Impact of External Factors on Consumer Decision-Making Process - Case Study Example

Impact of External factors on Consumer decision-making process Name Student Number Unit Name Unit Coordinator Word Count: Table of Contents Table of Contents 2 Executive Summary 3 Reference groups 5 Family life cycle and dynamics of husband-wife decision-making 6 Culture and core values 8 Sub-cultural aspects and consumer-age subcultures 9 Consumer decision-making, gifting behaviour and relationship marketing 10 Opinion leaders and use of innovativeness 11 Public policy and consumer protection 12 Conclusion 12 References 13 Executive Summary The decision for consumers to purchase a product or service is an ongoing process. Purchase decisions take different levels of thinking depending on the type of product or service. Also, consumer behavior is a significant concept in business today as the decision to buy by consumers dependents on the overall behaviors they display. It is also a basis for consumer decision-making process. This essay discusses the impact of different internal factors on consumer decision-making process when purchasing a Pepsi Cola product. The external factors include reference groups, the family, social class, culture and sub-cultural aspects, opinion leaders and public policy. The essay also explained the concept of consumer decision-making process in respect to economic, passive, cognitive and emotional models. The attitudes and actions of consumers towards Pepsi Cola product are influenced by these factors in different magnitudes. The essay concludes by stating that external factors are significant in consumer decision-making process and can also be used by the company to develop appropriate marketing strategies. Introduction Consumer decision-making process is a daily experience for consumers as they try to satisfy their needs and wants. The decisions made by consumers are sometimes easily arrived at, while in some situations they are required to involve in great deal of thinking before they eventually decide to purchase products or services that can meet their needs and wants (Chambers, 2012). Normally, consumers engage in the decision-making process to help them identify what they should purchase and what they should not purchase. Thus, consumer behaviour involves the overall behaviour displayed by consumers from the time they search for the product or services to purchase until they dispose off these products or services (Diecidue, Rudi, & Wejie, 2012). Consumer’s decision-making process is influenced by external factors, such as social class, the family, cultural and sub-cultural aspects, reference groups and public policy among others. The aim of this essay is to discuss the impact of external factors on consumer decision-making process. In discussing the impact of these factors on the decision-making process, Pepsi Cola product will be used to achieve this goal. Pepsi Cola is a product for Pepsi Cola Company and is categorised under soft drink Industry in Australia. The competitors for the product include but not limited to Coca Cola, Mt Dew and Diet Mt Dew. Pepsi Cola is used be consumers as refreshment. The discussion will identify how different external factors influence consumers’ decision to purchase the product. Consumer decision-making process Before making a purchase, consumers go through the decision-making process which includes recognition, information search, evaluating alternatives, purchase, and post-purchase (Lynch & Zauberman, 2007). This process applies in all situations irrespective of whether the decision to buy is influenced by internal or external factors. The first step is recognition where a consumer perceives a problem through loss of consumer’s actual state (Adapa, 2014). This is followed by search for information that can help lead to meeting the identified need. In this case, the consumer seeks to gain knowledge about possible solutions options to the problem and particular attributes to these options (Adapa, 2014). After getting the right alternative amongst the different alternatives, consumers may decide to purchase or ignore a product or service. Consumer may them decide to re-purchase or ignore depending on their experience with the product or service (Lynch & Zauberman, 2007). This is referred to as post-purchase behavior. Therefore, the external factors that will be used to discuss how they influence the consumer decision-making process include reference groups, the family, social class, culture and sub-cultural aspects, opinion leaders and public policy including views of consumer decision-making. These factors are used because they are applicable to the product under discussion. Impact of external factors on consumer’s decision-making process Reference groups Consumers use reference groups when purchasing product or services to promote self-image. In addition, identifying with a given reference group mediates to the consumer the sense of psychological utility. In order to achieve self-identity goals, consumers often use product to build and demonstrate their self-image by making reference to particular groups (Eszter, 2008). This also applies to Pepsi Cola product as some consumers purchase the product based on various reference groups. It is normal for people or groups of people to use or be used as a point of comparison in forming certain values, attitudes, or guide for behaviour. This is significant in consumer behaviour and more so among consumers who seek to achieve self-image (Eszter, 2008). The broad reference group that is related to consumer behaviour towards Pepsi Cola product is the comparative reference groups. Some consumers for the product use this reference groups as a benchmark to purchase the product and therefore, their attitudes and behaviours towards the product are highly influenced by the comparative reference groups. However, specific consumer-related reference groups that relates to Pepsi Cola product include friendship groups, shopping groups, work groups, virtual groups, brand communities and consumer-action groups. These factors greatly influence consumers’ decision to purchase the product (Eszter, 2008). Friendship groups are normally informal and unstructured in nature but have significant impact of consumer decision-making process. When friends socialize, the one whose brand is Pepsi Cola is likely to influence the others to purchase the product by expressing his or her experience with the product to friends. In order to have the same experience the friends may decide to purchase the product when they go shopping or if they need to refresh themselves. The same applies to the shopping groups. Consumers who shop together are most likely to influence each other to purchase the product probably to give it a trial or because a friend has purchased it (Mangleburg, Doney, & Bristol, 2004). This is more common among children and teenagers who go shopping together. Work groups as one of the reference groups applies to people who work together, especially as a team. Workmates have the potential to influence each other’s attitudes and actions related to consumption of Pepsi Cola product (Adapa, 2014). A consumer of a competitive product, such as Coca Cola may decide to take Pepsi Cola to compare the taste. He or she may end up liking the later product and make it his or her preferred brand. Virtual groups which are mainly internet-based have also the power to influence consumer’s decision to purchase the product. The internet shows some personalities that are associated with the product and this may make many people want to be associated with the product for purposes of self-image thus end up purchasing the product. In some case, consumers’ decision to purchase Pepsi Cola product is influenced by consumer-action groups (Adapa, 2014). However, this is more applicable to consumers who are not sure of which product to purchase. In this case, consumer may be encouraged to purchase the product with emphasis that it is the right product to consume based of its attributes, such as taste. Family life cycle and dynamics of husband-wife decision-making Consumer decision-making within the family is normally influenced by the structure of a given family unit. The family influences significantly the behaviours and attitudes of its members in relation to consumption and use of specific products or brands (Carey, Shaw, & Shiu, 2008). The family life cycle (FLC) is relevant to consumer decision to purchase Pepsi Cola product in different ways. However, the influence of FLC varies according to specific stages of the cycle. For instance, young singles can influence each other to purchase the product if one of them is a consumer of the product. In fact, the level of influence will be high since the two couples will always not want to go against the interest of each other due to strong attachment they may have towards each other. This may also happen among the young couple who have just married. Young married couples tend to reach agreement faster, irrespective of economic differences and this implies that one partner can easily influence the other partner to adopt his or her preferred brand or product, in this case Pepsi Cola product. Consumer decision-making process in parenthood is different from that of young singles and a young married couple, especially due to existence of children in the family. Children may also influence the parents to purchase the product, but this depends on the type of family; whether tactical, easygoing, autocratic, or malleable (Adapa, 2014). In easygoing families, children may influence their parents to purchase the Pepsi cola product since parents are likely to agree with their children concerning their attitudes towards the product. It is even easier in malleable families as parents allow children to get what they want in case they persist (Adapa, 2014). Therefore, in parenthood stage in FLC, children are likely to sway parents towards accepting the product under discussion. The dynamics of husband-wife decision making can also influence their attitudes and actions towards Pepsi Cola product in two perspectives. First, where one partner dominates in decision making, he or she will influence the other in accepting or ignoring the product (Carey, Shaw, & Shiu, 2008). For, instance, if the husband is known to make decisions in the home and he prefers Pepsi Cola to Coca Cola, he is likely to influence the wife to consume the same brand. This is true, especially if the husband is the provider of the family. However, in joint decision making, both the husband and wife have to arrive at an agreement before deciding which product to purchase. Thus, they may consider the quality and price of the product relative to other products before they make the decision to purchase. Social class and possible segmentation strategies There are three types of consumers in the market for product and services based on the social class. They include affluent consumers, middle-class consumers and non-affluent consumers (Adapa, 2014). Pepsi Cola Product serves both the affluent and non-affluent consumer markets. Affluent consumers are heavy spenders and they comprise of a larger share of all discretionary household income. Although, this group of consumers forms part of the market for the product, non-affluent consumers represent a larger proportion of the market for Pepsi Cola product. Social class exists in a form of a hierarchy ranging from low status to high status among people in the consumer market (Ducker, 2014). The social class category that is relevant to this product is the nine-category. This category of social class incorporates all consumers in different social classes served by the product. The product has a price that is affordable to consumer at lower, middle and upper levels that fall under different levels in their respective social classes (Adapa, 2014). In other words, Pepsi Cola is a product that consumers with low income and those with high income can afford to purchase as it comes in different quantities and prices. Therefore, the type segmentation strategy used in both affluent and non-affluent markets will be different considering the fact that the ability to purchase varies among the two markets. According to Thomas (2007) market segmentation involves subdividing the consumer market along certain similarity, commonality, or kinship and this helps the business to gain a competitive advantage in those particular segments. The possible segmentation strategy for these markets is distribution segmentation. This involves reaching the affluent and non-affluent markets through different channels of distribution (Thomas, 2007). In this case, the company may decide to sell the product in various shopping centers accessible by particular class of consumers. Also, through price segmentation, the company produces Pepsi cola in different quantities with different prices that even consumers with low income can afford. Culture and core values Culture constitutes learned values, beliefs and customs that influence the behaviour of individuals in a certain society. In the marketing perspective, culture means a set of significant assumptions that are shared by members of a community (Srnka, 2004). The decision to purchase Pepsi Cola product is highly influenced by the shopping culture among consumers. Consumers belief that shopping helps to create value in their lives (Adapa, 2014). Normally, when consumers go for shopping, they tend to develop a habit of purchasing certain products as part of their shopping. For consumers who value Pepsi Cola as their brand, they may decide that every time they do shopping, Pepsi Cola should be part of shopping. It is this belief that drives the consumer to purchase the product whenever he or she is out for shopping. Therefore, the shopping culture of consumers has much influence on their decision to purchase Pepsi product. Consumers’ core values also play an important role in influencing them to purchase Pepsi Cola product. In this case, the relevant core values include self-satisfaction, stimulation, self-direction and tradition (Adapa, 2014). People may choose to consume this product so as to satisfy themselves. This may be based on the belief that taking Pepsi Cola guarantee self-satisfaction. Individual stimulation may also influence an individual to purchase the product. This may occur due to the desire to change from one product to another just to gain the excitement one requires (Srnka, 2004). On the other hand, self-direction may influence consumers’ decision to purchase Pepsi Cola as a way of expressing their freedom or curiosity. This implies that consumers’ decision to purchase is typically due to their willingness and not through coercion. Some consumers of Pepsi Cola repeatedly purchase the product because it is their tradition. Such consumers are said to be loyal to the product and brand and they gain great satisfaction from use of the product. Sub-cultural aspects and consumer-age subcultures Consumer behaviour towards the Pepsi Cola product is also determined by some aspects of sub-culture. The consumer market for the product is characterized by distinct cultural groups that exist within the larger Australian multicultural society. In particular, the ethnic subcultures, such as Asian-Australian consumers, Non-English Speaking Background (NESB), Sojourners and Indigenous subcultures all have different beliefs that define their identity (Adapa, 2014). The consumption behaviours of these sub-cultural groups are likely to have much impact on use of this product. For instance, if indigenous subcultures do not value recreation, there is a possibility that the product will not sell very much in their market. Another significant aspect that is relevant to the product is age subcultures based on age groups, such as generation Y, generation X, baby boomers and the elderly (Adapa, 2014). Different age cohorts respond to products in various ways. The generation Y consumers are often open to change and tend to be disloyal to brands. This implies that the company may not reliably use it as the key target market. However, this group of market is highly influenced by peers and friends (Srnka, 2004). Therefore, if they are influenced to purchase Pepsi Cola by friends and peers it could have a positive impact on the sales. For generation X, they are interested in purchasing good brand names because of perceived quality associated with the brand. Pepsi Cola is a commonly known brand in the soft drink industry and is therefore likely to benefits from this group of market. Baby boomers often make important consumer purchase decisions and are likely to go for quality which is inherent in Pepsi Cola product (Srnka, 2004). Although the elderly are interested in the right product and services, they are also keen on right advertising presentation. Therefore, the strategies for marketing the product should create a significant impact on this group of the market to increase consumption. Consumer decision-making, gifting behaviour and relationship marketing Consumers use and buy products or services according to their needs, tastes and preferences, and buying power after arriving at the decision to purchase. A decision is a process of selecting an action from various alternative choices (Adapa, 2014). The models of consumer decision-making that are relevant to this product include economic, passive, cognitive and emotional models. Economic model considers consumers as economic persons whose decisions are often rational. In this case, consumers tend to acquire information about all available product choices and rank these choices to be able to identify the best choice (Lynch & Zauberman, 2007). For instance, a consumer may rank Pepsi Cola against its competitors, such Coca Cola, Mt Dew and Sprite to identify the best brand amongst the alternatives. Whether or not the consumer decides to choose Pepsi Cola depends on what he or she perceives as the best for consumption. Concerning the passive model, consumers behave irrationally towards certain products. They purchase products due to influence of marketers in their promotional initiatives (Adapa, 2014). In the same perspective, some consumers purchase Pepsi Cola product to support the efforts of marketers in promoting the product. Therefore, they are seen to be submissive, but not rational in decision-making concerning their buying habits. Consumers are considered as thinking problem solvers under the cognitive model of consumer behaviour. Before consumers resort to buying product or services, they first seek and evaluate information concerning different products and brands (Wheeler & Arunachalam, 2009). For instance, when consumers want to satisfy their refreshment needs, they would first want to know more about various products that can meet their needs including Pepsi Cola. Depending on how they process the information about the products and brands, they will decide to purchase one product and ignore the rest to fulfil their needs. How consumers feel about particular products and brands influences the decision-making process (Lynch & Zauberman, 2007). Therefore, consumers may decide to purchase Pepsi Cola depending of their state of mind at the time of making the decision to purchase. Consumer gifting behaviour also relates to the purchase of Pepsi Cola, especially the interpersonal and intrapersonal gifting (Adapa, 2014). A consumer of Pepsi Cola may decide to buy a friend the product in form a gift with the belief that it will be appreciated. Alternatively, an individual may decide to buy Pepsi Cola as a self-gift because it is a favourable brand to the person. According to Hennig-Thurau, Gwinner, and Gremler (2002) relationship marking is important such that it helps increase the market base for the product and increase consumer loyalty. Through the word-of-mouth communication, existing customers can attract new customers in form of relational partners to the products of the company. This can help promote consumer loyalty and in tern increase the company’s profitability. Opinion leaders and use of innovativeness Consumers for Pepsi Cola product may get information about the brand from different sources including opinion leaders. This is the process whereby an individual informally influences in a certain way the attitudes or actions of a group of people (Adapa, 2014). Consumers of the product who are influenced by opinion leaders tend to belief in everything they are told and hold them in high esteem. Opinions leaders have the ability to influence the actions, opinions and behaviours of consumers for Pepsi Cola product. This is because consumers consider them to be non-purposive and trustworthy. This implies that the can help increase the customer base for the product and even promote customer loyalty since they are able to change consumers’ actions and attitudes towards the product (Adapa, 2014). Therefore, the company may use opinion leadership as a tool to help influence new customers to purchase the product. The usage of a product plays an important role in consumer behaviour. This is influenced by Use Innovativeness (UI) which is form of variety seeking behaviours among consumers in the usage context (Roehrich, 2004). Consumers who have a high UI tend to display high creativity and tend to use the product in different ways. Consumers who are UI are likely to increase the consumption of the product, especially if it is multifunctional (Roehrich, 2004). Therefore, a company that manufactures product that can be put into different uses by consumers is likely to benefit from UI consumers as they may become loyal to the product or brand. Public policy and consumer protection Public policy is a government initiative aimed at protecting consumers from exploitation in the market. Consumer protection is enhanced through government regulation, consumer education, complaints handling, incentives and promotion of self-regulation in industries (Adapa, 2014). Through various government legislations, consumers of the product are provided with avenues through which they can seek redress in case their rights are violated by manufacturers. In addition, where consumers are enticed to buy a product or service by deceptive advertising it is an illegal act and consumers have the right to seek redress in relevant consumer protection agencies (Adapa, 2014). In particular, Pepsi Cola Company adheres to advertising standards and codes when promoting it brand and ensures that consumers’ rights are upheld. For instance, the company utilizes green marketing and advertising and even the packages for the products are reusable and friendly to the ecosystem. Consumers are also protected from price exploitation which may occur in form of deceptive pricing. Deceptive pricing occurs when a company falsely advertises a large reduction in price for the product when in actual sense the price is still higher (Adapa, 2014). The price for Pepsi Cola product is regulated and the company may not charge consumers a price much higher than the acceptable minimum price under the legislation. Even through consumers are protected by government legislation against exploitation in the market, they also have the responsibility to exercise consumer ethics while interacting with products and services in the market place (Adapa, 2014). Consumers are expected to do the right thing at the right time in the marketplace and avoid engaging in dishonest behaviour. Conclusion Consumer behaviour can be explained using different concepts and theories as indicated in the essay. Before consumers of Pepsi Cola decide to purchase the product, they have to go through the consumer decision-making process which involves realizing the need or want, information search, evaluation of alternatives, purchase and lastly post-purchase. The essay has identified and discussed different external factors that influence consumer decision-making process, such as reference groups, the family, social class, culture and subcultures. Reference groups include friendship groups, shopping groups, work groups, virtual groups, brand communities and consumer-action groups. Stages in the family life cycle, and dominance and joint decision making among husband and wife also influence consumer decision to purchase the product. Social class influences consumer behaviour in respect to affluent and non-affluent consumers. All in all, external factors are important in determining consumer behaviour and they are helpful to the company in regard to designing and implementing marketing strategies. References Adapa, S. (2014). MM311: Consumer Behaviour. [Power Point slides]. Carey, L., Shaw, D., & Shiu, E. (2008). The impact of ethical concerns on family consumer decision‐making. International Journal of Consumer Studies, 32(5), 553-560. Chambers, K. (2012). Internal Influences affecting the consumer purchase decision making process. Diecidue, E., Rudi, n., & Wenjie, T. (2012). 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