External Factors Influencing Consumer Decision Making in Car Purchase - Literature review Example

Name: Student number: Name of the unit: Unit coordinator: Word count: 2114 Table of Contents Table of Contents 2 Executive summary 2 Introduction 4 Product overview 4 External factors influencing consumer decision making in car purchase 5 Family 5 Social class 6 Reference groups 7 Culture 7 Subculture 8 Government and economy 9 Opinion leaders and concept of diffusion of innovations 9 Conclusion 11 References 11 Executive summary This report looks at consumer decision making and looks exclusively and external factors affecting decision. The paper has selected decision making process in making a car purchase. A car is a valuable product and its decision making is complex and involving. The report have identified external factors affecting decision making in car purchase as; family, social class, culture, government, reference groups, and opinion leaders. The report have looked at each of the factors critically and proved why it’s vital in making a decision to purchase a car. The role of family in making a decision is outlined with each member taking part in coming up with final decision. The paper also identifies that the type of car will depend on the social class of the user. Upper social class will purchase a car that portrays their affluence as opposed to those in lower social class. Culture will determine how a society accepts to innovation. For new cars models, individual decision to buy will be determined by collectivism, individualism and uncertainty in a culture. Government will have influence on variety, purchase power and prices. The paper shows how consumer conforms to a reference group tastes and preferences. Lastly, the paper looks at the role of opinion leaders in decision making and how they impact diffusion of innovations. The paper shows how all these external factors will have an impact on the final consumer decision in purchasing car. Introduction The field of consumer behavior has generated a lot of interest among researchers. This is due to the role it plays for marketers’ activities (Kotler, Armstrong, Wong & Saunders, 2008). There has been development of various theories related to how consumer makes choices. The most famous theory in consumer decision making is utility theory which claims that consumers’ decisions are based on the expected outcome. Using this theory, consumers are seen as rational decision makers whose only main concern is their self interest (Blackwell, Miniard & Engel, 2001). Despite this, contemporary research on consumer decision making process looks at awide range of factors that influence the final consumer decision. Consumer behaviour can be defined as the behaviour that is exhibited by the consumers when purchasing, using or evaluating a product that is aimed at satisfying their needs (Kotler et al., 2008). The process is affected by both internal and external factors. This report will analyse consumer decision making based on external factors when purchasing a car. This will be achieved by describing the product, outline external factors affecting the purchase decision and justifying why they are the most influential in making a car purchase. Product overview The Car industry is dynamic and highly affected by trends such as technology. The market is dominated by various major brands. Purchasing a car is a major decision due to the fact that it’s a product purchased occasionally and a major investment. There are different brands of cars each with its specifications. Cars also vary in prices and use. There are cars designed for leisure, family and business. Consumers have to look at issues such as vehicle safety, durability, appearance and expected use. There are also other factors such as vehicle reputation, safety ratings and its driving performance. This makes consumer decision to make a vehicle purchase to be very complex and involving. External factors influencing consumer decision making in car purchase Consumer decision making is affected by external influences. These influences are; family, social class, reference groups, culture, government and opinion leaders (Blackwell et al., 2001). These are the main factors that will influence consumer when deciding the type of car to purchase. I have chosen these factors since each play part in making major decisions as explained in the report. Family Family is one of the major influences when making a decision to purchase a car. This is especially dependent on the type of the family in place. It’s important to understand that in a family setting, each person has a role (William & Ferrell, 2011). According to Mooij (2004), each member has specific duty that they have to perform. The differing roles of individuals in a family will have a great effect when purchasing a car. For example, a husband may plan to buy a luxury car. This decision may be objected by a wife who may want him to purchase a family car. Also husband and wife may come up with a common decision to buy the vehicle, but the children input will also play a part. When members of a family decide to make a car purchase, there is the initiator, gatherer of the required information on different car brands, someone acting as the decider and there is a person who will be the buyer (Mooij, 2004). The initiator is the person who will come up with the suggestion to purchase a vehicle. For example, a wife may suggest to the husband that they need an extra car for the family. In this case, she has acted as the initiator for the purchase process. If they agree to purchase, their son in college may gather information on different models of vehicles available in the market. Once the information is ready, the process of selecting the best car for the family needs starts. Issues such as money available, expected use and size of the family among others will play a part in this process. In this case, the major wage earner may make the final decision (Lye, Shao, Rundle-Thiele & Fausnaugh, 2005). For a small family, they may prefer to buy a small car while a large family may go for a station wagon. This is a decision that family will have a major role to play. Social class In a society, people are divided into classes. Social classes can be looked as a hierarchy with distinct positions. There are those in upper, middle and lower class status in a society. Each class have its own power and prestige. According to William & Ferrell (2011), characteristics in each class determine ones behaviour hence influences their choices. That with low economic status occupies the lower class. In this case, those in the low economic class may opt to buy a second hand car due to low financial status. For a consumer in the upper class in the society, they have financial capability, hence can afford to buy expensive cars. Individuals in different social, economic classes have different consumption patterns. People in similar class have same desires, attitudes and preferences. Consumers buy products to satisfy their needs and also based on their meaning. Products and services have a social meaning (Hogg, 2006). When purchasing a car, those in upper social class will make a decision to buy a car which portrays their status. For the upper class, their possessions are a sign of wealth. The decision being made by each class will be based on their desire to acquire symbolic possession. It is hard for a person in low social status to buy a sports car. They will prefer to buy what their class can afford. The same applies to the affluent who will buy a car that portrays their position in the society (Lye et al., 2005). Reference groups This is a group in which one identifies with. This makes one to assume certain values and behaviours from the group. These groups involve family, clubs and peers (Mandl et al., 2011). It’s important to note that most aspects of consumer behaviour take place in a group setting. When purchasing a car, one is influenced by the reference group. This is due to fact that group acts as an influence and determines what is acceptable and what is unacceptable in the group. Members in a reference group tend to use similar products. In some instances, a group may be regarded as undesirable. This is a dissociative group and products used by this group may be avoided (Hogg, 2006). A car brand being used by a dissociative group is seen as inappropriate and will affect the final decision. In this case, a car serves as a group identity. Consumer will always conform to the group expectations in most cases. The individual sense of identity to a specific group will determine the type of car they will decide to buy. Despite the fact that people do not consider themselves conformist, they are always affected by their reference group when making purchase decisions (William & Ferrell, 2011). For the affluent people, they belong to a certain reference groups and will always conform to its standards. Their brand choice and the final purchase decision will be based on the reference group. Culture Culture involves norms and value which are created by the society in which consumer lives. Culture has its own boundaries which determine behaviours in any specific situation. Culture is not static since it changes over time. According to Kalliny & Hausman (2007), cultures dictate the clothes to wear and type of lifestyle in most cases. Culture has an impact in making a decision on which car to purchase. This is due to the fact that usage behaviour of products and services are determined by culture. Culture also plays a role in innovation acceptance and diffusion. For example, research has proved that diffusion occurs fast in high context cultures. Two cultural concepts can be used to give insight on how culture will affect acceptance and diffusion of a new product hence decision making. Assuming that the new innovation is a car, individualism/collectivism and uncertainty avoidance will play a part (Kalliny & Hausman, 2007). In an individualist society, people rely mostly on their personal beliefs when coming up with decisions. In contrast, collectivist societies rely on group consensus in making a decision (Hogg, 2006). This implies that each group acceptance of an innovation will differ. Uncertainty avoidance will also determine the rate of adoption for a new car model. When a culture has high uncertainty avoidance, they have rigid rules and their acceptance to diffusion and innovations is slow (Hassan, Mourad & Tolba, 2010). Subculture Subculture exists within a dominant culture. Subcultures may be based on generation, religion, age, gender and language among other differences (Kalliny & Hausman, 2007). Each subculture has its preferences and taste. When purchasing a car, subcultures play a major role. Each subculture has its taste when it comes to making a purchase related to car. Each generation has its own preferences when it comes to making a car purchase. Younger generations such as Generation X and Y prefer trendy cars. These are the generations that are more technological aware and are more attracted to innovative products. They are also more attached to their subculture. Baby boomers and elderly Consumers have their own tastes. For example, baby boomers may prefer purchasing a station wagon since most of them are raising a family (Mandl et al., 2011). Government and economy Government comes up with policies which determine the costs of products. Government may also restrict certain types of products in a country market. When one is making a decision to purchase a car, they have to be affected by the government regulations. For example, when there are high taxation on vehicles, their prices goes up. The consumer will have to make a decision based on their ability to pay. This may limit the choices a consumer has when making the final decision (Kardes, Cronley & Cline, 2011). When there is high inflation, products and services are sold at higher prices. It’s also important to consider that the government controls the economy. They also set taxation rates and other levies which affects the prices for cars. When the economy is underperforming the population social status is affected. Their purchasing power goes down and cannot afford for expensive products (Lye et al., 2005). Under such conditions, most consumers cannot afford to buy expensive cars. Opinion leaders and concept of diffusion of innovations According to Hassan, Mourad & Tolba (2010), concept of diffusion of innovations is based on the transfer of ideas from one society another. Success of an innovation diffusing into a society is based on how fast it’s accepted. In this case, a new car model will take time to be accepted unless marketing channels are used to speed up the process of adoption. A consumer aiming at purchasing a car will most likely go for the car that have been in the market and has a proved performance record. Despite this, use of opinion leaders can accelerate product acceptance hence influencing decision making (Kotler, 2000). Opinion leaders enable the product to diffuse fast into the society. Opinion leaders have a lot of followers and greater access to the social network. They are also seen by their followers to have the capability of adopting innovative ideas. They have knowledge, social influence, innovative and interpersonal factors. Opinion leaders can use word of mouth to influence the decision making process (Hassan et al., 2010). Consumers imitate them since they act as their role model. When a consumer is looking for information on the best car model to buy, they are likely to search for opinion leaders in this area. Most of the vehicle magazines use opinion leaders such as well known race car drivers. The evaluation of the opinion leader on a new car model will have a great impact on the consumers’ decision. Most of the new innovation in the vehicle industry uses opinion leaders who enhance the rate of diffusion. This moderates the relationship that exists between acceptance of the innovation and its diffusion (Hassan et al., 2010). Conclusion In conclusion, consumer behaviour is very vital for the marketers. Consumer behaviour can be defined as the behaviour that is exhibited by the consumers when purchasing, using or evaluating a product that is aimed at satisfying their needs. Consumer decision making process is affected by both internal and external factors. Making a decision to purchase a car is one of the major decisions made by consumers occasionally. To determine the best car, the process is complex and involving. External factors affecting decision making when purchasing a car are; culture, government, reference groups, family, social class and opinion leaders. Each of the factors will determine the final consumer decision in this process. References Blackwell, R.D, Miniard, P.W, & Engel, J.F, (2001). Consumer behaviour. Harcourt College Publications: USA. Hassan, S., Mourad, M. & Tolba, A. (2010). Conceptualizing the influence of lead users and opinion leaders on accelerating the rate of innovation diffusion. Int. J. Technology Marketing, 5(3), 203-218. Hogg, M. K. (2006). Consumer behavior: 1. London: Sage Publishers. Kalliny, M. & Hausman, A. (2007). The Impact of Cultural and Religious Values on Consumer’s Adoption of Innovation. 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