Consumer Behavior - External Factors in Consumer Decision Making Process - Coursework Example

Consumer Behavior Name: Tutor: Course Name: Course Code: Date: Table of Contents Table of Contents 1 Introduction 2 External factors in consumer decision making process 2 Family 2 Family life cycle in consumption 3 Changes in husband-wife Decision Making 3 Social Class 4 Culture 4 Cross-cultural consumer behavior 6 Reference Groups 7 Market segments 7 Targeting 8 Opinion leaders 8 Relationship Marketing 9 Innovativeness 10 Gifting Behavior of Consumers 10 Models of consumer decision making 11 Marketing Ethics 12 Public policy and consumer protection 13 Conclusion 13 References 15 Introduction This essay explores the external factors that can influence customer decision making in consumer behavior across all services and products. Fridge or refrigerator is a product regarded as a luxury item in emerging markets but necessary in many developed countries. Consumer behavior involves different processes. Consumers initially try to obtain commodities to be consumed, then goes on to select only the brands that guarantee better utility (Blythe, 2006). Upon selection of the commodities, consumers undertake an estimate of money available for expenditure. It plays major roles from conserving perishable goods such as food, medicine and many other goods which are temperature dependant. There are various models and brands of fridges based on the manufacturer. The major brands are LG, Samsung, Sharp, Armco and Ramtons. Customers intending to make purchases on fridges are influenced by internal and external factors into their buying behavior. External factors are external to the individual hence not personal (Czinkota & Kotabe, 2001). They are associated with the groups the individual interacts with and belong. Consumer behavior informs the selection, buy and consumption of fridges to satisfy their desires or needs. Lastly, the fridges consumer analyzes the commodity prices prevailing and takes the decision regarding its consumption (Schiffman et al. 2013). External factors in consumer decision making process Family Buying behavior is affected by the family since it is one of the crucial interests to most market researchers. Consumption patterns in Children are more like their parents. Some items bought or not bought by individuals currently results from actions of their parents when they were growing up. As an adult, products such as the toothpaste and brand of soap in which their parents used are favored (Dickson, 2002). Family members have the most influence to Firms show interest due to certain purchases. A great deal in children influences purchases in many household. Half of nine to seventeen year olds were asked to find out about products or services online by their parents. The knowledge obtained was to be used to design their showrooms with desires appealing to children. Czinkota and Kotabe (2001) learn that marketing to children is under increasing scrutiny. Children have been deliberately manipulated by some companies to nag their parents buy their products. Family life cycle in consumption Life cycle stage or family lifecycle is important. The products purchased and consumed depend on types of households and families with several factors influencing their expenditure patterns. Situations such as financial problems or severe illness affect on how well one passes through the stages (Hutt & Speh, 2004). The family life cycle is a stage a family member goes through childhood to retirement years undergoes intellectual and emotional stages called the family life cycle. Developing or gaining new skills in each family life stage has challenges. These skills are essential as every family goes through the changes and that some may not pass through them smoothly. Fortunately, the skills if missed in one stage can be learned later stages (Malhotra, 2008). Changes in husband-wife Decision Making Relative amount of influence is of interest to marketers to establish the input of husband and a wife in family consumption choices. Couple conflict overtime can be harmonized by sense of fairness in family decision making, through perceived fairness such as empowerment, empathy and egalitarianism in a gendered pattern are moderated by spousal traits (Czinkota & Kotabe, 2001). Conflict management across major decision making is one of the ways to market products successfully to families. Therefore, salespeople need to understand family behavior. Their perceived fairness cuts across the relationship between the spousal. Husband-wife decision making in recent years of changing household roles has changed spousal behavior. For example, women influence selection of the pharmacists while husbands take part in selection of insurance agent and lawyers. However, health care professional’s selection has little influence on joint decision making (Dickson, 2002). The choice family farm machinery is mostly influenced by the husband while a personal car is either equal or syncratic. Social Class Income differences are one of the various methods that ascertain social class. Arrangement of the society hierarchically defines the social class. These divisions signify social status hence an essential determinant of consumer behavior. Social class affects media patterns, consumption patterns, lifestyle, interests and activities of consumers (Meldrum & McDonald, 2007). However, it may not be true but it contributes to variations in social status but not the only cause of differences in lifestyles or consumption patterns. For example, two consumers one self-employed and the other senior management professional with similar income can have different lifestyles owing to their education levels and nature of employment (Czinkota & Kotabe, 2001). For these two consumers, preferences vary a lot regarding brand and product purchases, interests in pursuit of leisure time activities and media consumption patterns. Social class can be measured as a composite variable owing to such revelations through the years. Marketers have been prompted not to reflect not only on income differences, but other indicators such as material possessions, designation and educational qualifications type of profession (Dickson, 2002). Culture Culture comprises the basic taboos, tradition, attitudes and values of the entire society within the individual’s support and approval. Samli (2012) notes that consumer behavior encompasses processes where groups or individuals do selection, purchases, and utilize or product disposal. It also involves the experiences or ideas to satisfy desires and needs. It is basically linked to once status or the financial ability of the individual. An individual from childhood learns cultural norms over which the influence is invisible in daily behavior as it is so ingrained. Acceptable norms of behavior are taught to individuals through culture, defining what right and what is wrong (Samli, 2012). Certain sanctions are imposed an individual who deviates from acceptable norms. Marketers take great interest in product use because this encourages increased consumption or may influence best positioning of the product. Hofstede (2001) notes culture as a reflection of people through use of symbols, language, colors, and message sources. Communication messages are cultural influences that are highly conspicuous. A country’s culture is so strong as to associate and adapt messages to their automobile brands. Cultural values influence methods of conducting businesses while culture affects consumption behavior as seen in people’s dressing style and food habits. It also affects consumption patterns engendered by attitudes, communication (language), and values. For example, savings and consumption affects decisions regarding possessions arising from attitude towards prosperity and future security (Yoon et al. 2006). Citizens of many African countries value food direct from the field rather than in a fridge. For example, American automobile brand Ford, communicates American high life and heavy duty engines since it is widely present in the US. They use the brand logo depicts the American spending culture. To indicate cultural adaptation, Chevrolet uses a famous Indian festival. Multinational brands develop messages based on cultural specifications in their areas of operations (Lambert-Pandraud et al. 2005). Regarding sub-cultures, people within a culture can form a subculture if they have something in common and deemed different from the dominant culture. Subcultures are shaped by geographic locations, ethnic backgrounds, common interests, religions and vocations or jobs (Meldrum & McDonald, 2007). In age Subcultures, Consumers as they move through their life cycle undergo predictable changes in lifestyles, values and consumption patterns. The four critical age trends are; teens, youth middle aged and the elderly. With the change in the age trend, consumer behavior changes accordingly. Preteens influence purchases in a range of product groups since they select the outlets to spend their own money.  Marketers by appealing to preteens at an early stage build brand loyalty through television. Teens exceed 6 percent of the population and segmented into various lifestyle groups (Hutt & Speh, 2004). They have increased influence on purchasing and spending power. They are open to new products, ideas and get preoccupied with their appearance. They remain enthusiastic television viewers. Generation X or Young Adults are distrustful of marketing and love a balance of leisure and work (Jobber & Fahy, 2003). They tend to live at home and are close to their parents. This group is not drawn to hyping up products or traditional forms of advertising but stay in control by buying communications equipment. Their products are based on their practicality. Baby Boomers have a greater income than any other age group at the moment. They increase at a rate of 10 percent each year compared to 5 percent of the rest of the population. This group is highly educated and has discretionary income than other groups. They are health conscious, save less and buy more (Blythe, 2006; Dickson, 2002).  In the United States, the fastest-growing subculture is from the people of African Americans, Hispanic and Asian origin. The youth are bringing out a unique sub-culture through language and music. This is exhibited in the hip hop and rap culture in the US. This is similar to Hispanics purchasing power which has continued to grow after the launch of Home Depot a Spanish version of the Web site. McDonalds has created a fast food sub culture among young people. They exhibit obesity and tendency to consume salty and fatty foods (Czinkota & Kotabe, 2001). It features components like cafés serving full meat, Latino pastries, fish counters and coffee. It is useful to market products based on the consumers’ ethnicity though in the future ethnic groups’ boundaries are blurring. In response to people’s interests, subcultures like college students can develop behaviors and similarities that enable marketing professionals to design products specific for them (Jobber & Fahy, 2003). Hip-hop subculture has developed alongside extreme sports such as whaling or fantasy gaming such as aces and gambling. Cross-cultural consumer behavior Many items such as values, personality, lifestyle and culture influence consumer decision-making. Australians may feel overloaded in the need for low tolerance of uncertainty because they are exposed to broad product choices. Consumers get confused over choice when they experience information overload (Malhotra, 2008). Australians are expected to be cognitively overloaded than Singaporeans in purchase decisions because of the type of cues they apply to make choices. For example, Western consumers make effective evaluations of a single brand based on individual attributes than Eastern consumers who are more effective in making inter-comparison between attributes and brands (Nisbett, 2010). Behavioral characteristics of the consumer can be explained by religion. For example, some Islamic countries have strict regulations regarding boarding of rooms for night or day stay. Most lodges insist on marriage certificates for couples in tending to stay in the hotel rooms. This will affect their choices and attitude towards buying personal cars hence influencing their comprehensive view on decision-making (Hofstede, 2001).Furthermore, Western consumers are probable to make a consideration on a range of alternatives and product information hence becoming more open to innovation and change and less likely to avoid uncertainty. People from Eastern cultures take a broader contextual view while those from Western cultures are more focused on specific objects (Nesbitt, 2010). Furthermore, due to their collectivistic nature, people of Chinese descent as compared to the North Americans, rely and search more on social networks for information. The latter uses a variety of information sources. These values can be applied to cope with different personalities (Jobber & Fahy, 2003). Reference Groups Close friends and family are the primary reference groups in the life of the individual owing to the frequency of interaction and primacy of the significant others. Colleagues, schoolmates, other acquaintances and the neighborhood are Secondary reference groups to an individual. Reference groups are peopling that influence behavior or attitude of individuals (Malhotra, 2008). Individuals use these groups as reference points for learning behavior, attitudes and beliefs hence adapting these in their lives. In imitating their behavior an individual may not or may personally interact with others. This includes those groups or individuals from whom an individual learns by observation form the reference groups. Reference groups also influences Product consumption such as conspicuous luxuries. A product that is consumed conspicuously is acceptable to the buyer’s reference groups hence influencing the choice of the brand (Hutt & Speh, 2004). In case of inconspicuous products, reference group influence is lower given that there are no or little sanctions for failure to buy the ‘correct’ choices. In conspicuous consumption nature, brand and product purchases are highly influences by reference group. Market segments Market segmentation is based on social classes and income differences. It distinguishes consumption patterns despite remaining a crucial differential consumption patterns. Social class is used with other measures like life cycle and life stage. The refrigirator market segments will reflect the classification in the table below (Churchill & Iacobucci, 2005). The upper class (upper and lower) prefers LG and Samsung refrigerators. It is preferable by the wealthy and professional individuals such as footballers, lawyers, doctors, CEOs, musicians and athletes. The middle class like middle level managers, blue and white collar employees prefer Ramtons and Armco. Working people but on welfare will buy used fridges from the above market segments. The lower income classes have use fridges as they do not perceive immediate needs or cannot sustain its maintenance. Targeting The growth of middle class in China and India is creating opportunities for many refrigerator firms to sustain their brands. In a recession customer bases are desired to be as large as possible by makers of upscale brands when luxury buyers are harder to come by. United States has been overtaken by China as the largest technical market in the world. A wealthy individual can wear old clothes and shoes or use a beat-up old fridge than an ordinary individual owning an upscale refrigerator (Aaker et al. 2007). On the contrary, firms do not want to risk making their brands cheap. For example, Samsung brands like Smart fridges do not have the Samsung label on them. In another case, Tiffany was selling cheaper silver jewelry product line to a lot of customers. However, tarnished by the line, the company later worried of its reputation. Luxury car brands while intending to keep their prices high struggle to keep the supply of their products in check. Supply and demand to some extent determine a product’s price (Hutt & Speh, 2004). Occupation is the primary variable determining social class while income helps define the term. To some extent, similar consumers exhibited purchasing behavior in the same social class. Marriages in some countries are expected take place in people within their own social class. It is not always correct for many people to claim that they are middle class. Opinion leaders A consumer may want to join and identifies with reference groups such as close friends, family, social groups and work groups. Due to guidance and opinions to individuals by opinion leaders on particular topics and exert great power on buying decisions. Opinion leaders are taken as part of reference group (Kotler & Keller, 2006). Customers may reject being associated with groups such dissociative groups. These leaders wield expertise in specific areas hence consumers respect them and often seek their opinions prior to buying services and goods. The higher credibility of opinion leaders as they propagate word of mouth communication form part of the reference group. Unlike marketers, they have not vested interests in selling the product to others (Nesbitt, 2010). They are category or product specific characterized by high involvement level. Appearing to be like other members of their group, it makes it hard to identify opinion leaders as their influencing power is stronger but do not stand out (Schiffman et al. 2013). Marketers can identify reference group members by conducting appropriate product specific research. Special tools like network analysis using special software are required in reaching opinion leaders today. The questions about respondents’ level of involvement, social standing in groups, knowledge level, ability to influence others and the inclination to adapt new products is concern by this kind of research. Attitudes and behavior of consumer are influenced by these groups (Yoon et al. 2005). For example, if one desires to be a professional football player, an inspirational group is available in the names like Diego Maradona, Ronaldo or Aniesta. A refrigerator mechanic may have a great deal of knowledge regarding the performance of the various fridge brands. Some buyers may seek their advice hence influencing consumption (Hutt & Speh, 2004; Dickson, 2002). Relationship Marketing Personal relationships between individuals provide loyal customers with increased communications, special services, attention and discounts beyond the core service or product. Relationship marketing emphasizes long-term commitment to the individual customer although general advertising, direct marketing and sales promotion used as part of a relationship marketing strategy (Aaker, Aaker & Kumar, 2007). The six areas where loyalty building requires a strategy to save on costs are reduced marketing costs, lowered transaction fees, increased cross-selling success, and positive word of mouth, reduced failure costs and reduced customer turnover expense. Customers feel good about the firm and derive personal connection to the business. The intention is to foster ongoing customer communication and furnishing loyalty by building extras like perks and upgrades. Innovativeness Creativity and innovation has improved the way consumers seek and make decisions on the products and services. The use of social media like Facebook, Myspace and Twitter has increased B2C distribution (Dickson, 2002). The four components of innovation are; innovation itself, communication channels, the social system and time. Long-term relationships with existing customers is ultimately a firm’s advantage as it is less expensive and easier for existing customer to take an additional sale. Use of internet and e-commerce has improved customer relationships. Club membership stimulates a sense of belonging (Kotler & Keller, 2006). There is no expectation of an immediate payback. Internet usage has increased as result of a new form of relationship marketing. Today, due to six major forces, consumers are less loyal than in the past. These are abundance of choice, availability of information, entitlement, commoditization, insecurity and time scarcity (Yoon et al. 2005). Meldrum and McDonald (2007) observe that database marketing and market research have been fused as promotional marketing tools to participants in relationship marketing in firms. The ability to satisfy consumer needs is improved through affective, cognitive, situational and social norms perspectives. Gifting Behavior of Consumers The feelings generated by gifts and amount of money spent is of great interest in consumer behavior. Gifting behavior takes place between a giver and receiver and is the process of gift exchange. Inter-category involves a group giving an individual a gift and vice versa (Lambert-Pandraud et al. 2005). A group gives itself a gift in intra-group gifting. Gifts occurring between two individuals are interpersonal. These gifts are given to, received from others or to oneself. It is a symbolic communication with explicit and implicit meanings. The five gifting subdivisions are; intergroup, inter-category, intra-group, interpersonal and intrapersonal gifting (Dickson, 2002). Intergroup gifting has one group exchanging gifts with another. When the giver and the receiver are the same individual then the gift is intrapersonal. For instance, a LG fridge donated or preferred by an individual to himself or herself. Models of consumer decision making In this consumption situation, consumers place give more attention to current feelings and moods but least on pre-purchase information. There are economic, cognitive, passive and emotional perspectives of consumer decision making. Economic view guides the Consumers to make rational decisions. Given that consumers in any given situation are rarely knowledgeable and aware of all the product alternatives, features and benefits, most consumption situations are not characteristic of this model (Jobber & Fahy, 2003). Customers are unable to make rational decisions hence the passive view shows consumers as basically submissive to the promotional efforts of marketers and self-serving interests. Consumers perceive that they are irrational and impulsive purchasers, ready to yield to the aims and arms of marketers (Schiffman et al. 2013). The mind of a consumers are depicted as problem-solvers by cognitively seeking out products, form preferences, engage in post-purchase evaluations, process information, and services that fulfill their needs and make choices of their selections. Consumption situations is a characteristic of consumers who experience high levels of perceived risk and are highly involved with purchases (Kotler & Armstrong, 2004). Consumers in emotional view have deep feelings or emotions concerning myriad purchases. Fantasy or stressing nostalgia is emotional advertising appeals are ways of ‘luring’ customers to the product. Other factors influencing consumer decision making Advertising, public policy, pricing legislation and consumer ethics are some of the factors that also influence consumer decision making. Ethical marketing efforts and decisions should suit and meet the needs of business partners, customers and suppliers (Kotler & Armstrong, 2004). A claim or promotional statements with subjective expressions instead of objective views is puffery. For example, literally, a ‘reasonable person’ would not take into consideration an advert such as Gatorade drink adverts communicating the ‘Gatorade speeds like a rocket.’ How the business relationship will exist is influenced by the expectations each party brings into a marketing transaction. Consumers as observed in recent trends prefer ethical companies hence making ethics a component of a corporate image or a selling point (Lambert-Pandraud et al. 2005). For instance, a consumer wishing to purchases from a retailer has his or her expectations varying from wanting to pay a reasonable price and being treated fairly by the salesperson. Unethical behavior negatively impact company relationships. These are deceptive marketing, price wars and selective advertising. Marketing Ethics Conflicts and disagreements bring about the ethical problems in marketing. Each marketing facet has ethical danger. Skilled marketing ploys may not be easily unraveled by the public due to inadequate market and product awareness. The stereotyping and invasion of privacy are ethical problems in market research given that any analysis of real populations needs to place individuals into groups and make approximations (Kotler & Armstrong, 2004). However, a variety of ethically undesirable results of stereotyping would be obtained if conducted irresponsibly. Market audience and public policy can discourage demand by way of selective marketing by disenfranchising them altogether or through undesirable market sectors. Vulnerable audiences in emerging markets are another ethical issue relates to developing countries (Aaker et al. 2007). Ethics in advertising and promotion is dynamic. For example, Tobacco 70 years ago was advertised as a health product. The truth about tobacco offends morality and the law as the advertiser today will fail to take the defense. However, the law permits puffery which has a thin line in differentiating it with fraud. The mainstay of advertising content is sexual innuendo which is a form of sexual harassment (Schiffman et al. 2013; Malhotra, 2008). Teleological theory advances a thought of moral consequences of action judged as morally right (Blythe, 2006). Customers are baited by product advertising through a bait and switch which is forms of fraud. This is teleologically wrong. The advertisers using negative advertising techniques dwell not on the advantages of their own but disadvantages of competitor products. Politics use these methods where approaches are unsolicited, direct marketing remains a controversial advertising channel (Malhotra, 2008). Examples are constipation medication, feminine hygiene products and hemorrhoid and. Condom advertising is acceptable in the interests of AIDS-prevention but is seen by some as promoting promiscuity. Public policy and consumer protection Many companies have a mindset concerned with population and the environment in business operations. In their sphere of influence businesses realize their social responsibility to things, people and places. These are the aspiration of governments, local authorities and regulators. Consumers are guarded by rogue marketers who do not appreciate good marketing practices. Children's advertising has issues centered on violence (Schiffman et al. 2013). This also affects advertising probably seen by children. Borders of ethics and legality are pushed more strongly by telemarketing and electronic spam. These are direct mails and television commercials. Consumer behavior and decision making processes are a result of external and internal factors (Kotler & Armstrong, 2004). These external factors are culture, reference groups, social class and family. The issues surrounding marketing and appealing to consumers are defined by marketing ethics. They come at low prices as customers discover that what are available are the ‘switched’ costlier products and not the advertised goods (Kotler & Keller, 2006). Selling a service or product at a very low price is a predatory pricing practice intended to create entry barriers for prospective new competitors or drive competitors out of the market. Sometimes going unnoticed by the public, deceptive marketing is not one target market specific. Several ways are involved in deceptive marketing such as use of humor to present to consumers. Relief or escape from some kind of human constraint is through humor. Some advertisers take this advantage to advertise a product deceptively with a claim that it alleviates the pain through humor (Briley et al. 2006). It stops from being functional after a certain period of time or becomes unfashionable. Consumers will be under pressure to re-purchase. Pricing ethics are critical in commercial contracts when promised to one party are bid rigging and is a form of fraud (Churchill & Iacobucci, 2005). Several other parties present bid but for the sake of appearance. Conclusion The essay has established that there are factors consist of family influences, culture, reference group subculture and social class that influence consumer behavior and purchase decisions. Other factors like cultural, social, psychological, and personal also influence consumer purchases. In order to build a commitment and loyal usage many firms are pursuing relationship marketing programs of their services and products. It involves keeping promises and building trust (Aaker et al. 2007). Relationship marketing to automobile companies is building strong and lasting relationships with a core group of customers through long-term bonds. Some products may be of interest to some people while offending others in advertising. Past industry attitudes are current examples of unethical market exclusion such as plus-size markets, gay and ethnic minority. A product with a limited useful life is governed by the policy of planned obsolescence. Spouses take into consideration the perceptions of fairness from their partners by taking action to restore fairness (Churchill & Iacobucci, 2005). A product is bought on an impulse in such cases because of emotional drive from the buyer. Marketing decisions and efforts are necessary to a consumer market. They are necessary to suit and meet the needs of business partners, customers and suppliers. References Aaker, D., Aaker, V., Kumar, G. (2007). Marketing Research. New Jersey: John Wiley & Sons, Inc. Blythe, J. (2006). Marketing. London: SAGE Publications. Briley, A.D., Morris, M.W. & Simonson, I. (2006). Reasons as Carriers of Culture: Dynamic versus Dispositional Models of Cultural influence on Decision-Making. Journal of Consumer Research. 27:157-178. 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