Tuesday, January 28, 2020
Consumer Buying Behavior And Decision Making
Consumer Buying Behavior And Decision Making Recent research discovered that consumers are just likely to make purchase and to be influenced not only by relatives and peers, by endorsers but also by attitudes, situations and emotion (Olsen et al., 2007). The process of consumer decision making can be viewed as three well defined stages namely the Input, the Process and the Output as shown below (Schiffman, 2005). The Input Stage influences the individuals recognition of a product need and consists of two main sources of information which is the firms marketing efforts in term of its price, promotion, location of the retail outlets and the second source is the external sociological influences on the consumer which includes family, friends, neighbors, social class amongst others. The Process stage emphasizes on the way consumers make their decisions. The psychological factors built-in each individual like motivation, perception, learning, personality and attitudes which affect the way external elements from input stage affects the consumers recognition of a need, pre-purchase search for information and evaluation of alternatives. The output stage comprises of two related post-decision activities namely the purchase behaviour and post-purchase evaluation. A low-cost and non-durable product may be influenced by the manufacturers coupon and may actually be a trial purchase. The consumer evaluates the product through direct use. For a relatively durable product such as a laptop, the consumer decision-making model is examined in greater depth (Schiffman, 2005). 2.1 Factors influencing Consumer Buying decision 2.11 Cultural Factors In a sense, culture is a societys personality (Wayne, 2008). According to Hawkins (2009), culture is defined as the sum of total learned belief, values and customers that serve to direct the consumer behavior of members of a particular society. Individual are brought up to follow the beliefs, values and customs of their society and to avoid behavior that is considered as taboo. (Graham, 2009). Overall societies are segmented into subcultures. The sub-cultural divisions are based on nationality, religion, geographic locality, race, age and sex. 2.12 Social Factors A reference groups are groups that serves as frames of reference for individuals in their purchase or consumption decisions. Indirect reference group consist of groups with whom a person does not have direct face to face contact, such as movie stars, TV personalities, sports heroes or even interesting-looking people on the street (Graham, 2009). An individual who has little or no experience with a durable product is more likely to seek out the advice or example of others (Solomon et al., 2009). When consumers are concerned with obtaining accurate information about the performance or quality of a product or service, they are likely to be persuaded by those whom they consider trustworthy and knowledgeable (Hoyer et al., 2007). Appeals by celebrities and other reference group are used very effectively to communicate with their market. For many consumers, their family is their primary reference group for many attitudes and behavior. The members of a family assume specific roles in their everyday functioning, such roles or tasks extend to realm of consumer purchase decisions. 2.13 Psychological Factors Psychological factors arousing within individuals relatively drive general behavior of consumers and thus affect their behavior. The main influences on consumer behavior are personality and self-concept, motivation, learning and perception (Sorensen, 2009). 2.14 Individual Factors Demographic variables are individual characteristics which consist of occupation, sex, income, origin, ethnic, race and age (Kanuk,1999). 2.2 Organizational Buying Behavior The decision making process by which formal organizations confirm the need for products and services to be purchased, consider and select among alternative suppliers and brands (Glavee, 2009). (Hutt, 2009), as an outcome of the vast area of prior research, proceeded the characterization of the industrial buying behavior divided into three major aspects: The Buying Process, The buying Centre and Factors influencing the buying centre. As Kelly (2007), the buygrid model is a conceptual model, which describes the different combinations of buying phases and buying situations. It incorporates three types of buying situations: (1) the new task, (2) the straight re-buy, and (3) the modified re-buy, combined with eight phases in the buying decision process. The model serves as an easy framework for visualizing the otherwise complex business buying process and enables the vendor to identify the critical phases and situation requiring specific types of information. 2.3 The Buying Centre As Hutt (2009) mentioned, companies do not buy, people do. It is of utmost importance to have a concrete knowledge about those involved in the buying decision making process of the goods or services that a vendor aim to sell. It has been indicated that many individuals are pertained in the buying process of industrial goods. 2.4 Roles of the Buying Centre members Buyers are known to assume some common roles in a buying process (Wind, 1967). These roles are classified into six groups which are shown below. Initiator is the one or group of individuals who become aware of a company problem and recognize that the problem can be solved via acquisition of a product or service. The influencers are those who have a say in whether a product or service is bought or not. The more critical a purchase is to companys business, the higher the number of influencers. Gatekeepers usually act as problem or product experts. They have information about a range of vendor offerings. Other buying centre members therefore rely on their information for their assessment of prospective vendors offerings. Thus, by controlling information, and, by having access to decision makers in the firm, the gatekeepers largely determine which vendors get the chance to sell. Deciders are those who make the actual purchase decision. For instance, they say yes or no to what vendors offer. The buyer is one who makes arrangements for the delivery of the goods. He is also often directly involved in negotiating the conditions under which the transactions will be made. Users are those who usually make use of the products in normal working process. 2.5 Factors influencing the buying process and the buying centre Different attributable influences that affect the buying process and the buying centre previously addressed ( Nielson, 2008) : Aspects influencing the buying process Brief description Organizational Technology, goal, task, actors, structure. Interpersonal Formal authority, persuasiveness Personal Status, politics, ethics. Environmental Physical, economic, technological, legal, political and cultural. 2.6 WOM in Consumer Environment Word of mouth is about disseminating information by verbal communication, particularly references including general information in an informal or person-to-person approach. Word of Mouth is usually regarded as a verbal communication, although web dialogue, such as, message boards, emails and blogs (Olson et al., 2010). 2.7 WOM influencing consumer buying behavior WOM is considered to be of utmost importance in shaping consumers attitudes and behaviors. Silverman (2011), studied the diffusion of technology products and concluded that the pattern of ownership may be justified by the presence of an effective network consisting of neighbours exchanging product information. Songe (2006) pointed out that WOM is the most essential source of influence in the purchase of technology and household goods. It is three times effective as radio advertising, newspapers and magazines. 2.8 Characteristics of WOM WOM can be seen as positive as well as negative (Jantsh, 2010). Negative WOM arose when consumers gather information on lack of service, high prices or impolite sales personnel. PWOM is a reference to the passing of positive information. Scharffer (1998) indicated that dissatisfied customers made complain twice than when they are satisfied. Goodman (2009) justified that the services recovery programmes, service guarantees and complaints process affect the direction of WOM. WOM is considered to be an unlimited activity to consumers. The WOM activity can be perceived as a function where the individuals with whom the organization and its employees come into contact like the customers, suppliers, competitors, the general public, or other stakeholders (Misner, 1999). Throughout a decision making process, WOM may be employed at different stages. WOM can be used before or after a purchase. The use of WOM in a pre-purchase stage is referred to as input WOM and Output WOM is issued after the purchase (Assael, 1997). The effectiveness of WOM is far from being unnoticed. Some organizations regard customer WOM as one of the most strong marketing tool (Wilson, 1994). According to Scharffer (1998), marketers attempt to directly influence opinion leaders, incite WOM communication in advertising or depict communications form opinion leaders. 2.9 The Nature of WOM Nail (2002), distinguished three main types of WOM communications in an evaluation on personal influence in buying technology products namely product information, private experience and recommendation. Product information is informing about the product such as benefits of the products. Private experience includes explanations about reasons for purchasing the product. Recommendation refers to point of views about the product. These categorization implies that WOM attends to inform and to influence. Product news, for example, is efficient in bringing awareness about a product and its features. Listening about the experiences of the product from a friend help the consumer in evaluating the absolute merits of one brand or another. Eventually through the perceptions of others, advice is essential in making the purchase decision stage (Solomon et al., 2009). 2.10 Opinion leaders and followers According to Rosen (2002), mass media messages are caught and disseminated by opinion leaders. He also pointed out that mediated communication are circulated to opinion leaders who disseminate it through WOM to their peers. This in turn exert some influences. According to his theory, opinion leaders are present in all groupings of society and may be persuasive on specific topic (Songe, 2006). Lois (2007), could not differentiate between followers and opinion leaders. In his research, he inclined to talk of influencers rather than opinion leaders. He pointed out that influencers are active information searcher, more dependent and more innovative. The follower is active and may ask for information as well as considering opinions of others Those who diffuse information are also likely to receive it which denote that opinion leaders are also followers and vice versa. Wilson (1994) has certified that there is a dominance of personal influence in decision making. In his study, Hutt (2009) added that people who received positive WOM about a new product were more likely to purchase it rather than those who received negative WOM. The powerful effect of WOM is linked to various factors. There are situations where consumers referrals are perceived as being more rational and reliable than commercial sources of information (Rosen, 2002). Dialogues with either friends or relatives tend to be friendly and can help for trying out certain behaviours. Potential consumers of a particular product can acquire some of the product experience by searching for someone who has acquired recent experience with the product (Silverman, 2011). 2.11 Importance of WOM in service sector Good service is essential to promote positive WOM. Consumers depend largely on personal communication with other customers since their experiences are regarded as a trial (Goodman, 2010). Wilson (1994), in turn found that services consumers choose to search for reference from relative and peers rather than promotional sources. Customers are skeptical. They do not believe anymore about what they see or hear. (Kelly, 2007). According to Finch (2003), it is considerable when reference groups are likely to influence especially when the customer is dealing with a decision process and the purchase of the product involve certain risk. Proctor (1995) noted the individuals who have ongoing involvement are more prone to be opinion leaders. Consumers would rather seek information from friends and family if risk is likely to emerge when making a purchase (Scharffer, 1998). 2.12 Motives for engaging in WOM communication Finch (2003), concluded that there are a multitude of reasons for engaging in WOM communication. Sernovitz (2009), supported with evidence that those who disseminate information are certainly those who are experiencing the product. The involvement in the product-related decision is an essential component in personal communications. According to Songe (2006), WOM communication is the basic interest in the product category concerning ongoing involvement. Individuals who have an enduring interest in a product category experience satisfaction in discussing about it (Wilson, 1994). Additionally, Rosem (2002), pointed out that WOM communication is usually introduced to remove any doubt about product choice. According the theory of Wilson (1994), a consumer may try to decrease discomfort by explaining the positive aspects of a recently purchased product to peers and family. Furthermore, purchasing the similar product by a friend or relative proves the original judgment of the consumer (Skubal, 2002). Discussing about the product may likely to drive people to personal satisfaction (Songe, 2006). 2.13 Post-Purchase Decision-Making Negative WOM is known to be a framework of customer complaining behaviour. Harris (2008) suggested that consumers can either express their dissatisfaction or end up the relationship when confronting with unmet expectations. Furthermore, Burg (2005) classified three main reactions to dissatisfaction namely switching to another brands or substitute, making a complaint to the retailer or personnel and finally informing others about the unsatisfactory product or service. Concerning minor dissatisfaction consumers are not likely to complain nor do they spread negative WOM (Finch, 2003). When the level of dissatisfaction is important, consumers are more likely to complain (Kelly, 2007). Goodman (2009), referred that after purchases, consumers are likely to engage in a post-purchase evaluation of the product. If the consumer is not satisfied, psychological discomfort may occur. 2.14 Pre-Purchase DM According to Scharffer (1998), WOM is seen as a process through which consumers convey both informational influence in evaluation of the product and the purchase intention of fellow consumers. This type of information can thus be expressed according to the choice of the referral source or the task of selecting the product (Lees, 2007). 2.15 WOM has a powerful influence on organizational DM WOMC is thus considered as a growing necessity in B2B markets. According to Neilsen (2000) , WOM consists of informal communications directed by consumers at other consumers about ownership or characteristics of particular goods or services and or their sellers. WOM is perceived as an exit outcome to dissatisfaction with the product quality it can be perceived a behavioral manifestation of a latent loyalty towards the supplier or the brand (Canning, 2007). The WOM system is referred to a network where personal, verbal, face to face communication take place. It is also defined as the attribute of the information dealt and how these information would determine the role of the participants (Balter et al., 2009). 2.16 Provision of WOM While in any prevailing WOM circumstances, recommendations, opinions, information are likely to succeed in both ways. Emotions influence how decisions are formulated. In B2B purchase, the buyer does not encounter the overall benefit of the solution and may not be compensated for making a good purchase, but a bad purchase can damage the reputation and job security of the buyer. The study of Prahalad (2004) revealed that organizational buying decisions are normally influence fear. Organizational buyers tend to reduce fear by reducing risk. Personal risk is mostly hidden from the rational process and is considered as an important factor in B2B buying. Like in quality judgments, satisfaction can result to positive WOM through an exit, voice and loyalty logic argument (Nielson, 2002). To such a degree that satisfaction has affective bases, the statement specified earlier about the influence to WOM route has validity as well (Robins, 2008). The involvement with a product certainly provides a person with the motivation and ability to come up with product-related conversations with others. Like Jantsch (2010), observed an individuals frequent engagement with a product or service brings out to overflowing thoughts and emotions that can easily recalled in WOM experiences, frequently willfully so, in order to clear out the tension or the experience. Dissatisfaction with a product presumed to be essential by the individual is particularly filled with WOM potential (Balter et al. 2009). Researchers have been able to separate several product-related factors that reduce the occurrence and extent of WOM activity. Price awareness for product, for one, has been encountered to correspond remarkably with WOM transmission. Preceding a dissatisfactory experience, individuals have demonstrated to participate in more or less WOM conversations depending on the seriousness and controllability and composure of the problem (Bowman, 2009), as well as the perceived likelihood of a favorable redress (Wilson, 2006). Positive outcomes concerning complaint handling and redress, like the diffusive and synergetic justice of the redress orientation and the convenience of recovery, can lead positive consequences for a provider as individuals have the tendency to respond to positive things about the provider (Balter et al., 2009). 2.17 Strategies for managing risks Rosen (2009) introduced three strategies for managing risk namely: Approved supplier list. B2B buyers are prone to select companies they already know. If a member from the buying centre has pre-approved a supplier, the risk is reduced even if it is not the right solution. Word of mouth for example colleagues and friends. User communities are one of the main sources of information for researching B2B purchases. A recommendation from a credible source tend to reduce risk. Word of mouth from existing suppliers. A good representative build good relationship with their suppliers to create a credible source for referrals. 2.18 Buyers seek personal recommendation The most influential channels across decision making process were blogs, word of mouth, websites, trade journals and other form of media. According to Nail (2002), organizational buyers valued WOM communication which provide a personal recommendation. 2.19 The Buying Process Bowman (2009) made the conclusion that B2B buying is a decision process driven by the emotions of the people involved. Business buyers are mostly motivated to reduce personal risk of making mistakes. The decision making process in the B2B environment is not an easy task. Generally doers are those making the purchase of the product or service. The buyer has the entire responsibility for reducing corporate risk. The presence of a broad chain of gatekeepers in organizations means determine the level of complexity in decision-making process in B2B environment. In the B2B environment, decision making process is much more puzzling where there is no specific decision-maker across organizations (Nail, 2002). Graham (2009) implied that in an organization there is a gatekeeper who is allowed to share ideas and information to the members in the buying centre. Both the doers and the buyers need to search for information in the buying process. B2B website should take into consideration the information needs of those who search the Internet. Person to person meetings are crucial to reach the emotional needs of prospects. Building credible relationship through person to person meetings with both doers and buyers is necessary in the complex decision making process. Analytical plan offer recommendations about which options and information to consider or to reject. This help the organization to facilitate decisions to their relevant core. 2.20 The impact of Social Media Robins (2008) declared that online channel, precisely the social media occupied an essential role in how research is proceeded and finally the decision on business purchases in the future. Social media like Website, Blogs or Facebook are also considered to be influential. Inactive channels like the press advertising are equally influential. Robins (2008) pointed out that decision-makers need to search social media channels for information to their actions. Colleagues and peers add value to decision and thus minimizing risks (Siguardarson, 2000). Factors like the ability to learn from experiences of others, the ability to access to information and the ability to communicate with others. According to the study of Robins (2008), B2B buyers refer to trade journals as well as professional online media for B2B decision making. The study also regards word of mouth and personal reference from professional colleagues or peers which is considered as the most influencing source in buying decisions. According to the study of Fader (2010), there is a noticeable change in the influence of supplier websites at the beginning of the purchasing process. He further characterized websites as very influential. Personal recommendation is clearly approved as the most valuable factor in B2B purchasing decisions. Channel like Trade journals, Website, Blogs and Facebook are seen as large influencers concerning the provision of information to help buyers identify potential suppliers. Buyers and deciders are personally involved in the final decision making process. The members in the buying centre regularly used word of mouth and supplier websites as sources of information (Bowman, 2009). Mass media is a mean of reaching directly opinion leader, follower or the gatekeeper (Jantsch, 2010). According to Santeller (2010), the gatekeeper is considered as a source of information to both opinion leaders and followers. The research of Hoyer et al. (2006) showed that diffusion of social of social media is increasing constantly. According to the study of Sorensen (2009), some B2B buyers prefer to use of social media channels while others refer more to traditional information channels. He further observed that B2B buyer opted for issue-based information from supplier websites as a main source of information at the beginning of the buying process. Furthermore the level of influence are reduced towards later stages.