Consumer Decision Making - Internal Factors - Coursework Example

Consumer Decision Making - Internal Factors Name Institution Date Executive Summary In an effort to understand the role of consumer behavior in shaping marketing strategies, marketers have extensively relied on the theories and practices advanced in behavioral sciences. Consumer behavior broadly refers to the conduct of consumers when buying and consuming goods and services. The study of consumer behavior provides information that is critical to strategic decision making especially in regard to segmentation of markets, positioning of brands, new product development, advertising, and distribution strategies. The variation in the preferences and tastes of consumers across the world requires firms to understand consumer behavior so as to develop effective strategies in response to varied market demands. Studies in consumer behavior are aimed at providing marketers with skills and knowledge that are essential in undertaking consumer behavior analyses useful in development and implementation of affective marketing strategies (Hamansu, 2008) Introduction A comprehensive evaluation and understanding of the factors that influence consumers decision making process enables marketers to be proactive in assessing the efficacy of their marketing strategy in a given market segment. The consumer decision making process is influenced by both internal and external factors. Internal factors concern the long-term and short-term emotional concerns of the consumers. With reference to the fast food industry, this study is seeks to explore the internal factors and the theoretical and conceptual tools of consumer behavior that contribute to development and execution of feasible strategic marketing initiatives. Concepts and Theories Several theories and concept have been advanced to explain consumer behavior. In Engell and Blackwell’s model on consumer behavior, they describe the decision making process based on fives stages: Need Recognition Need recognition happens when a consumer realizes there is a gap between their ideal situation and the real situation. The ideal situation is what the consumer expects based on the mental constructs, which can be in conflict with the perceived situation that is imposed by external factors. Consumers are motivated to take action to minimize the state of tension created by the perceived gap between expectations and the real situation (Schiffman & Kanuk, 2000). The Theory of Hierarchy of Needs: The theory of hierarchy of needs was advanced by A. Maslow who proposed the concept of hierarchy of needs. Foremost in this hierarchy are physiological needs, such as hunger and thirst. Security concerns come second in priority, where individuals seek protection and dependence. Thirdly, individuals switch attention to affective or social needs, such as need for family and friends. In forth place are esteem needs, where focus turns to need for self-respect, success, prestige and assuredness. Lastly individuals seek to satisfy needs of actuality, which involve personal fulfillment and efflorescence. The Psychological Field Theory: The Psychological Field Theory was advanced by Kurt Lewis. The argument in this theory is that feelings and beliefs are caused by external environmental factors. Behavior is thus influenced and shaped by social influences that form the psychological field. The psychological field is thus the source of the tension that motivates individuals to take action. The Cognitive Dissonance Theory: In this theory, L. Festinger argues that individuals assume a state of cognitive dissonance when their behavior does not conform to their attitudes and opinions. Individuals are then motivated to take action to minimize the tension brought about by this dissonance. Individuals hence transform their attitudes and opinions to justify their behavior. The Self-Concept Theory: The theory postulates that individuals make decisions on the basis of the mental picture they have formed about themselves. By interacting with the environment, an individual begins to reflect on who they really are, their self image, and how other people perceive them. Consumers thus make purchase decisions based on their self-concept. The attribution theory: The argument in this theory is that it is possible to make deductions about a person’s internal feelings by observing their outward behavior and the psychic and social situation in which the behavior occurs. It is therefore possible to tell what an individual feels by predicting what they do. Information Search At this stage customers seek value by comparing the different options at their disposal. Clarification regarding the value of a product can either be internal or external. An internal search involves a recollection of past experiences with a range of different products. Consumers often rely on internal search when faced with purchase decisions that concern products that are purchased on regular basis. Reference to past consumer experience is also more likely where there is high risk of making wrong purchase decisions. Evaluation of Alternatives At this stage the consumer explores product attributes that they consider to be of value to them. A criterion for selecting the product to be purchased is established and brands that are considered to have preferred attributes are selected from the available options. Purchase Decision The consumers at this point decide how they are optimizing the value of the purchase to be made. They decide from whom they are going to purchase the product, when they are going to make the purchase, or whether not to buy at all. Purchase decisions are made after consideration of key value factors such as terms of sale, product return policy, and previous experiences in buying from the proposed seller. Post-purchase Behavior Subject to the consumer’s expectations, the consumer can either be satisfied or dissatisfied by the product or service. The satisfaction derived from consumption influences the buyer’s value perception, communications among consumers, and chances for a repeat-purchase (Macdonald & Sharp, 2000). Decision making process in the fast food industry: a case study of McDonalds The global fast food market is highly competitive, with numerous players competing for consumers that are vastly diversified. There are several key players in the industry such as Wendy’s and Burger King, but McDonalds has in the recent past emerged as the market leader (Schlosser, 2002). McDonalds attributes its success to several factors that include strong brand recognition, product customization to meet the diversity in needs and preferences, continuous product innovation, and convenient and strategic locations for their outlets (Bateman & Snell, 2004). Market Segmentation Market segmentation involves the division of a market into distinct buyer segments based on variation in needs, preferences and behavior. There are several market segmentation variables that marketers can try out solitarily or in combination in order to best meet the needs of the customers. They include; Geographic segmentation: Companies may segment their target market based on geographic locations such as countries, cities or regions. Most companies that have international presence such as McDonalds have operations in several geographic locations, but their marketing mix is tailored to address the differences in needs and preferences of the customers in the different locations. McDonalds for instance serves pasta salads in Rome, soup in Japan, while in Paris they serve wine (Schlosser, 2002). Psychographic segmentation: Psychographic Segmentation involves the division of the market based on social class, lifestyle and personality. McDonald’s strategy on segmentation is based on the recognition of how lifestyles and living patterns have changed in the advent of rapid technological innovation (Schlosser, 2002). The international economic environment has become more vibrant, rendering a majority of the people in employment to more preoccupied with time and effort saving. Poverty of time has made more people to prefer ready-made solutions such as fast food, rather self-made solutions. Demographic segmentation: Demographic segmentation involves the division of the target market based on age and life-cycle, gender and income. MacDonald’s marketing strategy focuses on kids, youth, and the young professionals that have decent income, but are either too busy, or don’t have families that can encourage them to have their meals at home. Market Targeting Market targeting refers to the evaluation of the attractiveness of market segments and the selection of the segments that present the best value for a firm. Companies ought to evaluate and make decisions on the market coverage they seek to serve. Market targeting can either be differentiated or differentiated. Undifferentiated marketing refers to a strategy where a company disregards the market segments and targets to serve the entire market with a single offer. Differentiated targeting involves targeting several market segments and offering a deferent design of product for each segment. McDonalds for instance has customized its product mix to meet the needs and preferences of three distinct market segments, that is: children, teenagers, and young urban workforce (Schlosser, 2002). Market Positioning Market positioning entails the competitive positioning of the preferred product and development of an appropriate marketing mix tailored for the target market. Once the segmentation process has been accomplished, marketers must then decide the product position they want to occupy. Product position refers to the impressions, perceptions and feelings that consumers have in regard to a given product. A product can be positioned by emphasizing in the marketing mix attributes such as better performance, better service, or better personnel. McDonalds for instance focuses on their people being polite. Internal Factors that influence the decision making process Motivation/consumer needs Motivation refers to the energizing force that stimulates consumers to satisfy an identified need. Motivation to satisfy a need is determined by the position a need occupies in a consumers hierarchy of needs. Consumer motivation is aroused by emotional, physiological and cognitive variables. Foremost in the hierarchy of needs are physiological needs, after which consumers want to satisfy learned needs. The lowest in the hierarchy are needs that are basic to survival. Subsequently needs begin to increase in stature, moving from need for self-preservation to need for personal fulfillment. McDonald’s strategy recognizes that the need cognition process among teenagers is largely impulsive. Product pricing has a significant influence on purchase decisions made by the teenage category. Apart from aggressively pricing its products, McDonalds has expanded its marketing mix to include other incentives such as Wi-Fi facilities which greatly appeal to the teenage category. Perception The decision making process is largely influenced by processes that involve the use of available information to create meaningful mental pictures. Consumers cautiously select, organize and interpret information regarding available product and service options before making purchasing decisions. Selective perception thus determines the value and risk consumers perceive in any purchase decision. Selective Perception: Selective perception is determined by an information filtering process that involves selective exposure to product/service information, selective comprehension of this information, and selective retention of information deemed to be of value. More attention is given to communication that is congruent with individual beliefs and attitudes. Information can therefore be distorted by consumers just to make it more consistent with the consumer’s attitudes and beliefs. McDonalds in an effort to influence consumer perception has strategically positioned its brand as a symbol of fun and happy moments. To enhance its value proposition that influences customers to regard McDonalds as the better option, the company strives to deliver superior products and high quality service served in outlets that have excellent ambience and high standards of hygiene (Schlosser, 2002). Learning Consumer decision making is greatly influenced through learning from repeated experiences and thinking. The learning process can either behavioral, cognitive or attributed to consumer brand loyalty. Behavioral Learning: By repeatedly getting exposed to a given situation or information, consumers end up developing automatic reactions to such stimuli. Concepts derived from the behavioral learning theory have been put to use by marketers. Stimulus generalization is a concept employed by marketers to evoke consumer response to a given product or service by associating or generalizing the stimuli among several products/services. Cognitive learning: Cognitive learning refers to the ability of consumers to link two or more ideas. Through observation of the consequences of other peoples purchasing behavior, consumers are likely to adjust their behavior accordingly (Hirschman, 1985). The concept of cognitive learning has been well employed in McDonalds strategic targeting of children. By providing additional incentives for children such as toys with Walt Disney characters and play places where they can play air hockey and arcade games, children have learned to associate food with fun in McDonalds’ outlets. Conclusion The competitive environment witnessed in the fast food industry for instance is largely attributed to the diversity in consumer preferences. Rapid technological innovation has revolutionaries the employment market which has greatly impacted on lifestyles. Fast food has subsequently emerged as a necessary option for a workforce that must save on time and effort. To be able to meet the needs and expectations of consumers that have poverty of time, the fast food industry led by McDonalds has initiated significant changes in product design, planning of operations and efficiency in delivery of services. McDonalds has risen to be the global leader in the fast food industry because of its ability to effectively integrate consumer behavior and expectations product and service development. References Bateman, T. S., & Snell, S. A. (2004). Management: The new competitive landscape [2nd Ed.]. McGraw-Hill: New York, NY. Hirschman, E.C. (1985). Cognitive processes in experimental consumer behavior. Research on Consumer Behavior, 1, pp. 67-102. Hamansu, S. M. (2008). Consumer behavior [cit. 05.12.2010] Available at http://knol.google.com/k/consumer-behaviour# Macdonald, E., & Sharp, B. (2000). Brand awareness effects on consumer decision making for a common, repeat purchase product: A replication. Journal of Business Research 48 (1), 5- 15. Schiffman, L. G., & Kanuk, L. L. 2000. Consumer behavior (7th ed.). Upper Saddle River, NJ: Prentice-Hall. Schlosser, E. (2002). Fast food nation. New York, NY: Perennial. Read More