The Necessity of Studying Consumer Behavior - Essay Example

I. Topic: The necessity of studying consumer behavior. Develop logical arguments using a specific brand. A. What is the scope of consumer behavior for study? The scope of consumer behavior for study includes the three phases that are associated with the purchase decision-making of consumers which include the pre-purchase, purchase, and post-purchase evaluation. During these phases, various decisions are made which eventually lead to the choice of a certain brand. For a given product such as a car, the three phases that entail the whole decision process becomes more extensive, because buying a car is not like buying any commodity product. The study will entail the consumer behavior in choosing Toyota for a given car brand. B. What kinds of decisions consumers make? If possible, identify as many as different types of consumers’ decisions, depending on the scope of consumer behavior. In choosing a car, various decisions have been made as the customer progresses from one phase to the next. In pre-purchase for example, after the consumer has recognized a need in the form of a problem or an opportunity, the choice of where to look for information as regards the available alternatives to address the problem or opportunity is one of the decisions to be made. The choice of how much time and effort, i.e. her level of involvement in the decision, is also one of the decisions that she would make. She may look for information in the Internet, or she may decide to visit a car dealer to inquire about the product. After the consumer gathers enough information as regards her choices for the car models, the consumer will have to decide on what attributes she gives much emphasis, which will eventually constitute her criteria for the purchase decision. After she has determined her choice of brand,.she has to deal with smaller decisions such as the model of the car she would get, and the specifications. Sometimes, the choice of financing is part of the decision process, and could influence the purchase of one brand over the other. After she has made her choice based on her set of criteria, the next decision she has to make is how to place her order, i.e. the distribution channel. She can either choose to go to a nearby dealer, or place her order in the Internet if her chosen brands website has such an option available. The consumers last decision as regards the buying process would be an action that is prompted by her evaluation of the product. Her last decision will depend on the level of satisfaction or dissatisfaction concerning her purchase, i.e. advocacy, positive feedback, no action, positive feedback, or lawsuit for extreme cases. C. What kinds of benefits marketing managers get from the study of consumer behavior? In other words, identify any kinds of managerial implications which will be helpful for designing marketing strategies or programs. Studying the consumer behavior is the cornerstone of the consumer-centric marketing philosophy. In times when the market and the competition both toughens up and becomes increasingly sophisticated, the focus on consumers in terms of doing business is the new rule of the game. Thus, studying consumer behavior is crucial for marketers, in order to meet the needs and wants of the consumers and therefore gain the loyalty of consumers, which translates into market share and company sales. For car marketers for example, every stage of the decision process provides a lot of insights as regards how marketers can influence the ultimate decision of the consumer. For example, the choice of sources of information can be utilized by marketers in order to reach their consumers as regards their product offerings. For the purchase phase, the marketers can utilize the chance to interact with the consumers and communicate the values of the brands in the process. II. Topic: How consumers go through the seven-stage buyer decision process and how different they are, when they attempt to purchase and consume your chosen brand A. What are the details of seven-stage buyer decision process? The buyer decision process is comprised of the following stages: need recognition, search for alternatives, evaluation of choices, the purchase decision, and then purchase evaluation. This is usually referred to as the cognitive path to a purchase decision. The decision process starts with the recognition of a need in the form of a problem or an opportunity. In the case of a car purchase, the need may arise from an opportunity, such as incentive to own a car due to lower fuel prices, or a problem such as need to travel to farther locations due to business needs, for example. After the need is recognized, search for information in order to address the need is started. When enough information is gathered, the choices are analyzed according to the available information. When the consumer decides on what product to purchase, the evaluation of the purchase soon follows. The subsequent actions then follow the evaluation of purchase. B. Given the choice of a particular brand, what kinds of actions or decisions occur at each stage of the buyer decision process? Specifically, identify possible situation when consumers recognize their needs, identify where consumers search for decision-making information, and so on. For choosing Toyota as the brand of choice, the first thing that prompts in the consumers mind is recognition of a need either in the form of a problem or an opportunity. From the previous example where need may arise from an opportunity, such as incentive to own a car due to lower fuel prices, or a problem such as need to travel to farther locations due to business needs, search for information as regards the possible alternatives that could address the need follows. In the case of the car purchase, the consumer can look for information in various sources—the Internet, friends or family members, a car dealer, a car agent, etc. After the consumer gathers information about brands and product offerings, the consumer evaluates the choices. In order to evaluate her choices, the consumer decides on what attributes to give emphasis on in terms of the purchase. By determining what factors the consumer is looking for in a car, how she feels for certain brands, how much is her budget consideration, only then can she come up with her ultimate choice for the purchase decision. For example, if the consumer puts premium on value for money and availability of spare parts as well as quality, she can narrow down her choices into a few brands which Toyota can be a part of. If she happens to purchase Toyota, her reaction will be a decision based on her experience with the purchase as well as the whether her expectations have been reached which results in satisfaction or dissatisfaction in the process. Actions ranging from advocacy, positive feedback, no reaction C. How different consumers are at each stage of the buyer decision process? The difference among consumers is determined by their individual level of involvement in the decision process. Since risk that comes with the decision to purchase is usually subjective and depends on the individuals perception and current situation, the extent of the consumers involvement will differ in each stage of the decision process. These risks could also determine the path the consumers will choose individually to arriving at the purchase decisions: either through the cognitive path or the emotional path. Some of the customers will base their decision on the functionality of the car, some will base it on the appeal of the brand image. These choice of paths make consumers differ much at each stage of the buyer decision process. III. Topic: To evaluate the effectiveness of need recognition theory. A. What are the key ideas of current need recognition theory? According to the current need recognition theory, consumers purchase decisions are prompted by needs which either come in the form of problems or opportunities. According to this theory, consumers are rational individuals who spend most of their time assessing their needs and trying to address these needs through available alternatives in the marketplace. B. Is there any other competing theory? Ehrenberg and Goodhart in 1979 proposed an alternate model to need recognition theory. This is the ATR model: awareness-trial-repeat or reinforcement. According to this theory, most of consumers purchases are not prompted by the rational way of understanding its needs and addressing the needs by the various alternatives that are available in the market (247). According to them, most of consumers buying activity are done out of habit instead of constant reflection of their needs and how to address these needs. C. Is this theory effective in predicting when consumers recognize their needs? Can you find better theory for this purpose? The need recognition theory is effective in predicting consumer behavior. By looking at the stimuli, either an internal or an external one, consumers purchase decisions can be traced back from the needs that are prompted by these stimuli. D. What is your alternative theory or ideas? My alternate theory is Ehrenberg and Goodharts ATR model. The idea of consumers relying on habit for most of their purchases, except of course when the cost to the decision is relatively high as determined by the risks associated with the purchase, is a more viable observation in terms of behavior of consumers. In the ATR model, unless the decision does not provide consumers usual level of expectation, consumers are less likely to be involved in the decision-making processes such as looking for alternatives and assessing choices. IV. Topic: Understand the characteristics of target consumers’ search behaviors in terms of their search frequency and depth of information amount A. When are consumers involved in search behaviors? Consumers involvement is related to the level of risk that is associated with their purchase. Some of these risks include financial risks as well as social risks. When both the perceived risks are high, consumers tend to spend more time and more energy in coming up with their decisions—due to the higher perceived consequences that are associated with such risks. This financial risks are the perceived risks of failure of the product or service in relation to the amount of money the consumer has to pay in exchange for the product or service. The higher the amount of money at stake, the more the consumer gets involved in the purchase decision-making process. Social risks are perceived risks of failure in relation to the users image as perceived by its immediate social group. When the perceived impact of the products failure or shortcoming in relation to the users reputation is high, the consumer tends to have greater involvement in the decision-making process. B. What types of information do consumers search for when they attempt to purchase your chosen brand? When consumers attempt to purchase Toyota, it means that the Toyota brand already belongs to the consumers evoked set. Consumers already have preconceived notions about the brand and has already made their decision based on this information. However, as the risk gets higher consumers decision-making process becomes more extensive as they get more involved. They will demand more information as regards the purchase decision. When consumers attempt to buy Toyota, instead of starting from the information-gathering stage where the various alternatives to address the need are looked upon, they go directly to evaluating their choice of Toyota. The evaluation will be based on additional information that will support their preconceived notion about Toyota. They will look for information that will help them prove that Toyota is the best choice for their car purchase decision. When their preconceived notion differs with the information that they get, the conflict results in cognitive dissonance. C. How frequent and how much information do consumers obtain from search behaviors? In terms of a car purchase where the stakes are high, consumers tend to get enough information in order to verify that Toyota is the best choice for their car purchase decision. Because consumers are more involved in the decision, and purchasing a car is not a frequent purchase decision, the search for information is less frequent but with a more extensive scope of information. D. What is the role of cost-benefit perspective or information overload understanding the consumers’ efforts of search behavior? The level of the perceived cost is associated with the level of risks in the process. The higher the cost to the consumers, the more the consumer is prompted to look for more information. It is very usual though that for low-risk purchase, depending on the point of view of the consumers, the benefit of getting more information is not offset by the perceived cost. Hence, the habitual path of buyer decision-making process denotes this kind of behavior. Thus, extensive search for information may likely appear in purchase decisions which entail high social and financial risks. When the risk of failure is realized, it becomes cost to consumers. When the cost to consumers is high, only then will the benefit of more information to aid them in the decision process prompt such extensive search behavior. V. Topic: The roles of reference price in shaping consumers’ opinions and its impacts on brand choice decisions A. What does that mean by reference price? For a given line of product, consumers have a preconceived notion of a certain price level that they use as reference. This can exist either in their memory, or based on the price of substitute products to which they compare the price based on perceived value. Reference prices help shape the perception about a given product. B. What types of reference price do marketers need to consider? Marketers need to consider different types of reference price such as prices of competitors as well as prices of substitute. By knowing how to position the product offering through the relative prices in the competition and the substitute, the company can give a better picture as regards the product offering in contrast to the other competitors. In the car example, a reference price for Toyota can be prices of its competitors such such as Chevrolet or Volvo. Because each brand differs in terms of benefits and offerings—thus, positioning, Toyotas price can be referenced based on how consumers perceive the brand according to quality and price. Say, since Toyota is more of value for money and Volvo emphasizes on safety, Volvo must have put a premium on its pricing. Therefore, Toyotas price must be lower than Volvo. C. What are the key ideas of mental accounting theory as the underlying theory? The underlying theory of the reference price is the mental accounting theory. Mental accounting theory is based on the perceived utility and value of a purchase. For every transaction that a consumer makes, there are costs and benefits to be assessed. If the cost to a consumer, which is either represented by an acquisition cost of the product as well as the perceived cost in terms of utility, is higher than the perceived value, then the consumer will find the purchase transaction not rewarding enough to pursue. For the car purchase example, if the cost of purchasing Toyota in terms of acquisition is high enough to justify the utility or value that the consumer thinks she would get from the purchase, then she can possibly turn down the decision and just look for other alternatives. The perception of lower utility can also be derived by comparing the different offers of brands in the same product line. D. What are the roles of reference price in shaping consumers’ opinions? The reference price shapes consumers opinions by providing cues as regards the brands chosen positioning. Price is a very potent tool in order to send a message about what the brand offers, such as in terms of value, quality, etc. The usual perception is, the higher the price a brand has given a range of brands in the similar product category, the more it offers. A brand with a premium price positions itself as a premium brand in the process. In the car example, reference price play a huge role for Toyota to communicate its brand positioning. Toyotas reference prices are prices of competitors that offer little or no difference in terms of performance, but is positioned at a premium price. Juxtaposing Toyota with competitors of similar performance emphasizes Toyotas value for money positioning. E. What are the impacts of reference prices on consumers’ brand choice decisions? Consumers use reference prices in order to compare the positioning and the offers of various brands for a given category. As according to mental accounting theory, consumers form their perception of value based on the cost and the relative utility that they can get from a purchase. Thus, by looking at reference prices, they will have better picture as regards how a brand is positioned in the market. For example, a consumer would use reference prices in order to verify that Toyota would offer value for money. As value for money is determined by a more (better performance) for the same (price) or same (performance) for lower (price) value positioning, consumers will look at the different brands and compare the prices and performances. If consumers find that Toyota brand either offers better performance for the same price, or same performance for a lower price then consumers can conclude that Toyota indeed offers value for money. Bibliography Duncan, Tom. (2005). Principles of Advertising and IMC. 2th ed. New York: McGraw-Hill. Kotler, P., & Armstrong, G. (2004). Principles of Marketing. 10th ed. New Jersey: Pearson Education. Pickton D., & Broderick A. (2001). Integrated marketing communications. 2nd ed. United Kingdom: Pearson Education Limited. Read More