Consumer Behaviour in Decision-Making Process - Coursework Example

Consumer Decision-making - External Factors Table of Contents Consumer Decision-making - External Factors 1 Table of Contents 1 Introduction 2 Howard-Sheth model 3 Engel-Kollat-Blackwell model 5 Bettman’s Information Processing Model of Consumer Choice 7 Communication Model 10 Influence of Reference Groups 12 Diffusion of innovations 16 References 17 Introduction Just one question, how do consumers make decisions, has been at the core of marketing debate for more than 70 years now. All these decades, while marketers have been manipulating several principles of marketing, so have been consumers who they try to reach out to. While marketers think of which products and service should they sell, consumers have been riding newer parameters as to which products or services should or should not they buy. There is a thin line that consumers set on which brands should they endorse and which they must ignore. This is because consumer decision-making is based on a unique process and unique set of rules as determined by the buyers and not the sellers. The decision-making process is underlined by a few decision-making models, theories and strategies that consumers use to reach an internal consensus on a specific brand or product that takes a lead over the rest and in fact a plethora of them available in the market. Consumer decision-making is related directly to consumer behaviour, the study of which focuses on how consumers spend the resources of time, effort and money that are available with them on items which are related to their consumption (Schiffman and Kanuk, 1997). It is a wide field based on the tenet that a consumer is driven to make decisions to buy a product when he finds a need for the same (Solomon, 1996). Officially, Belch (1998) defined consumer behaviour as ‘the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires’. The behaviour referred to here is either that of an individual or a group or even an organisation. Consumer behaviour determines a marketer’s strategy on how the product is supposed to be positioned in the first place. Howard-Sheth model Of great interest in consumer decision-making is the input/ process/ output stages. That brings one to Howard-Sheth model of decision-making, which runs through three levels of decision-making (Sheth and Newman, 1991). The first level is related to problem solving. This is the stage at which consumer is completely raw about the product, even the basic reference of which he lacks. The situation warrants information seeking about all the products available in the market before purchasing. Then he places himself in the limited problem solving situation, wherein he has little or partial knowledge about the market. This is when the consumer begins a comparative analysis, more often mental than physical. This leads him to the habitual response behaviour. The consumer, at this stage, is fully armed with characteristics of different brands and he can make clear differences between them. Given that he is even capable of telling which product suits his need and why, The Howard-Sheth model, at this point, says the further action is governed majorly by four sets of variables, namely inputs, perceptual and learning constructs, outputs, and exogenous variables. 1. 1. Inputs Three different types of stimuli are involved in this i.e., information sources, significant stimuli, and symbolic stimuli. The first one is provided in the consumer's environment, the second one is provided by the physical brand characteristics and the third one by visual or verbal product characteristics. The third type is driven by social environment of the consumer; which includes reference groups, family and social class. All three stimuli are inputs regarding the presence of the brand and communicated to the consumer. These stimuli belong to the Theory of Buyer Behaviour. 2. Perceptual and learning constructs This involves use of psychological variables at the time when the consumer is contemplating to decide. Parts of these variables are perceptual by nature and their intensity depends on how the consumer receives and interprets information as handed over to him by the input stimuli or by model's other parts. There is every chance of stimulus ambiguity from taking place if the consumer does not interpret or understand stimulus in the correct manner. It is not that the stimulus as handed over by the environment is wrong; it is how the consumer interprets it. Furthermore if the consumer distorts the sets of information received perceptual bias results. There is a continual interaction between learning constructs and perceptual constructs; something that gives this model an advantage on its own - an advantage that is distinctive. 3. Outputs When learning and perceptual variable work together, outputs result. outputs are consumer's reactions to variables like the brand, attention, attitudes, comprehension and intention. 4. Exogenous factors These do not have any direct with consumer's decision-making process. However, variables as consumer personality traits, importance of the purchase, time pressure and religion do have a relationship. The model counts importance of symbolic and significant stimuli because these two determine such important aspects of the purchase viz. price and quality. However, it is worth mentioning that these stimuli do not work in the same manner across all societies. Societal orientations tend a consumer to react differently to these stimuli. Engel-Kollat-Blackwell model The need for this model arose on account of fast-growing and increasing body of knowledge today's consumer's behaviour. The model has been subjected to a number of revisions so far with a hope to reach an improved descriptive stand on the component-subcomponent relationship in its variables. The model describes four stages in the decision-making process. Stage I: decision-process stages There are five decision-process stages and this Stage I is primarily confusing on the same. These include: recognition of the problem, alternatives search, and evaluation of alternatives, purchase and finally the outcome. It should be noted that the second one i.e., evaluation of alternatives leads to attitude formation that draws a consumer nearer to his purchase intention. But contrary to long-held belief, it is not necessary for every consumer to pass himself through all these stages. This is because some consumers depend on an extended problem-solving behaviour, while some on routine problem-solving behaviour. Stage II: Information input Non-marketing and marketing sources feed the consumer with product-related inputs at this stage. The information helps in both problem-recognition and decision-making process. Despite the pool of information at his disposal if the consumer is still far from making a decision, he presses his need for sourcing information from external sources. If the clutter still persists, it can be said that the consumer has reached a dissonance because the alternatives that he has selected are not satisfactory as desired. Stage III: Information processing In order to process information the consumer focuses on exposure, perception, attention, acceptance and information retention. This must act on the consumer in a methodological order of getting exposed to the message, being able to allocate space for the incoming information, being able to interpret the stimuli received, being able to retain the message so that he can transmit the inputs received to his long-term memory. Stage IV: Influencing variables Here the environmental and individual influences act on the five stages of the decision-making process, detailed above. Consumer’s individual characteristics come into picture here. These include his motives, lifestyle, values, social influences, reference groups, culture, personality and family orientation. Consumer's financial standing is a situational influence, which is also responsible for his decision-making process. Bettman’s Information Processing Model of Consumer Choice This model was suggested by Bettman in 1979 and based on the hypothesis that consumers did not have ample information-processing capacity. He said they were not equipped with analysing complex alternatives with regard to decision-making. Instead they would use pretty simple strategies to make purchase decisions. He divided the model into seven stage. Ist of Processing Capacity The stage says that consumers are not interested in extensive information processing or complex computations. They would, instead, cling to choice strategies, which makes selection of products easy for them. IInd Stage of Motivation This is the central point in Bettman model, which says motivation is the key to decision-making. Maslow’s Hierarchy of Needs (1970) is at the core of theories on motivation. In this the consumer looks at self-achievement, and the need for affiliation and power. IIIrd of Attention and Perceptual Encoding This deals with consumer's goal hierarchy and is based on voluntary and involuntary attention, both of which help a consumer make a decision. Perceptual encoding is his way of receiving stimuli and deciding whether or not he wants more of the same. IVth of Information Acquisition and Evaluation Consumer starts looking for external sources if he feels the information that he has in hand is not sufficient enough to help him reach a decision. He would keep looking for additional information until he realises that the received sets of information are enough to make a decision. Vth Stage of Memory The consumer retains all the information that he has received and when the need arises he first reaches to the same than any other set of information. He would re-look for more of it if still he fails what he has is not enough. VIth Stage of Decision Process This stage rests of the "rule of thumb" or application of heuristics. The rule is governed by application of both situational and individual factors. As a result of this it is not necessary that a decision a consumer takes in one situation would be the same he does in another. VIIth of Consumption and Learning Process This is a postpurchase scenario, the first step of which on part of the consumer is to gain experience after he has evaluated alternatives. He stores the evaluation and uses it for future purchasing situations. Relevance of Consumer Gifting This is a recent trend to steer consumers towards positive decision-making. Gifts have now become an important feature of marketing, though small businesses are yet to catch up with it in a large way. Gifting is a relevant practice because it helps businesses reposition their products and create diversity. Gifts represent more than ordinary purchases that take place daily. It is because they carry a symbolic meaning for the consumers who act as brand ambassadors in their own small right and thus help other consumers in their decision-making. The practice of gifting is considered as an exploratory purchase behaviour that involves vicarious exploration and uses innovativeness (Schiffman et al, 2011). Link of Sociocultural Inputs to Decision Making Models Dawson (2006) has remarked that consumers' choices are driven by a set of consumer attitudes. While internal factors are greatly responsible for making purchase decision, external factors are equally important. Consumers' external incentives and buying consciousness influence consumers' decision-making capabilities. How consumers buy and use products is driven by society's cultural norms like customs, conventions, festivity, religion, lifestyle, class and subculture. The pattern of living, decision-making and consumption are significantly influenced by the culture. Kotler (2000) has stated that culture can be acquired either from the family or from the region in which the consumer is located. Culture is a boundary within which a man thinks or acts. His behaviour is cross-cultural when he acts or thinks beyond his own culture. It has been recommended that marketing experts should take a serious note of a consumer's culture as it is an important determinant on how he thinks of a product or how he makes a purchase decision regarding the same. Sociocultural inputs are external stimuli that acts as one or more sources of information that the consumer receives to make a decision. Consumers either adopt or reject a product if their sociocultural moorings support or reject it. Religion forms one important part of this sociolcultural aspect, though there is not any conclusive research yet that shows consumers are drastically influenced by it while making purchase decisions (Essoo and Dibb, 2004). Not only that, it is held that sociocultural variables are a combination of economic, cultural and instrumental variables and all together go a long way in affecting consumer's decision-making capability. They have significant impact on the decision-making even while they work alone or in combination with each other. Communication Model This model envisages speaking to the heads and hearts of the consumers. In order to acquire, grow and retain consumers, it is important for companies to know what goes on in consumer's mind while he makes a decision. It can be both a cognitive and an experiential act depending on the category of the product or the situation under which it is intended to be sold. Decision making on part of the customers is both a rational and an emotional act; driven by both head and the heart. The decision-making can be influenced by three factors, which include level of involvement that is high to low, retention of customers versus their acquisition and consumers versus business. The variables on the head side are cognitive and rational, while on the heart side they are experiential and emotional. This where the communication model come into picture as it is based on three approaches i.e., cognitive approach, experiential approach and habit/repeat approach. The first two fall in the bracket of high involvement, and the last one in low involvement. The communication model takes into consideration all of them, particularly the cognitive response, which involves judgement, reasoning and knowledge. For both businesses and consumers, the process can be greatly simplified when an evoked set of brands that are frequently purchased are used to attract prospective consumers. This minimises six risks on both sides, which include financial risk, physical risk, performance risk, psychological risk, time-loss risk, and social risk. This is followed by the affective response which involves emotional processing the outcome of which is that the consumer either prefers or not prefers a brand and in the process develops a conviction about it. All along consumers attitudes and action go side by side, and consumers normally act as per their beliefs or attitudes. What they decide is largely dependent on what they know about a brand. The communication model uses persuasion in all cases with an intent of bring about changes in attitudes, beliefs and behaviours. Communication model is a sort of intervention while the consumer is on his way to make a decision. The intervention fails if the marketer does not fully understand the consumer's needs (Belch & Belch, 2011; and Hardman, 2009). Influence of Reference Groups Two or more individuals comprise of a group and they share common sets of values, norms and beliefs. They have certain explicitly or implicitly defined relationships to one another so as to make their behaviours interdependent. A reference group is a group the perspectives of which are shared by an individual in his behaviour, including that of purchase decision-making. Groups are classified according to four criteria based on membership, strength of social tie (primary being strong and secondary tie being weak), type of contact, and attraction. Of the two types of reference groups; one being dissociative and another associative, it is the latter that influences decision-making of an individual in a positive manner. Aspirational reference group has positive desirability and its members emulate each other. Of these the brand communities add value to a product or a service. It is a chain reaction. When one member becomes part of a brand, others follow and what ensues is brand loyalty of highest order. One individual can have several reference groups and consumers are significantly included in their decision-making by coinciding their decisions with that of the reference group (Leon and Kanuk, 2003). Impact of advertising appeals Advertising, in reality, uses these references groups to influence consumers. It is a widespread phenomenon all over the world for young boys and girls and even old people to identify either with sportspersons or cine starts. This is one reason why celebrity endorsements take place. When celebrities endorse a product, these people start identifying with the brands as they identify with their reference groups. 1. Family: An individual's personality characteristics are influenced by the family. Family is a reference group. It is the ultimate face-to-face interaction an individual has as a consumer. It is different from the larger reference group as it involves well-being of all members in the family; one member's satisfaction of needs must reflect on every other member’s face. The products, however individually bought, are deemed for mutual consumption. One person in the family, though, acts an agent on behalf of others in making purchase decisions. Several family members enter a discussion on what or what not to buy and each member plays his role on the basis of the type of purchase that is to be made. Women would take keen interest if the kitchen appliances are to be bought and men are to assume a greater role if house tiles are to be replaced with fresh one. The types of products to be bought determine the type of involvement. 2. Husband-wife dynamics Kassarjian (1982) has remarked that in as far as family decision-making is concerned, the husband-wife dynamics plays a significant role. Scholars like Bonfield (1978) and Davis (1976) were earliest few who focused research on this dynamics on a couple of questions. These included discussing relative power of husband over wife and vice versa in different situations, influence of the product on this relative power and part played by the marital roles. Consumer decision-making in the light of this dynamics has been largely based on the role differentiation in the marriage and also power allocation. 3. Culture Studies have indicated that culture, either on its own or in conjunction with personal and economic factors, has a significant influence on the buying behaviour of individuals. Since culture is a broad and pervasive terms, it needs a detailed investigation of society in its totality; where the culture is ingrained. Culture is a mix of knowledge, religion, language, customs, music, art, traditions, work patterns, products and technology. It is the sum total of learned beliefs, attitudes and values that serve as a guide to consumers for their decision-making initiatives. This view is seconded by Page (1995) who has defined culture as this: “a group of complex belief and value system, and artefacts handed down through generations as determinants and influences upon human buying behaviour within a given society” Even as the impact of culture on decision-making is considered as less tangible, there is some impact anyway. 4. Subculture People falling within a subculture have distinctive attitudes and follow slightly different objectives than the parent culture group of which they are a part of. Since their life patterns are different, their ideologies are different too; something that manifests in their decision-making abilities. 5. Social class This is an important social group. Each society has social class stratification and each social class shares common values. Their influence on an individual is often so subtle and broad that he is hardly able to perceive it. Even if he does not, it retains its influence on him in whatever he does. When marketers devise marketing mixes, it is important for them to keep this social class in mind as it influences decision-making (Myers, Stanton and Haug, 1971). The decisions can further get influenced by the type of class that works as an influence. Affluent class will exert influences that are driven by luxurious bent of mind, while the non-affluent classes will exert an influence in sync with their own social standing. 6. Cross-cultural consumer behaviour This behaviour determines to what extent are two different consumers belonging to two different nations different or similar. The same is true when two consumers belong to two different societies. This understanding is considered to be of importance in the wake of multinational marketing, so as to devise appropriate strategies that complement each of these consumers in their respective regions by a single product. Reactions can be similar if there is a great deal of similarity between two cross-cultural consumers but having near identical decision-making attributes. There is a duality involved for marketers with respect to cross-cultural acculturation. In the first instance marketers have to completely orient themselves to beliefs, values and customs of each; and secondly they have to work in a manner that they are able to convince them to break the traditions with which they have been brought up (Kassim, nd). Diffusion of innovations It has been discussed with varying orientations and perspectives, like consumer-oriented, product-oriented, market-oriented and firm-oriented. The consumer-oriented approach is a favoured one, since it has a greater relevance to consumer behaviour. According to this orientation every product is considered a new if the consumer thinks so. Consumer's perception of the product deepens his belief in the same. The product is termed as an innovation if it has undergone a recent change in its attributes, form or overall benefits. Such changes are embodied in two different connotations; one deals with technology and another with behavioural patterns and usage. If the same innovation is viewed by the marketer than a consumer, the product is said to be market-oriented. It is independent of how much exposure a consumer has to the product or what its sales figures are. The product is said to be completely new, if it is a first time product. In other words, the newness of the product referred to here is from the company's perspective than anything else. References Bonfield, E H. (1978), Perception of marital roles in decision processes: Replication and extension. Advances in Consumer Research, 5, 300-307. Belch, G.E. (1978). Belief System and the Differential Role of the Self-Concept In Advances in Consume Research, Vol .5 ed . Keith H.Hunt, Ann Arbor, Michigan Association for Consumer Research. Belch, G. E., & Belch, M. A. (2011). Advertising and Promotion: An Integrated Marketing Communications Perspective. New York: McGraw-Hill Higher Education. Davis, H. L. (1976). Decision making within the household, Journal of Consumer Research,2, 241-257. Dawson, J., Findlay, A. and Sparks, L. (2006). The Retailing Reader. London: Routledge. Essoo, N., & Dibb, S. (2004). Religious Influences on Shopping Behavior: An Exploratory Study. Journal of Marketing Management, 20(7/8), 683-713. Hardman, D. (2009). Judgement and Decision Making, Psychological Perspective. West Sussex, UK: John Wiley & Sons. Kotler, P. (2000). Marketing Management. India: Prentice-Hall. Kassarjian, H. (1982). Consumer Psychology, Annual Review of Psychology, 33, 619-649. Kassim, S.A. (nd). Cross-cultural consumer behaviour: An international perspective. Available: http://shamanaz.com/wp-content/uploads/2012/09/CB-CP12.Culture-part3.pdf. Accessed 24 May, 2014. Leon G. S. and Kanuk, L.L. (2003). Consumer Behaviour, Pearson India Pvt. Ltd. New Delhi. Myers, J. H. Stanton, R. R. and Haug, A. F. (1971). Correlates of Buying Behavior: Social Class vs. Income, Journal of Marketing, Vol. 35, No 4; pp. 8–16. Schhiffman J.B and Kanuk, L.L. (1997). Consumer Behavior. Prentice Hall: NY. Solomon, K. (1996). Consumer Behaviour, 3rd edn Prentice Hall Englewood Cliffs. NJ. Sheth, J.N.B.I. and Newman B.L Gross, B.L. (1991) .Why We Buy What We Buy a Theory of Consumer Behavior. Journal of Business Research, Vol 22. 159-170. Schiffman, L, et al. (2011). Consumer Behaviour 5th ed. Sydney: Pearson: Australia. Read More