes buying a can of soda or energy drink, a pack of cigarettes, a pack of chewing gums and a packet of milk among others. Primarily, the decision making process a consumer goes through when making a purchase takes place in five stages (Lamb, et al., 2011). The author indicates that during the five stages, the consumer is susceptible to internal influences which encompass attitudes, roles, perceptions and lifestyle and external influences which ranges from cultures and subcultures, social groupings, household systems. Important to note is that each situation and influence is unlike (Schiffman, et al., 2011). According to Jullisson et al. (2005), when a person becomes aware of their need, the mental process begins the consumer decision making process as they begin to establish means to meet the identified need and once the process is finished. The individuals are countered with the charge of assessing and contemplating all information that influences the actions they take to effectively and efficiently meet their need. The consumer purchasing decision making process models The consumer information processing model The five stages are the primary basis for the development of the consumer decision making theory referred to as the consumer information processing model and therefore, it is essential to analyse the five stages. The first stage is the need recognition stage where the consumer becomes conscious of a need which is initiated internally or externally (Schiffman and Kanuk, 1997). (Solomon, 1996) argues that the consumer establishes the need either through advertisement or through discussions with friend which ignites awareness of a need or through consultative selling where the seller is able to reveal the consumer need and through analysis of consumer’s present situation which makes the consumer aware of dissatisfaction. How does a marketer or a seller then influences stage one then? The seller can design their message to a potential need (Lamb, et al., 2011). For instance, pizza restaurant which promotes late delivery through commercial adverts aired at 11 am which triggers the consumer’s awareness of their need that they are hungry. The second stage occurs subsequent to need recognition which is characterized by the consumer seeking for solutions which will meet the identified need which entails establishing the criteria which is important to them and more significantly seeking suitable locations where their solutions to their needs can be found (Lamb, et al., 2011). According to the author, an important aspect to remember in second stage is that anxious consumers can skip it and result in impulsive buying while the amount of information search is determined by the strength of the need and the drive the need generates. More often than not, consumers seek for information by going online, reading magazines, reading adverts and seeking opinions from friends among others (Jullisson, et al., 2005). To influence the second stage, the marketer needs to establish the information sources which are more significant and influential to potential consumer and thereafter, ensuring the seller’s information is accessible there (Schiffman and Kanuk, 1997). For instance, if a potential consumer is an avid internet user, they are more likely to rely on internet sources for information and therefore, to influence them one would only need to make their information available online. It is essential for one to make themselves accessible at points where consumers seek information about products and services (Lamb, et al., 2011). The third stage is where the consumer examines the options they are accessible to or which are available to them (Schiffman, et al., 2011). The consumer takes the information gathered in the second stage and processes it in view of assessing their options and come to a decision. The decision is informed by assessment, identification and evaluation of the value of alternatives (Solomon, 2010). Consumers are more likely to evaluate the alternatives in terms of pricing, colour, status, quality, warranty, durability, safety, style and incentives among other things. An important aspect to take into consideration is that decisions are informed by the perceived high or low risks for high involvement purchase and low involvement purchases respectively as discussed by (Solomon, 1996). High involvement purchase occurs in purchase of high-cost products such as vehicles while low involvement purchases occurs in purchase of low cost products such as a can of soda, new deodorant and baby pampers among others (Schiffman, et al., 2011). To influence the third stage, a marketer should offer the high involvement purchase consumers with information which reaffirms the positive outcomes of the purchase. Placing greater emphasis on the important features of the products and ensuring the consumer understand and see value of the products over those offered by the competitors as noted by (Schiffman and Kanuk, 1997), which can be achieved by demonstrating or citing the added advantages the products have that the competitor’s products or services do not have. For the low involvement purchase consumers, the seller/ marketer can influence this stage by offering them less information and still moving the consumer past evaluation stage. The fourth stage is the purchasing stage which is determined by the information processed in stage three where the consumer establishes where to buy, when to purchase and how to buy what they need (Schiffman and Kanuk, 1997). Offering consumers with the best shopping environment and shopping experiences that even surpasses their expectations is bound to influence and quicken their purchase. This includes saving the consumer’s time by having established terms of purchase and return policies as echoed by (Wood, 2001). Use of sales promotions are suitable way of retaining and attracting existing and prospective buyers respectively such as special offers. In addition, effective and competent customer service is crucial in influencing the purchase stage. The fifth stage is the post-purchase evaluation stage where the consumer revaluates their purchase (Schiffman, et al., 2011). Understanding the post-purchase conduct of consumers, one understands the influence and the probability of a repurchase or return business (Solomon, 1996). More often than not, consumers whose needs are totally met and are satisfied become loyal customers and are good for business in regards to offering referrals (Solomon, 2010). Dissatisfaction should be avoided at all costs prior to and during purchase (Lamb, et al., 2011). Carrying out post purchase assessments such as customer surveys and follow-up mails and offering after sale services such as warranties and guarantees are ways of determining the satisfaction rates among consumers and more fundamentally resolving cases of dissatisfaction (Wood, 2001). Understanding the five stages of consumer decision making process is essential in helping the marketer or seller to influence the whole process and not merely the purchasing decision. The hierarchy of effects model The second widely acknowledged model of consumer purchasing decision-making process is the hierarchy of effects model. According to varied models on consumer decision making process, the underlying view is that consumers experience a succession of mental processes prior to buying a product as echoed by (Lamb, et al., 2011). The psychological stages in consumer decision making process as suggested by the hierarchy of effects model begins with unawareness, then awareness, followed by knowledge and then the psychological stage of liking as discussed by (DeLozier, 1976). Preference follows which is followed by the psychological stage of conviction and finally the consumer makes the final step of purchasing. The steps are as illustrated in figure 1 Figure 1; a basic model of psychological stages in the hierarchy of effects model The model gives greater emphasis to the learning that consumers go through as they process information from the external environment. According to the hierarchy of effects model, the decision making process starts with the state of brand unawareness which generates to awareness which is prompted by external stimuli which includes commercial advertising messages, word of mouths or reading information in magazines (DeLozier, 1976). As the consumer acquires and process more information, they get more detailed and comprehensive knowledge about the brand (Wood, 2001). Thereafter, the knowledge is utilized as a foundation to develop a liking or a dislike resulting in brand preference in relation to varied brands (DeLozier, 1976). Nevertheless, consumers need to be moved past the preference stage in order to ensure they actually purchase the preferred brand. The preference stage illustrates a developed mental preference (DeLozier, 1976). It takes conviction for the consumer to make actual purchase of the brand. Different consumers usually are in different stages and more importantly not all consumers at one stage progress to the next stage and there are those consumers who may require more time and persuasion than others prior to moving from one stage to the other (Wood, 2001). Just like the consumer information processing model, the hierarchy of effects model suggest that consumers are motivated cognitively, that is, they are thinking information processors (DeLozier, 1976). However, it can be argued that the liking and preference state which are emotional responses towards brands are developed prior to the knowledge stage which is formation of cognitive judgment (Farris, et al., 1987). Some critics suggest that both knowledge and preference states occur at the same time. Regardless of the criticisms, the view by the model that cognition precedes preferences is valid particularly for high involvement decision making circumstances such as purchase of electric equipments such as computers and automobiles, offering a conceptual guideline for thinking about event sequence that starts with initial awareness and ends with purchase action. There are varied reasons why consumers make purchase actions among them to sustain their lifestyles, to underpin self concepts, to be able to be part of a social group or obtain acceptance and acknowledgement in a group they already are members to and to convey their cultural identity as indicated by (Jullisson, et al., 2005). (Schiffman, et al., 2011) suggests that consumers make purchase actions from enterprises which meet their psychological needs where the businesses makes the consumers feel valued, understood, comfortable and accepted. Often, consumers make their purchases depending on their consumption patterns that are influenced by family life cycles and household structures (Jullisson, et al., 2005). As earlier indicated, consumers make their purchases informed by the decision making process which takes into consideration the consumer’s external and internal influences. In regards to internal influences, information is often from past experiences and when the information from internal sources is limited, the consumers seek information from external sources (Schiffman, et al., 2011). (Schiffman, et al., 2011) indicates that the degree of external search is influenced by the amount of knowledge the consumer has about the brand, perceived consumer risk, perceived effect the information will have on the quality of decision made, time available and ease in acquiring information. Consumer decision-making Theories There are economic theory, emotional model, cognitive model and passive model as theories to consumer decision making. In the economic model, it suggests that the decisions made by consumers are rational and consumers are primarily sentient to all product options, they understand the product benefits and limitations and they are able to logically choose the best product option (Schiffman, et al., 2011). Be it as it may, the theory is limited since consumers do actually have inadequate information and knowledge, they have already established habits and skills, they take into account more than just the price –quantity variable and they often are unwilling to use their time to make the perfect decision (Schiffman, et al., 2011). Schiffman et al. (2011) highlights the passive model, which suggest that consumer basically pursue promotional efforts although the theory is limited since in this era of globalization and technology advancement, consumers are not only sophisticated but also very much informed and active in buying decisions owing to ease in accessing information. The cognitive model compares to the hierarchy of effects model in that the consumer is thought of as a thinking problem solver who makes decision through a sequence of steps (Schiffman, et al., 2011). According to the theory, consumers cannot be logical economically though they try to make the best decisions despite their limitations. Consumers will at times shorten their decision rules to simplify the decision making process and ease information excesses. The emotional model suggest that consumers can link their purchases with emotions in which case, they spend less time and efforts seeking information and assessing other product options, which results in impulse buying (Schiffman, et al., 2011). To capture emotional consumers, marketers need to design their messages in such a way to appeal to the emotions of the consumer such as making the consumers believe since they have worked hard, they deserve to treat themselves and in other instances, convincing consumers they deserve it. Emotional consumers make purchases at the spur of the moment and depending on temporary state of mind of the consumer (Schiffman, et al., 2011). The simple model of consumer decision making According to Schiffman, the consumer decision making process is a process that follows a sequence and is influenced by varied components namely inputs, the process and outputs (Schiffman, et al., 2011). (Lamb, et al., 2011) suggests that through the inputs of external influences such as marketing strategies and social cultural environment, consumers undergo the process of making up choices from need recognition, information search prior to purchase action and assessment of alternative products and services which is influenced by internal factors such as psychological factors. Following the evaluation of alternatives, the consumer gains information and makes the purchase, which is then followed by post purchase evaluation which influences whether or not a consumer repeats purchase or not (Lamb, et al., 2011). Primarily, inputs are external activities which serve are source of information on certain brands, related ideals, qualities and as defined by Schiffman. The process variable focuses on how consumers makes and reaches at a decision on wether to but or not. The process is influenced by psychological factors are discussed above and consists of three steps namely; need recognition, pre-purchase search and evaluation of product options (Schiffman, et al., 2011). In regards to outputs, the simple model suggests that the component is the final step of making decision by the consumer and entails purchase behaviour, which the reaction before purchase decision is made and post purchase assessment which is the reaction after the purchase action (Schiffman, et al., 2011). Marketing inputs to consumer decision making process As earlier highlighted, marketers have a huge role to play in influencing not only the purchase decision but also the entire consumer decision making process (Lamb, et al., 2011). Among the marketing inputs includes direct marketing, mass media adverts, packaging, product, branding, personal selling, pricing, distribution channels used, sales promotion, target marketing and overall strategies as highlighted by Schiffman et al. (2011). Socio-cultural 'inputs' to consumer decision-making process Social cultural inputs relates to social cultural factors that influence the attitudes, perceptions, ideals, views, lifestyle and roles of consumers. Among social cultural inputs to decision making process includes information consumer access to, from discussion with friends who may recommend or disapprove a product they may have had past experience with, which may then influence whether the consumer buys or not (Schiffman, et al., 2011). The element of usage by others is critical to purchase decision making since, a consumer may opt for a product that others are using owing to the issue of familiarity and alternatively. The consumer may opt to buy a product not commonly used by others around him as a means to gain social status or to establish their individual taste and identity (Lamb, et al., 2011). Comments from experts are the other social cultural input to the consumer decision making process since consumers tend to comply with views from experts and more often than not, experts are key opinion leaders and when these experts recommend a product or brand, the consumer associate the brand therefore with quality or best practice standards (Solomon, 2010). For instance, nutritionists have associated carbonated soft drinks and energy drinks with excessive sugars and calories which are health risk which has translated to consumers shying away from carbonated drinks as a means to keep fit and at worse has seen some countries prohibit use of energy drinks such as Norway and France among others. In addition, consumers are more likely to purchase brands that have backing from established institutions such as antibacterial soaps recommended by medical associations. The other social cultural input includes internet discussion groups where consumers can easily be swayed to buy or not to buy a brand based on arguments for or against the brand (Schiffman, et al., 2011). In this era of advancement in technology where consumers are accessible to varied internet sources of information such as websites, blogs, social networks such as Twitter and Facebook among others, consumers are able to read on reviews from consumers who have had previous experience with the brand and from that inform their decisions about the brand offerings. Culture and subculture influence the purchasing decision making process as consumers are more likely to go for brands that reinforce their cultural identity or which appease to their beliefs, norms and offer meaningful symbols (Solomon, 2010). In regards to lobbying as an input, this relates to brands, products and services that receive either strong backing or disapproval from key market figures and players such as trade and labor unions as noted by (Lamb, et al., 2011). For instance, when labor unions and trade associations lobby against a brand or asks its members to boycott a product, a consumer may opt not to buy on this basis. For instance, due to alleged cases of child labor and forced labor in cocoa plantations, consumers have been lobbied to boycott chocolate brands believed to have raw materials from plantations practicing child labor and forced labor. Family, social class and public policies are the other social cultural inputs to decision making process that determines if a consumer buys a brand or not (Schiffman, et al., 2011). The 'psychological influences' on the decision-making process According to Solomon (2010), the psychological influences on the decision making process include components such as perceptions, motivations, learning beliefs and attitudes. In regards to perceptions, this is the process by which consumers choose, organize and interpret stimuli into meaningful and coherent picture which can be generated through selective exposure, selective distortion and selective retention (Schiffman, et al., 2011). Perceptions influences consumer’s view on pricing, brand names, quality and reliability (Lamb, et al., 2011). In relation to motivation, consumers are motivated to buy products that meet their needs based on Maslow’s hierarchy of needs from physiological needs such as food, water, housing and education security needs such as job and financial security. Social needs such as the need to belong, self esteem needs such as buying products that boosts one’s social status and esteem and self actualization needs as highlighted by (Stanovich & West, 2008). In regards to learning, there is stimulus generalization where learning happens when consumer’s response is extended to a second stimulus comparable to the initial one and stimulus discrimination where consumers have learned the ability to distinguish among comparable products (Solomon, 2010). In relation to beliefs, these are the structured patterns of knowledge which a consumer holds as true and in most cases, consumer purchase products based on their on what they believe is true about the products as described by Schiffman et al. (2011). As part of psychological influences to the decision making process is the element of cognitive biases, which are thought patterns determined by generalizations and observations which may result to memory errors, inaccurate perceptions and faulty rationale (West, Toplak, & Stanovich, 2008). Cognitive biases entail belief biasness and overreliance on past knowledge in coming to decisions as discussed by Marsh & Hanlon (2007). In addition, hindsight biasness, omission biasness where consumers tend to omit information through as risky, confirmation biasness where consumers see what they anticipate to see as discussed by Nestler & von Collani (2008). Cognitive biases impacts on consumers by making them to over depend on expected observations and past experiences and knowledge, while dismissing observations and information through uncertain without seeing the bigger picture as supported by Stanovich & West (2008). Although this form of outlook results to poor buying decisions, they enable consumers to make efficient choices with the help of heuristics as argued by Shah & Oppenheimer (2008). The actual 'process' of decision-making itself As stated above, the actual process of decision making entails recognizing the need which for instance in relation to an energy drink, the need is the need to boost energy. Need recognition can be instant or planned and in case of energy drink following a workout can be instantaneous while an energy drink meant to mix vodka for a party at work or at home can be planned as supported by (Solomon, 2010). There is the component of pre-purchase search in the actual process which entails seeking information regarding a brand or product offering (Lamb, et al., 2011). For high cost products which have high risks, the pre- purchase search often takes more time, efforts and the consumer is likely to look for information in varied sources (Schiffman, et al., 2011). On the other hand, for low cost products that have low risks such as soft drinks, chewing gums, and toiletries, the pre-purchase search is limited or it does not occur. The third component to the actual process of decision making is assessment of other product options and for low risk, low cost products, there is no time allocated for information search. Therefore, means the decision to buy is always faster compared to high cost, high risk purchases where consumer has varied information and are accessible to varied options which means arriving at a decision to buy a particular brand takes relatively longer since the consumer needs certainty and reaffirmations that they are get value for money (Schiffman, et al., 2011). Conclusion The mere act of purchasing a product or service is characterized by a sequence of events that influences a consumer’s choice of which particular brand to buy, where, when, how and why. Understanding the decision making processes that consumers go through when they buy products and services is fundamental for organizations in helping them customize products and services that aligns to their consumer’s decision making process. More importantly, understating the consumer decision making process allows organizations to effectively and efficiently design marketing strategies in terms of pricing, packaging, branding, pricing, promotions, placing and distribution which influences overall business performance and productivity. As discussed in the report, there are varied views, models and theories explaining the consumer purchasing decision making process. The primary elements of all theories in understanding consumer behaviour are that the actual process entails need recognition, pre-purchase searches, purchasing action and post-purchase behaviour. Based on Schiffman’s simple model of consumer decision making, the whole process is influenced by inputs which are marketing inputs and social cultural inputs. 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