Consumer Buying Behaviour towards Financial Services in the United Kingdom - Essay Example

CONSUMER BUYING BEHAVIOUR TOWARDS FINANCIAL SERVICES IN THE UNITED KINGDOM

Chapter one: Introduction

1.0. Overview

Consumer behaviour refers to the process involved in the selection of products and services that best serve the needs of consumers and the impacts of the choices on both the consumer and the entire society (Hoyer et al. 2012, p.3). Consumers buy and consume various goods and services with the aim of maximizing their utility. Maximization of utility entails getting the product that enables the buyer to serve their needs in the most efficient manner. The Factors that influence the consumer behaviour will be analysed in this research paper (Finkelstein & Fishbach 2010, p.365).

1.1. Background to the study

Consumer behaviour explains how consumers make choices among various products available in the market based on their ability to maximize utility. The knowledge of consumer behaviour helps in understanding the preferences of different consumers and their purchase behaviour (Hoyer et al. 2012, p.3). The knowledge about consumer behaviour is applied in laying out market strategies and the knowledge can be used to make better marketing campaigns (McFerran et al. 2010, p.927). Therefore, companies may get useful information on how and when to advertise its products to prospective consumers. Knowledge on consumer behaviour also aids producers in getting information across customers.

1.2. Problem Statement

This study will uncover various segments in the market, with varying priorities, that will help in enhancing effective marketing communications. The data collected during the survey will enable marketers to understand how the industry can adjust their core competencies and strategic capabilities to enhance maximization of utility by the consumers. Consequently, the organizations will effectively direct their energies towards making products that have the optimal mixture of features desired by the buyer.

1.3. Research Purposes

This research will help organizations understand their consumers. When marketers understand the saving and investment culture, class, and the tastes of their different customers, they can be able to provide products that suit the consumers.

1.4. Research Objectives

The aim of the research will be determining the consumer behaviour and factors that affect the choice of financial products by consumers in the United Kingdom. The following objectives will have to be accomplished:

1. To study consumer behaviour towards Financial services in the United Kingdom.

2. To identify the factors that influences the choice of financial services in the United Kingdom.

3. To determine how income levels affect the types of financial services sought by consumers in the United Kingdom.

1.5. Research questions

The following questions or lines of inquiry will be devised:

1. What is the general consumer behaviour towards financial services in the United Kingdom?

2. Which factors influences the choice of financial services among consumers in the United Kingdom?

3. Do income levels affect the types of financial services sought by consumers?

1.6. Research Hypothesis

The speculated hypothesis regarding this research includes:

• The demand for financial services in the United Kingdom has risen persistently in the recent past.

• Income levels do affect the type of financial services sought by different consumers in the UK.

• There exist other factors that influence the choice of financial services by consumers.

On forming the research hypothesis, a plan will be formulated with the primary aim of answering the research questions. Hypothesis testing will be conducted using grounded theory will be employed. The theory will be developed from a mass of data and historical research; that is, data from previous studies will be considered. This approach (the grounded theory method) will ensure that data collection and theory building go hand-in-hand.

1.7. Justification and importance of the study

The research will help organizations understand consumer philosophies when making decisions on the choice of financial services. It will help marketers understand what customers look for, the efficiency and the features of the services in serving consumer needs and how the product features influence buying decisions. The research will sample financial products offered by three institutions in the United Kingdom and analyze how the recent demand patterns for the products in the market. The research will be aimed at understanding why the demand for certain financial services exceeds the demand for others in the selected samples and the range by which the demand varies. Is it because of the customer’s level of income, the features of the product or the cost of the product? Since the research will be product centred rather industry centred, the use of various products will broaden the scope of my research. It will also give a bigger pool of data that will produce clearer trends and patterns. These trends can be very useful in forming an inductive hypothesis.

Chapter 2: Literature review

2.0. Introduction

Consumer behaviour comprises of a psychological behaviour that buyers experience while trying to identify the products that maximize their utility. In the process of making purchasing decisions, they gather and interpret market information, make purchase plans and implement them through selecting the products that are capable of maximizing their utility (Rani 2014, p.52). According to the Marshallian theory, buying decisions are a consequence of conscious and rational decisions. The theory implies that, before purchasing a commodity, the consumer has to analyze the existing products in the market and use the information in making rational purchase decisions (Dietrich & Kraff 2012, p.49).The theory also assumes that consumers are aware of the market and that, they are fully mobile; which is not realistic (Kumar 2014, p.43). Maslow’s theory will also be used in the process of comprehending customer needs and wants that result in the choice of products and services that maximize their utility. However, the theory does not provide for the ever-changing wants and needs of an ever-changing community (Kumar 2014, p.37).

The Needs, Opportunities and Abilities model will be used to illustrate how consumers purchase particular products based on their ability to maximize their utility (Bakker & Demerouti 2008, p.216). This model takes into account needs at the individual level (micro level) and needs at the society level (macro level). Therefore, this theory successfully integrates the various factors that influence buying behaviour of consumers (Bakker & Demerouti 2008, p.217). The research will examine how the factors at the micro and macro level influence buying behaviour of various consumers.

Before customers finalize evaluating products, they have to balance some various factors (Blythe 2008, p.417). These factors include financial benefits, that is, saving money, acquisition costs, the risk of purchase, and personal benefits such as self-esteem (Schau & Gilly 2003, p.389). If benefits exceed the cost, customers enjoy purchasing the products since they are able to maximize their utility while minimizing costs (Blythe 2008, p.417).

The consumer purchase decision-making process consists of five stages; need recognition, the search for information on the products that can satisfy the needs, evaluation of the various alternatives, making a purchase decision, and the purchase evaluation ( Berkowitz 2011, p.125). Therefore, the need is like a catalyst that triggers the decision of an individual to purchase a given product. For instance, the need to make investments on a given project will make a consumer select and purchase a given financial product, such as a loan that will serve his/her need efficiently. Therefore, the buying decision is a consequence of the investment need. With the need for a particular commodity in mind, one tries to gather information on rational decisions that are capable of maximizing utility (Umass 2016, para 3). This information may come from private sources, public sources, experimental sources, and commercial sources. On gathering adequate information, the consumer evaluates the various alternatives present in the market and tries to identify the best available option according to his or her needs, tastes and costs. The customer then buys the products and post evaluates it; that is, evaluates whether the product fulfilled his or her needs as anticipated (Umass 2016, para 6). The stages involved during the purchase decision process can be illustrated using the following chart:

2.1. Factors that influence the consumer purchase decisions

Consumers make certain purchase decisions based on their given income levels. The level of income contributes towards consumer purchasing decisions. The level of income earned by a consumer influences the types of products they purchase, depending on their cost and efficiency in maximizing utility. Therefore, it is essential for marketing specialists to identify the income brackets for consumers in their anticipated marked shares before laying out their marketing plans (Arnould & Thompson 2005, p.871). The analysis would contribute towards increased demand for certain commodities or demand for new products. For instance, in a market share consisting of middle-income consumers, the marketers would design financial loan products with affordable rates of interests, convenient payment intervals and match the consumer needs. They may choose to offer loans for small businesses, education, and investment on middle sized projects (Rani 2014, p.54).

Social factors also influence Consumer behaviours. The factors are based on the social status and the group to which the customer belongs in a given society (Belch & Willis 2002, p. 111).They include characteristics such as occupation, lifestyle, personality, age, and self-concept (McFerran et al. 2010, p.923). For example, a large number of high- class consumers will most likely choose prestigious or luxurious products in the market. Therefore, people may be influenced to purchase by initiators, deciders, and influencers (Rani 2014, p.55). Psychological factors also influence consumer buying choices. They include perception, learning, attitudes and motivation (Rani 2014, p.55; McFerran et al. 2010, p.924).

2.2. Purchase behaviour

The study of different factors influencing purchase behaviour of various people from different backgrounds and cultures will enable the researcher to clearly understand the consumer behaviour (Bloch et al. 1986, p.119).Consequently, most organizations and firms in the United Kingdom will make use of the study outcomes to improve their marketing strategies and raise their revenue growth rates. For instance, the knowledge on the psychological behaviours of consumers when making purchase decisions will help the organization in adjusting the features of their products in line with the tastes and interests of prospective customers. Consequently, the sales volumes for the organizational products will be raised, leading to high revenue growth rates. The organizations can also use the information concerning consumer behaviour in designing various packages that combine certain consumer tastes and interests. For instance, a financial institution may develop products that integrate savings, investments and loans targeting consumers in a given income bracket.

Therefore, organizations marketing and decision-making outcomes can be greatly influenced by the level of knowledge on consumer behaviour when making purchase decisions. The knowledge on how consumer decision strategies and motivation differ between commodities enables organizations to improve their marketing strategies and marketing campaigns to reach consumers more efficiently. Advertisements are also made more logical and perhaps, having symbolic or emotional appeals (Arnould & Thompson 2005, p.873).

Chapter 3: Research Methodology

3.0. Introduction

The research will use an inductive approach to data collection. This approach will begin with a specific observation of consumer behaviour. The approach be developed into a tentative hypothesis which will be tested using the knowledge and skills related to consumer behaviour. Therefore, its theoretical position cannot be established until the process of data collection and analysis has been finalized.

The researcher will use quantitative methods of data collection during the study. Data concerning income levels of consumer samples for certain financial products will be obtained. A ‘bottom-up’ approach comprising of four stages will be employed. The first stage will entail basic observations and from which some regularities and patterns will emerge. From the patterns, the hypothesis will be developed and tested by use of quantitative data collection and analysis. The outcomes of quantitative data analysis will be used in formulating policies that can be used by a financial organization during design, sales and marketing for their products.

Data collection stage will incorporate two phases. They include primary data collection and secondary data collection. Primary data will be exclusively collected for the research project using questionnaires, interviewing and observations. Internet forum discussions and questionnaires will be deployed during the entire data collection process. The use of internet forums will cut on the cost of conducting the research, without compromising on the amount of data collected (Bryman & Bell 2015, p.193). Secondary data will comprise of official records on purchasing patterns for given financial products in the recent past. This data may be accessible from public libraries, the internet and company records.

To reduce sampling error and thereby, improve the accuracy and generalizability of the study, a stratified probability sample will be used to analyse the data collected (Csikszentmihalyi & Larson 2014, p.47). The variables for the research will include income levels, types of financial services available and social classes (Ordabayeva & Chandon 2011, p.33). More emphasis will be attached to the experiences of the respondents. The grounded theory will be used during the data analysis process. The process will involve grouping the collected data with the aim of arriving at more accurate and relevant results (Gambetti et al. 2012, p.667).

Ethical considerations

In the process of data collection, ethical issues may be faced regarding informed consent and voluntary participation. The prospective participants will be fully informed of the procedures of the research. They will also be briefed on the challenges that are likely to be encountered during the research process (Kono 2012, p.13). While collecting data via interviews, confidentiality will be guaranteed among the respondents with the aim of safeguarding their right to privacy. In secondary data collection, intellectual property will be respected, and plagiarism will be negated through proper referencing. Moreover, maximum caution will be ensured against misinterpretation of information.