The Psychological and Corporate Influences on Consumer Choice - Coursework Example

Critically consider the ways in which economists have recognised the psychological, social and corporate influences on consumer choice. Introduction The concept of consumer choice in a free market economy is defined as the greatest degree of freedom available to a consumer to buy whatever he/she wants subject to the purchasing power and the laws of the country. Economists have identified three classes of influence on the consumer choice, i.e. psychological, social and corporate. Psychological influences are associated with such modern marketing techniques like advertising, promotion and pricing strategy. For instance a seller might carry an advertisement in such a manner so as to influence the consumer’s choice, viz. the use of a popular person like an actor or talk-show host/hostess. Social influences are often attributed to class and culture such as those associated with the consumption of luxury goods. Corporate influences are said to be one of the most influential because they invariably come from the very manufacturers and sellers of those goods. For example businesses adopt a variety of strategies or/and sales tactics including those associated with benchmarking products and creating brand loyalties through value creation (Hallberg & Ogilvy, 1995). Analysis Consumers have to make a choice between two or more goods before making an actual purchase. In a free market economy where price mechanism alone allocates scarce resources consumer choice is naturally assumed to be free from any influences because depending on the purchasing ability of the consumer he/she might decide to buy a good at its market price. However the contrary is much truer than this theoretical economic explanation to the consumer’s behavior. In the first instance in a free market economy the producer has an equal amount of freedom to use marketing tactics to attract the attention of the potential customer. Customers are influenced by a variety of sales tactics that producers use in order to increase sales volumes. Psychological, social and corporate influences are the most predominant among them. Economists identify psychological influences such as those related to emotions, impulse or/and ostentation. According to economists emotional involvement in consumer choice though might not be measurable, cannot be ruled out altogether (Luce, Bettman and Payne, 2001). As a result every consumer is assumed to be influenced by positive and negative emotional factors like personal memories associated with a product. Michael Jackson related merchandise and memorabilia for instance have such an emotional impact on many potential buyers because he is associated with the firmament of pop music. When millions of Americans purchased Obama merchandise during the heat of his election as the first African-American President, emotions played a big role on consumer choice. Impulsive buying habits are associated with psychological influences on consumer choice. Consumers might purchase a certain product even if it’s not essential simply because the impulse to buy the target product is stronger than the impulse to buy something else. In this instance the product dimensions like texture, quality and colour might have little relevance if at all in the consumer’s choice (Hausman, 2000). Demand for certain products such as fashionable clothing and body sprays and sudden decisions to go to bargains are all associated with impulsive behavior. The consumer is influenced by the mere presence of the product. The purchase wasn’t premeditated; neither was it essential. Impulsive consumer behavior has been critically examined by economists with a view to articulating some significant theoretical postulates on the perceptive consumer behavior and related habits. Many research studies have focused on the psychological aspect of cognitive behavior in order to delineate the associated concepts of visual impact and imagination. According to them both the visual impact and imagination play a very decisive role in influencing the choice despite the consumer’s intelligence dictating otherwise. Ostentation is associated with Veblen goods. Veblen goods are those goods which people tend to buy as the price goes up. Such goods are difficult to locate though economists have identified diamonds and expensive cars as Veblen goods. Thus the choice of the consumer to buy the good is associated with the ostentation or conspicuous consumption. In other words some people would like to be noticed. Conspicuous consumption is also subject to the same economic laws when it comes to economic downturns though. The current economic recession and the financial crisis have forced people to postpone their purchases. Social factors of influence on consumer choice or behavior have acquired a new dimension in the sphere of marketing (Kardes, 2005). Social factors can be attributed to family, religion, culture and all other social demographic characteristics. Social demography plays a pivotal role in influencing the consumer because one or more of its varied features invariably underlie the consumer’s choice to purchase. Independent analysts have identified the usefulness of social variables in the market segmentation strategy of the firm beyond the mere demographic sphere of influence. Cultural aspect including religion plays a very important role here though the scope of each parameter cannot be determined without proper metrics. According to a recent study social factors of influence on consumer choice such as household purchasing patterns cannot be accurately assessed and predicted and therefore the circumstances under which conclusions are drawn would be open to a greater degree of variance in interpretation (Foxall, 1975). The author has identified social class as an exception to this rule. Despite the fact that social class is a multi-dimensional variable it is amenable to accurate predictions because consumers tend to associate themselves with class rather than remain neutral. In other words social class identifies the individual with a status tag. Social status gives the consumer a special identity which has not only an extrinsic value in the eyes of the society but also an intrinsic value to the individual. Family and neighborhood concepts have been put forward by some economists as factors with considerable influence on consumer choice (Hansen, Christensen & Lundsteen, 2007). Family is essentially the modern marketer’s target in times of economic downturns because the tendency of the part of family to purchase goods that can be collectively used by a greater number of members of the family cannot be ruled out. However under normal circumstances such social factors might not be of considerable importance. When individual choice becomes a family choice there is very little left for marketers because they have to identify only those variables which are more likely to increase sales volume and profits. As of late economists have identified the social influence exerted by neighborhood behavior of individual consumers on consumer behavior. For instance consumers living in a particular neighborhood may identify themselves with the kind of purchasing patterns thus making purchases according to the general purchasing tendencies of neighbors. Despite the theoretical outcomes the social influence of neighborhood on consumer choice has been subject to a series of changes based on recent shifts in attitudes. People tend to think that neighborhood influence is particularly negative when it comes to buying habits that are determined by community behavior such as those associate with religion and race. In other words the tendency to converge on neighborhoods where members of one’s own race or religion live is becoming much stronger among minorities. As such purchasing habits would be influenced by narrow racial and religious considerations. Therefore economists have suggested that the neighborhood influence can be regarded as more or less community centered living. The most influential social factor on consumer choice according to economists is the lifestyle. Life styles greatly influence consumer choice in a modern society because irrespective of any other social variable lifestyles have such a decisive impact on the consumer due to three main reasons. In the first place the consumer is more or less economically influenced to such an extent that he/she makes decisions according to what they are accustomed to. This influence is further enhanced by inability to diverge from the type of purchasing behavior. Secondly the consumer often identifies with a minimum set of goods and services that are essential to maintain the particular lifestyle. Finally the consumer takes lifestyle as a barometer of successful living. For example a middle class individual consumer is unlikely to remain in the lower bracket for too long. Thus the upper bracket becomes the typical lifestyle determined parameter. Corporate influences on consumer choice have become almost totally associated with corporate social responsibility (CSR). CSR related influences on consumer choice vary from corporate governance principles to the impact of climate change on consumer choice (Boulstridge & Carrigan, 2000). However the evolving economic theory on CSR related influences on consumer choice particularly identifies three theoretical postulates. a) CSR policies and initiatives of the company would affect consumer choice to such an extent that the consumer would think twice before making a purchase. b) CSR policies and initiatives including corporate governance principles are adopted by the organization as an inevitable outcome of its responsibility to the whole society. c) The consumer choice is subject to only limited influence coming from CSR policies and initiatives because the latter do not allow consumers to decide what is good or what is bad, but they have a positive impact on the consumers buying decision to such an extent which can be interpreted as simply ethical. As CSR policies and initiatives would include such corporate responsibility programs on employee welfare and community welfare. Even the extended programs of community welfare have been cited as influential on consumer choice due to the fact that the individual consumer makes purchasing decisions based on the corporate social responsibility ethics (Creyer, 1997). For example Wall Mart has successfully adopted such CSR strategies in closely knit communities of both employees and customers with a view to influencing them to buy consumer goods like groceries at the lowest possible price. However there is no compromise on the quality of the product. According to economists CSR policies and initiatives are primarily intended to portray the organizations philosophy of ethics in a new light. The organization does not expect the individual consumer to make rational decisions as taught in economics but ethical decisions in keeping with responsibility. The organization has a responsibility towards the society. However the employee and the immediate family members of the employee are taken in to consideration first. Therefore the organizations commitment to the larger society is purely limited to the theoretical behavior of the firm (Samli, 2000). Despite this limitation some economists have argued that Coase Theorem and the presence of externalities compelled the organization to avoid as far as possible those negative consequences arising from extraneous transaction costs. When Coase Theorem is applied to such extended examples as climate change, the modern argument that the business organization exists in the social context where influences on consumers persistently orient and re-orient CSR policies and initiatives acquires a greater significance. Economists argue that CSR policies and initiatives have only a limited impact on consumer choice because consumers are less likely to accept the pontificating behavior of the organization. In fact purchasing decisions are made subject to a number of dependent and independent variables such as the price, prices of substitutes, incomes and so on. In such complex decision making environments, individual consumers are less likely accept the ethical dictates of organizations. Further there is the associated corporate influence on consumer choice based on the multinational company’s (MNC) ability to influence consumers purchasing decisions through extensive investment expenditure in promotion activity (Windham, 2000). The best example is the internet related transaction process involving credit cards and other electronic ordering systems. Conclusion Consumer choice is no more the independent choice made by the individual consumer between two or more goods and/or services. The modern consumer is more or less a puppet on the chain because he /she can be influenced by a variety of external factors such as psychological, social and corporate. Psychological influences include such factors related to advertising and promotion. For example the modern business organization places emphasis on such concepts as emotion, impulse and ostentation. Social influences on consumer choice are basically related to the individual consumer’s social demographics and variables such as family, neighborhood and lifestyle. These variables determined the consumer’s choice between goods. As a result the individual consumer is influenced by his/her family choices like collective bargains and lifestyles that are peculiar to them. Finally corporate influences on consumer choice according to economists are basically related to CSR policies and initiatives such as employee and community welfare program and skill training initiatives. REFERENCES 1. Boulstridge, E & Carrigan, M 2000, ‘Do consumers really care about corporate responsibility? Highlighting the attitude-behavior gap’, Journal of Communication Management, vol. 4, no.4, pp.355-68. Top of Form 2. Creyer, EH 1997, ‘The influence of firm behavior on purchase intention: do consumers really care about business ethics?’, Journal of Consumer Marketing, vol. 14, no. 6, pp. 421 – 432. 3. Foxall, GR 1975, ‘Social Factors in Consumer Choice: Replication and Extension’, The Journal of Consumer Research, vol. 2, no. 1, pp. 60-64, Viewed 24 November 2009, http://www.jstor.org/pss/2489047. 4. HallbergGarth Hallberg (Author) › Visit Amazons Garth Hallberg Page Find all the books, read about the author, and more. See search results for this author Are you an author? Learn about Author Central , G & Ogilvy, D 1995, All Consumers Are Not Created Equal: The Differential Marketing Strategy for Brand Loyalty and Profits, Wiley, New Jersey. 5. Hansen, F, Christensen, SR & Lundsteen, S 2007, Emotions, Advertising and Consumer Choice, Copenhagen Business School Press, Denmark. 6. Hausman, A 2000, ‘A multi-method investigation of consumer motivations in impulse buying behavior’, Journal of Consumer Marketing, vol. 17, no. 5, pp. 403 – 426. 7. Kardes, FR 2005, Applying Social Cognition to Consumer-focused Strategy (Advertising and Consumer Psychology), Lawrence Erlbaum Associates, New Jersey. 8. Luce, MF, Bettman, JR & Payne, JW 2001, Emotional Decisions: Tradeoff Difficulty and Coping in Consumer Choice, University of Chicago Press, Chicago. 9. Samli, AC 2000, Empowering the American Consumer: Corporate Responsiveness and Market Profitability, Praeger, Connecticut. 10. Windham, L Laurie Windham (Author) › Visit Amazons Laurie Windham Page Find all the books, read about the author, and more. See search results for this author Are you an author? Learn about Author Central 2000, The Soul of the New Consumer: The Attitudes, Behavior, and Preferences of E-Customers, Allworth Press, New York. Read More