Internal Factors in Decision Making-Process - Coursework Example

nsumеr Dесisiоn making - Intеrnаl Fасtоrs Top of Form Bottom of Form Name Student Number:   Unit Name:   Tutor’s Name: Word Count: Table of Content 1.0 Executive Summary 3 2.0 Introduction4 3.0 Consumer decision-making4 3.1 Need/Problem recognition5 3.2 Information search 5 3.3 Evaluation of alternatives 5 3.4 Purchase decision 6 3.5 Post- purchase evaluation 6 4.0 Product selection 6 5. 0 Internal Factors in Decision Making-Process 7 5.1 Motivation 7 5.2 Personality 8 5.3 Perception 9 5.4 Consumer imagery 9 5.5 Learning & Attitudes 10 6.0 Conclusion 10 1.0 Executive Summary The theories of consumer decision-making process assume that the customer’s buying decision process is made up of steps through which the consumer passes in buying a product or service. In some cases, not every customer considers all these stages when making a decision to buy a product or service. In fact, some of these stages are skipped and this will depend on the type of purchase. This paper will be divided into three sections. The first section will discuss five steps that are involved in the consumer decision-making process such as need recognition, information search, evaluation of alternatives, purchase and post-purchase. The second section will focus on the selection of a product category/service category/specific brand and marketing strategy (segmentation, targeting and positioning).The last section will discuss the relevance of the all of the internal factors. 2.0 Introduction Consumer’s decision making process is made up of six basic steps: stimulus; problem awareness; information search; evaluation of alternatives; purchase; and post purchase behavior. A consumer may use routine, limited or extended decision making, and will depend on the degree of search, frequency of purchase, level of prior experience, time pressure and perceived risk associated with the purchase (Enge et el, 2004). In limited consumer decision, a consumer is able to involve each step in the buying process but the consumer will not waste time on any of the steps. In extended consumer decision, a consumer will utilize all the steps in decision making process. And in routine consumer decision, a consumer will buy out of habit but he/she will skip the steps that are involved in decision making process. To understand consumer behavior in their purchases is to understand how different people interact with marketing mix (Hoyer & Macinnis, 2008). The psychology of each consumer in the housing industry considers the product on offer in relation to their own attitude, culture, personal perception and previous learning (Hawkins et el, 2006). The customer or consumer will then decides whether to buy or not, when to purchase, the type of house he/she prefer, and other choices that are available in the market. 3.0 Consumer decision-making The study of consumer behavior focuses on how consumers make decisions on their available resources on consumption- related products or services (Solomon, 1996). Brink & Berndt (2009) have proposed Five Stage Model that is considered to be one of the most common models of consumer decision-making process and it involves 5 steps: These steps are: recognition of problem or need, information search, comparing the options or alternatives, buying and post-purchase evaluation. This model illustrates how the consumer makes their own purchasing decisions. 3.1 Need/Problem recognition Problem recognition is the first step of the Five Stage Model. Recognition of a need will arise where a person realize the difference between the desired state of affairs and actual state of affairs (Hoyer & Macinnis, 2008). And this will depend on different circumstances and situation such as professional or personal and this recognition results in creation of a purchasing idea. For instance, a consumer may recognize the need to buy a house compared to renting a house which is cheap. 3.2 Information search Once the need has been recognized, the consumer will search more product-related information before making a purchase decision (Hoyer & Macinnis, 2008). However, different persons will be involved in search process differently and this will depend on their previous experience, knowledge of the product or some external information such word of mouth (Hoyer & Macinnis, 2008). For example, a second time home buyer will use his experience and knowledge to choose the right house rather than asking another person for an advice. While, first time home owner will tend to ask friends’ advices and opinion or search in media and magazines before making a purchasing decision. 3.3 Evaluation of alternatives After gathering necessary information, a consumer will compare and evaluate the information in order to make the right choice (Kacen & Lee, 2002). In this step, the consumer analyzes all the information that he has obtained through search and considers alternative products according to the wants and needs (Enge et el, 2004). Moreover, various aspect of the product such as quality, size, price and brand will be considered at this stage. For example, when purchasing a house, a young person will consider factors such as price and convenience where as an older person is more likely to consider the design and quality of the house. 3.4 Purchase decision At this step, a person makes decision to buy a product after he has reviewed all the options and came to a final decision points. Kacen (2002) stated that there are a number of factors that can affect the purchasing process. For example, the desired house may not be available, in this case the purchase process may be delayed or the consumer may buy a less desirable house. 3.5 Post- purchase evaluation This is the last step in decision making process. This step is important to a consumer because it directly affects his future decision making processes for the same product. It will reflect the customer’s experience of purchasing a product. Brink & Berndt (2009) has stated that customer decision making process is a repetitive one and a good experience is important in reducing the uncertainty when the decision to buy the same product is considered next time (Hoyer & Macinnis, 2008). In addition, product evaluation tends to impact customer level of satisfaction regardless of their level of objectivity. 4.0 Product selection Consumer decision-making process will vary with the level of involvement in the purchase decision. Housing being a high involvement product purchase tends to be more involved decisions (Hawkins et el, 2006). Purchasing a house is considered to be highly important to consumers and require extensive information processing. Product segmentation allows a company to introduce a new product that specifically addresses the needs and wants of consumers. This strategy allows a company to increase sales and profits by conforming unique marketing activities that correspond with diverse preferences (Brink & Berndt, 2009). The two segmentations that will be considered when marketing housing product are: demographic segmentation and Psychographic segmentation (Hoyer & Macinnis, 2008). Demographic is based on some objective measurable, physical, or other classification attributes of prospective customers (Ofir & Simonson, 2005). The demographics will include age, family size, gender, social class and religion affilations. Psychographic segmentation is based on some emotional or subjective mental attributes, needs, aspirations of prospective customers. The variables are broke down by lifestyles, personality types and individual needs (Kahle & Close, 2006). The groups or segments of people the product is supposed to sell to is called a target market. Differentiated marketing will be used because this product is intended for older people Product positioning refers to the place a product occupies in consumers’ minds on important characteristics to competitive products. The approach to positioning that will be used is differentiation positioning (Ofir & Simonson, 2005). Using perpetual maps, marketers can visualize how consumers perceive competing products or brands. This will enable a firm to execute actions to position or reposition a product in the ideal location based on the perceptions of potential buyers 5.0 Internal Factors in Decision Making-Process There are several internal factors that influence consumer decision making process. Significant factors include: motivation, personality & self-concept, perception & consumer imagery, learning and attitudes. 5.6 Motivation According to Maslow (1943) stated that consumers are sometimes motivated to achieve certain needs. When one need is fulfilled then a person will seek to fulfill the next need, so on. A shelter fall under basic needs or deficiency and this has been found to motivate a person when deficiency of proper housing is unmet. Also, the need to full such deficiency will become stronger the longer the durations they are denied. There is limited choice for older people who want to move to specialist housing, in terms of tenure, size affordability, location and type of support or care. Older people are motivated to live in a decent housing after their retirement. The house is the place helping to meet the basic physiological needs, and help a person to maintain his life (Hoyer & Macinnis, 2008). In this respect, the Theory of Maslow's Hierarchy of Needs maintains that house not only meets the physiological needs but also sheltering-related needs. Maslow stated that security, physiological, esteem, and social needs are similar to instincts and play a major role in motivating a consumer. Maslow also termed the highest-level of the pyramid as growth needs. Growth needs do not stem from a lack of something, but rather from a desire to grow as a person. 5.7 Personality The product strategy will involve creating innovative houses that are aligned with eco-friendly environment. The full impact of a very well thought out brand strategy has come into focus and one in which customer experience is central (Hoyer & Macinnis, 2008). The branding strategy for these new houses will focus on emotions. The brand personality will be about imagination, lifestyle, liberty regained, hope, passion, innovations aspirations, dreams and power to the people through modern technology that have been integrated in building these new houses. The brand personality is also about simplicity and the removal of complexity from people’s lives. The new product will be people-driven product design; and about being a really humanistic company that connect with its customers. 5.8 Perception Since consumers’ attitudes towards purchasing houses are likely to be translated into actual purchases. Consumer perception influence customer levels of satisfaction and so their purchase decision (Steenkamp, 1990). Assess that brand awareness plays a vital role in consumer perception especially when their purchasing pattern is not defined. Branded products give a customer a feeling of familiarity especially in high involvement products for example, houses. Therefore, advertisement and media will be used to bring awareness about the new product (Steenkamp, 1990). Nowadays, expectations about the future economic conditions are bright and these have affected consumers’ perception towards buying houses. Lastly, low interest rate currently the country enjoys has significantly influence consumers decision to buy housed. For example, an increase in mortgage payment or mortgage rate discourages customers from purchasing houses and vice versa (Steenkamp, 1990). 5.9 Consumer imagery Positioning is the image that a product has in the mind of the consumer. Therefore, a marketer must create a distinctive product image in the mind of the consumer. How a product is positioned in the mind of the customer is more important to the product’s success than are the product’s actual attributes (Kacen & Lee, 2002). The three main approaches to positioning are head-to-head positioning, unique selling positioning and differentiation positioning. The approach must be determined by the expected perceptions of the potential customers (Kacen & Lee, 2002). Using perpetual maps, marketers can visualize how consumers perceive competing products or brands. This will enable a firm to execute actions to position or reposition a product in the ideal location based on the perceptions of potential buyers. 5.10 Learning & Attitudes After a consumer has purchased a product, the consumer will compare the product with his or her expectations and is either satisfied or dissatisfied (Kacen & Lee, 2002). Many companies will strive to produce positive post buying communication among its consumers and this will contribute to relationship building between the buyers and sellers. In this case, follow-up calls or ads from sales persons that deal with post-purchase stage will be frequently used to convince the buyers of the product that they made the right decision in purchasing the product. 6.0 Conclusion The consumer decision-making is a complex process which involves all the steps form problem recognition to post-purchase activities. All consumers have their own preferences in their daily lives and these preferences allow them to make different decisions. These decisions can be simple or can be complex and it will depend on the consumer’s opinion about a particular product or service, evaluating, selecting and purchasing among many options. Therefore, realizing and understanding the core issue of the process of consumer decision-making and utilize the theories in practice is becoming common among consumers. References Engel, J.F., Blackwell, R. D. and Miniard, P.W. (2004). Consumer Behavior, 8th edition, London: The Dryden Press Harcourt Brace College Publishers. Hawkins, D, Best, R and Coney K. A. (2006). Consumer behavior: building marketing strategy, Volume 1. New York: McGraw-Hill Irwin. Hoyer, W.D. & Macinnis, D.J. (2008) “Consumer Behaviour”, 5th edition, Cengage Learning Kacen. J. J. and Lee. J. A., (2002) “The influence of culture on consumer impulsive buying behaviour”, Journal of consumer psychology. 12(2), pp. 163-174. Kotler, P and Amstrong, G. (2005). Principles of Marketing, 7th edition. New York: Prentice Hall Publisher Maslow, A. H. (1970). Motivation and Personality, 2nd. Ed., New York, Harper & Row. Ofir, C. and Simonson, I. (2005) “The Effect of Stating Expectations on Customer Satisfaction and Shopping Experience”, Stanford Graduate School of Business 44p Solomon, M. R. (2010). Consumer behavior: buying, having, and being. New York: McGraw- Hill Irwin, Steenkamp, J-B.E.M. 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