External Factors of Consumer Decision-Making - Literature review Example

External Factors and Purchase Name Course Lecturer Date Executive Summary In the current market, most organizations are experiencing unprecedented competition and challenges as they try to respond to changes in society functions and modes of working. Organizational survival, effectiveness and competitive advantage depend on marketing focus, research and responsive activities of the organization. Changes and in particular technology adoption is at the forefront in most organizations. In regard to this change, there are factors to consider which play a greater role in the market and in different market segments. External factors that influence consumer behaviors are such essential factors which the company takes to manage the risks in the market and further innovation and change in marketing approaches. When any product development takes into account various external factors, it efficiently promote the achievement of business objectives. Microsoft latest version of window, window X has come into the market to improve the last version that is limited variously. The innovation is user-friendly and based on human factors such as user experience. To market window X, communication channels are majorly involved to ensure that the existing as well as new consumers are reached on time and make the right decision to purchase window X. The strong features of window X will facilitate both interpersonal and impersonal modes of communication and result to effectiveness in purchase. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Product overview 4 2.0 Introduction 4 2.0 Consumer purchase decision 5 2.1 Reference Groups 5 2.2 Social class 7 2.3 Culture 9 2.4 Subculture 11 2.5 Diffusion of Innovations 12 2.6 Opinion leadership 14 2.7 Public policies, advertising, pricing, legislation and consumer ethics 15 2.8 Family 16 3.0 Conclusion 16 References 17 Appendices 20 1.0 Product overview The first discussion had set to deliberate on the relationship between marketing and consumer decision making. The great deal of analysis was based on a new computer operation system, windows X as a product. The product was particularly targeted to a number of potential customers including; researchers, University lecturers and businesspeople. The identified group of people is usually very busy due to day-to-day activities involving their career and profession. Windows X has been specially developed eliminating the demand for hardware and in a user-friendly manner. It has various functions that help manage users’ needs like mobile phone, digital camera among others (Dignan, 2013). Having discussed the internal factors affecting the decision making, it is informative to turn to the external factors to have a comprehensive understanding about consumer decision making. 2.0 Introduction Dean & Sharfman (1996), points out that, consumers constantly apply their decision making skills before, during and after buying products or services. Generally, both the internal and external factors play a role in this process and its outcome. After consumers have identified their needs, they proceed to collect information that ultimately help them to evaluate the alternatives and finally make a purchase decision (Bonein, 2006). Wynstra, Axelsson, & Weele (2000) argue that, consumer purchasing decision is affected by factors which are outside their own control and have either direct or indirect impacts on how people live and consume. There are arrays of external influences including culture, groups, household culture and other members that a particular consumer interacts with. In determining what leads to these actions, this discussion critically combines the various theories in line with external factors to decision making. The critical analysis will generally look at how the relevant factors shape the consumer decision and in particular to the chosen product windows X for a category of consumers including researchers, University lecturers and businesspeople. The characteristic that promote these customers purchase decision will be looked at through the factors like culture, social, economic, business and family stand points. 2.0 Consumer purchase decision 2.1 Reference Groups As Rabjohn, Cheung & Lee (2008) observes, business owners and marketers are increasingly becoming aware of the external influences that are related with their market segments. Today most customers encounter many products to select from competition that exist through companies’ marketing strategies. In communication process, messages play a major role in changing and influencing ideas. Persuasive messages for that case develop through different channels such as impersonal communication through mass media including; print, electronic media, broadcast and outdoor advertising which the identified set of customers interact with nearly on a daily basis. Advertising media use celebrity endorsement and testimonials as reference groups. For lecturers and researchers, the formal source of influence may result from such reference groups and the demand of work and the need to deliver which may force them to buy a product that is efficient and can be used for various purposes as recommended by various personalities. The credibility is high as these groups of people are in most cases objective and honest and has a greater probability for acceptance (Pentina, Prybutok & Zhang, 2008). These customers are interacting with wide groups of members for instance colleagues in research fields, data analysis and storage for researchers. University lecturers are interacting with students’ community, other lecturers and pressures from other similar institutions that are currently adopting the window X product. Businessmen work across different fields like procurement, supply and communication. The people they interact with are critical for the way each accomplish individual and mutual goals. There are two types of groups in this case where first, a group in which our customers currently belong. These are people they interact with in day-to-day activities. Second, there are groups out there like similar institutions of learning, data company and other outstanding business or companies. Purchasing forces are also felt from primary and secondary, formal and informal groups due to intentions and pressures from such groups. According to Yang, He & Lee (2007), reference group who serves as the point of our customers’ comparison promote specific values, attitudes and behavior guide. There are normative and comparative reference groups who define general values or benchmark specific attitudes or behaviors. For the case of the lecturers, they have their support people like secretaries and tutorial lecturers under them. The information they gather is very useful in promoting confidence for the window X product for lecturers’ use. Businessmen may be influenced also by their employees, local community, personal secretaries as well as consultants and lawyers and so do researchers. Most of the influence will be from both informal and formal contexts of discussion and communication. There are various factors expected to influence these customers. The reference group has wide information about technological products and thus more information and experience. Most of the reference group members cite credible sources of information which is very attractive and powerfully influences decision (Pentina, Prybutok & Zhang, 2008). On the other hand, to those who have already bought window X, they make the product conspicuous. Consumer conformity is also a major factor that is promoted through reference group. Specifically, the businessmen will be influenced by the brand community, shopping, friendship and consumer action groups. Researchers and lecturers also have working, virtual and friendship groups to influence their decision to purchase window X. 2.2 Social class Social class involves the apparent divisions in the society in a hierarchical pattern forming distinct status. The relative status of certain members determines the class of a group. The main aspects of class are income and education, wealth and occupation type. Social class is a major influence of the quantity of goods that are purchased. The customers in this case can show similar pattern in purchase of different product such as automobiles, residential building and personal equipments such as computers (Grinblatt, Keloharju & Ikäheimo, 2008). Businessmen with similar wealth and income will influence each other in purchasing the window X to ensure that they do not lag behind with their computers used with those having lesser income and wealth. The need or function here is not the core factor but the identity with the greater body enshrined by social class. Lecturers and researchers are identified as a group with similar educational status and this is a determinant to the pattern of the product they use. For them, their status involved with highest efficiency and identification with the group will determine the purchasing decision. In this case, the group which is equally paid and educated members behave in the same manner out of the ensuing networks and influences they exert to each other. The relative ranking also can be based on wealth, prestige and power. Reputation promotes behavior, where most businessmen in upper class and having disposable income can spend more money in buying costly product. The affluent consumers such as businessmen with larger share of income will not mind about the cost as long as the product deliver the highest luxury possible compared to other adopted by cost considerations (Wiedmann, Hennigs & Siebels, 2009). Stephens, Markus & Townsend (2007) argues that, lifestyles profiles will manifest as distinct characteristics which will promote the behavior of these consumers’ purchases. Social class is very important for purchase of window X as it runs from the continuum of being essential and non-essential depending on alternative product in the market and its predecessor window 8. Most of researcher, lecturers and businessmen are continuing with their career development or are in middle class. Upward mobility and focus on opportunities higher in standard means that they have to identify with other who are ahead in terms of income and education. This might influence a number of them and mostly those at transition point to purchase window X as a way to identify with those whom they aspire. Middle class are ambitious and future-oriented to enhance the quality of their life. Self development and advancement is influenced greatly by existing forces of social class. As Steffes & Burgee (2009) views, particular media are meant for people with similar patterns such as socio-economic and geographic patterns of consumption. The promotional activities of Microsoft through these modes may target the group in question as purchasers of window X. The data for businessmen, researchers and lecturers in educational periodicals, magazines, journals and articles promote decision for purchase. As marketers, this is visualized and in most cases, the messages will emphasize on services, quality and atmosphere relevant to expectations. 2.3 Culture Culture manifest variously in all customers as every individual has taken the values, beliefs and customs that directly determine consumption behaviors in their culture. The behavior can then be seen in the subset societies that are further divided in the greater part of the culture and in particular to purchasing behavior. There are various scenarios under which culture reveals itself such as supranational, national and group depending on the division. At supranational levels, it might be the young generation way and pattern of purchase for instance the Virgin Mobile services which are mostly offered to young people aged between 14-34 years (Sawhney, Wolcott & Arroniz, 2011). There are also networked groups who usually utilize online and social networking platforms in daily lives. In consideration of window X, Microsoft is amongst the leading corporation which utilizes the online platforms for promotion and sales activities of its products (Darley, Blankson & Luethge, 2010). It is therefore expected that quite a great number of researchers and lecturers who overly use online tools for their study and research work will get information from such websites and advertisements. Constant interaction with information which in most cases keeps on being suited through updates will convince the customers to purchase. In addition, they will influence others in the same network as purchase culture is very effective way of influencing. What culture does to customers is to offer order, guidance and direction. As much as personality and other internal factors may determine otherwise, values that are identifiable with a particular subsets influence the purchasing behavior. According to De Mooij (2010), culture is also very dynamic, fitting in informal and formal contexts while undergoing continuous enculturation and acculturation. It is uniquely shared and evolve to suit to the interests of its subjects. A small group of consumer may exhibit particular behavior for a product or service. The values that fall under the overarching culture and that are directly or indirectly related to purchase are many. These factors such as achievement, power, pleasure, stimulation, conformity, security, self-direction among others influences to a greater extent to consumer purchasing behavior. For businessmen, power, conformity and pleasure may be some of the factors which will lead them to purchase window X. According to Legohérel, Daucé, Hsu & Ranchhold (2009), shopping is also a culture in its own as most customers value it as a way of creating values in life, as a popular pastime and assuming consumption lifestyle. Such a behavior is very common among a typical group of businessmen and particularly in an era when most business are using facilitative technology and continuously adopting the latest version to comply with changes in technological arena. Further, these groups of customers will not only conform to the national behaviors to purchase but as they hold a very significant position in the society, they are custodian of innovation and development trends. Having such a position they exercise the power by being ahead of the others to remain relevant to subordinate and networking groups. For instance, lecturers always interact with highly dynamic part of society which is overly characterized by technological adoption and usage. To work among them, they have to have a culture that swiftly puts them ahead of their subjects. 2.4 Subculture According to Nwanko, Aiyeku & Ogbuehi (2006), a subculture entails the distinct cultural groups existing and identifiable as a segment within the larger and complex multicultural society. Understanding of subcultures allows marketers to segment the markets in order to meet the specific needs, perceptions and motivation that a specific sub-cultural group shares. In a subculture, the members’ posses’ customs, beliefs and values which are set apart compared to the rest members of the same society. Some of the characteristic that are familiar with the set of customers identified for window X are geographical location, for instance the businessmen and age for researchers. Age is also a factor where age cohorts influence buying. The businessmen, researchers and lecturers in this case appropriately fall under generation Y, generation X and baby boomers that have grown in the ages of technological development and consumption of its products. Lecturers who in this case might be more in the category of baby boomers are facilitated to reveal mixed behaviors of both generation Y and X as they interact often with this age group. Precisely, window X is a product that is the going way for all these generation and thus means most of the customers categorized under it will purchase the window X to provide the features identified with the window. Most active researchers are the members of generation Y as most of the people born between 1980 and 1994 are in school from high school, colleges, undergraduates and post graduates researchers (Noble, Haytko & Phillips, 2009). As Lester, Forman & Loyd (2006) argues, the group is very open to change as well as being technologically sophisticated. In purchase, they are also disloyal to brands which mean that they often prefer short-term values which conform to their immediate needs. In this case, those who have used window 8 will readily consider another version which responds to their lifestyle, career and behavior needs. Microsoft, having in mind of such generation, has upgraded its windows and that means that the customers in question would remain loyal to Microsoft window X instead of purchasing Linux and other with lesser features. The group is highly influenced by peers and friends and this is a forceful factor to consumer behavior. As their lives and lifestyles revolve around similar things, there will be greater influence to purchase the latest version of the window among researchers. Having been born during the advances of technology, generations Y as well as other members of generation X are confident and optimistic which facilitate quick decision making and overly taking risk. Most businessmen and lecturers fall under baby boomers which are composed larger age categories that are also wealthy. Since most are affluent, they also make frequent consumer purchase decision. In most cases, such customers do not have much to buy as they already have the necessities of daily life. This is factors that possibly influence their decision in buying the new window version. However, the elderly who are more conservative and loyal to brands may fail to purchase window X as it does not in most cases influence their lifestyle (Yoon, Cole & Lee, 2009). Subculture is therefore a very significant factor and particularly has predominantly been considered by software developers, mobile and computer companies such as Apple and telecommunication companies who operate across borders. 2.5 Diffusion of Innovations Malerba (2006) observes that, company owners and marketer understand diffusion and its patterns and in precise terms, this is a factor that is directly invested in their control. The companies which are strong in the market and have a competitive edge make use of the basic elements of diffusion process. Continuous innovation has been pertinent with most International Corporation such as Microsoft, Apple and Samsung. The products and services provided by these companies are highly innovative. To deliver the user experience, companies have considered the human factors that reflect in purchase decisions. They have therefore developed products which maximize usability, improve efficiency and user’s safety. Creativity in innovation is expressed through their constant exploration of the way their existing and future customers interact with products and services. Such factors are incorporated in the design of products and adding stylistic changes for improving the usefulness and product performance. Human-computer interaction has promoted research and development which has reflected the response of customers to developed technological devices. Innovation is dynamic revealing its relative advantage where a product emerges as superior as compared to the other substitutes (Canny, 2006). For Microsoft window X, it has superior features than its predecessor window 8. Customers will also compare it with other brands such as Mac OS and Linux. The superiority of window X when compared with others puts it at a relative advantage to when customers are to consider the most innovative product. Most companies which are innovative always build and add features to the existing product in use. It is the sustainable approach which highly esteems compatibility as core. Potential consumers consider products that are consistent with their practices, values and present needs. Microsoft window X has shown such features that bring together various mobile and related gadgets together to deliver customers’ satisfaction. Considering the customers in question for window X, they can observe, imagine and describe the benefits of window X as it is possible they have experienced that of its predecessor window 8. The channels of communication account for purchase and promotion of purchasing decision. As Darley, Blankson & Luethge, (2010) deliberates, currently, most products and services are familiarized through online promotions and the traditional mass media. Communications for window X will involve marketers with consumers, communication among consumers, use of impersonal sources and interpersonal sources. Any of this is possible as Microsoft interact with customers through direct marketing in their stores located in various parts of the world. The new product will also have a lot of acclaim among its consumers of whom the businessmen, researchers and lecturers are part of it. Wide-range editorial and advertising matter will have the latest technological development where marketers promote such product. These groups of people interact with interpersonal sources such as informal opinion leaders and salespeople. Microsoft brands utilize the wide platforms of communication and in particular Google which is part of their tool used for marketing. The modern social system, characterized of positive attitude to change, skilled labor force and advanced technology diffuses innovation very efficiently. The society has respect for science and education. In the ordered social relationships, the customers in this case diffuse the application of technological trends. The rate of adoption for the window X is very high among the identified customers. 2.6 Opinion leadership Stagner (1969) deliberates that, opinion leadership involves a person with influence to a number of people and determines a lot to their decisions, attitudes and actions. For our customers, these may include professors, mentors or dean of faculty for lecturers, chairman of a group of businessmen or data experts for researchers during personal conversations. However, opinion leaders are not so relevant when it comes to purchase of personal products and in this case, they are less effective in promoting decision for purchase. Most people under the category of businessmen, researchers and lecturers are very autonomous as they are involved with making decisions often. Their position in society where they acquire information often also renders opinion leaders influence irrelevant. Opinion leaders are more effective in promoting products oriented for the greater good of the society, institutions and organizations. Marketers who deal with software products that facilitate communication, data storage and sharing across departments can successfully uses opinion leaders to influence purchase. Marketers use international conferences, shows and expos to reach such leaders. 2.7 Public policies, advertising, pricing, legislation and consumer ethics Public policies, advertising, pricing, legislation and consumer ethics are widespread factors that will influence decision making for purchase of window X. However, it effectiveness is less compared to others since in consideration of price; the window is expensive compared to other products in the market. Legislation will rarely support a particular brand and in particular when it has to do with individual choices. Advertising has been used as a tool to influence purchase of product but its effectiveness is facilitated after a number of people do the preliminary purchases which later promote more purchases through the other external factors such as reference group, culture, subculture and family. Consumer ethics are quite to come into the play as a factor for purchase (Hogarth, Javitt & Melzer, 2008). Pickett-Baker & Ozaki (2008) argues that, consumer are concerned with ethical issues that a certain product stands for and particularly in the developed world. Motivations can thus arise through ethical choices the customers make before purchase of products. Microsoft corporate social responsibility (CSR) is prominent and for that customer who might show care for environment they might consider window X on consumer ethics basis. Though, this might not be the major factor to influence purchase, it might interact to certain levels with other major factors. In regard to consideration of personal product, those benefits that are close to the buyer are first taken into account. Ethical issues comes second as it involves the company’s conduct and responsibility in relation to existing legal requirements, environmental protection and well as creating stakeholders value. 2.8 Family Family may be a less relevant external factor for consumer decision making for the set of consumers chosen in this case. In most cases, most people do not involve their wives, children and other family members in work, career and professional related matters. Purchasing window X can relatively be influenced by family, but it depends on the purpose and the use. The lecturers, researchers and businessmen carry out their most work away from home which means there are little attitudes, skills and knowledge contribution from blood related members (Epp & Price, 2008). 3.0 Conclusion The importance of external factors which affect consumer choices cannot be ignored by many companies worldwide. External factors are categorized under socio-cultural, technological and economic sets influencing behavior patterns. The dramatic increase of technological changes and competition encompasses the importance of considering various factors that influence consumer purchase decisions. Consumers present various inconsistencies in purchase decision-making. Marketers, therefore take into account various factors to tailor and monitor the possible changes affecting profits and company’s sustainability in their respective industry. This allows a company to align its business processes and strategies to success. 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