Consumer Decision-Making - Coffee and Service Fitness Gym - Case Study Example

Executive summary Consumer behaviors are actions that a person takes in purchasing and using products. That is, consumer behaviors include both mental and social processes that precede actions such as product choices, value addition to consumers and consumer purchasing power. Consumer decision making is psychological in nature. That is, even though an individual cannot see the decision, he is able to infer from observable behavior that a decision has been made. In common terms, consumer decision making is a cognitive process of selecting a course action from available several alternatives. The marketers, producers or sellers must be familiar with these behaviors in order to determine how perfect to maximize their sales and profit. Likewise, many reasons and factors have been pointed out to determine what influences the consumer behavior in the same market situation. In most circumstances, consumer decision making process is influenced both by internal and external factors. External factors are not individualistic, but rather eternal to the consumer. External factors are those that consumers have no say in, but directly affect their buying decisions. They include social class, culture, subculture, family and reference group influence. Internal factors include those things that the consumer has control over while external factors comprise those factors that are beyond the control of the consumers. However, the main aim of this paper is to analyze the external factors that influence consumer decisions. Table of co contents Table of co contents Executive summary……………………………………………………..1 1.0. Introduction……………………………………………………………….3 1.1. The product…………………………………………………….4 2.0. External factors………………………………………..…………………..5 2.1. culture……………………………………….…………………….5 2.2. Family………………………………………..……………………6 2.3. Physical appeal of the site…………………..………………….…8 2.4. Income and social class……………………………………………9 2.5. Opinion leadership……………………………………..………….10 2.6. religion………………………………………………….…………11 2.7. Marketing…..…………………………………………..……..…..12 2.8. Reference group……………………………………………………13 Conclusion………………………………………………………………………….15 References………………………………………………………………………….16 Introduction Scarcity of resources possesses a daunting challenge to consumers as they try to satisfy their wants. A satisfaction of a given want automatically triggers the need for another and this further complicates the choice of a product. The challenge is further made more practical when a consumer is faced with alternatives upon which he has to make a rational decision as consumers are assumed to be utility maximizes subject to the budget constraints. A rational consumer thus has to choose a bundle that will best maximize his utility. Opportunity cost is weighed against any preferred choice before the actual choice is validated. A consumer hence only settles on a product with lesser opportunity cost after a close evaluation of the salient issues surrounding a given preferable bundle. In a nutshell, the whole process before settling into a particular product by a rational consumer is referred to as the consumer decision making process. In addition to internal factors, consumer decision making is influenced by external factors. It is worth noting that external factors are associated with the group that the consumer belongs to or/and interacts with. The main scope of this study is to come up with reliable information based on the available consumer theories to review the circumstances that make one consumer to decide on buying a product or not. Consumer spending depends on their perception of the individual after the first time they consumed such product. For example if a consumer goes for a massage and the service is good, the possibility of revisiting the same place the next time he/she need the same service increases. Most importantly, the study shall come up with a reliable conclusion in relation to external factors that affect the consumer spending decisions and habits, information that can add to the body of knowledge that already exists in the field of economics. The product The product that will be used in this analysis is coffee and service fitness gym Coffee falls among the habitual product that one gets an addiction and has to routinely satisfy thirst for its consumption. However body fitness gym that offers massage is a lifestyle afforded by few. Therefore during marketing or consumer targeting session, the Cappuccino seller may use geographical segmentation to target people living in cold areas that depend on frequent coffee consumption to increase body warmth. In case of body fitness, psychographic segmentation techniques can be employed since most exclusive gym user adopt it as a lifestyle and it rather related to a given social class. Though geographical segmentation can also be applied in this case by targeting sporting area or a high class estate where lifestyle allow them consume good meal and weight control become too difficult (Adapa, 2012). To be specific, this paper utilizes Cappuccino coffee to analyze consumer behavior. Cappuccino Cappuccino is a hugely popular coffee drink that has become a staple type of drink found even at a corner of a common coffee joint. It comprises of equal parts espresso, steamed milk and milk froth. If made properly, Cappuccino can double as a desert with its complex flavors and richness. Therefore considering a market system that target specific consumer, product differentiation method is an appropriate method. Product differentiation is the process of distinguishing a product or service from others to make it more appealing to specific target group. Therefore the coffee marketing can use appealing quality packaging system that increases hygiene and cost. By making a gym sophisticated and accompanied by sauna, swimming pool and massage the customers will be exclusive. Competitors like tea, cocoa or Milo may not meet that standard of packaging that has class and at the same time have a trustworthy consumer. Motivation is the accelerating factors that make the consumer want the product so much. However regardless of the drive, Maslow realize that consumer needs have a hierarchy of order with basic need satisfaction being at the base of the pyramid since it is a need that one has no otherwise but to satisfy. Cappuccino Coffee falls under the physiological need where food, shelter and sleep fall. This is the most basic need that is normally recurring and has to be satisfied before other needs. However, gym, fitness, massage fall under Esteem need that someone want to accomplish to feel confident and respected for keeping in shape. Factors that influence the consumer’s decision making The consumer aims at maximizing his or her satisfaction from the product based on what they know think, see or have been told (Strydom, 2004). Most decisions arise from what they believe about the product, a fact that makes them become brand loyal to some products over the others. These are majorly the internal factors which make the consumer behave in certain ways (Hall, 1990). However, the study is focused on the external factors that may make the consumer behave in the same way too. To develop an effective way of addressing the topic of study, the paper summarizes the factors affecting the consumer’s decision making when buying a product in the following factor outlines: Culture The impact of culture is so natural and sometimes its influence on consumer decision making is barely noted. However, culture gives the much needed direction, order and guidance of society in each and every phase of human development. Children acquire from their environment sets of values, beliefs and customs that institute culture. Therefore, for a firm or company to undertake business effectively, it has to overcome the large cultural and economic boundaries. These attribute stipulate how people live and how they purchase as well. Culture is linked to a certain nationality or religious identity of an individual. In this case, culture is considered the widest environmental factors that have high effects of an individual’s behavior (Taylor and Lee, 2007). Culture involves societal thoughts, language, traditions, feelings and attitudes. in broader terms, both values and beliefs are mental images that influences various attitudes, which in turn influences how an individual evaluate alternative brands in a product category such as different brands of coffee or different gym sites. In relation to customs, it is one way that guides individual’s behavior. Culture is a diverse concept hence consumer behavior changes with culture. Although there have been cultural changes over the years, the sub cultures still dominates an individual’s choices of the products to purchase and hence become a significant external factor that effects the consumer‘s choice in a market set up (Deaton & Muellbauer, 1980). Therefore, decisions made during buying process of a consumer may be largely dependent on the cultural background of the consumer (Taylor and Lee, 2007). Family As mentioned above, many external factors influence consumer purchasing decisions. A family is the most vital consumer buying organization in society. This is because the family is made up of members that are the primary reference group in the society (Pride & Ferrell, 1989). The fact that the family helps shape an individual’s attitudes and behaviors makes it one of the vital factors in consumer decision making process. A decision can be made individually or by a group. But in most circumstances, a decision can be made by a wife, husband, and child and to a larger extent through collaboration. For instance, a husband can take a family out for dinner and convince the whole family to take a cup of cappuccino as refreshment (Pride & Ferrell, 1989). Families influences consumer decision making in numerous ways. First all, the influence of parents on decision making is derived from the fact that most parents play a vital role in influencing their children’s religious beliefs, consumer preferences and lifestyle choices. The family may determine the ethical lifestyle values and particular social relationships. Market is a social stage of exchanging goods and services between the buyer and the seller, and, therefore, social relationships and values of the consumer directly affect their decision making in the market (Hoyer & McInnis, 2001). Most people are who they are today due to the influences the parents had on them when they were young. In addition, the relationship that exists between spouses and children can result to more force on consumer decision making. The family influences affect how consumers consider purchasing more directly as compared to other social influences on consumer purchasing. The buying behavior roots from what the parent’s behavior and transferred to the consumer during growth and when it comes buying as well (Hoyer & McInnis, 2001). What an individual observes from the parent’s characteristic or style behavior become more of a culture to that individual, especially from his or her childhood thereby becoming a habit (Pride & Ferrell, 1989). Family lifecycle Nearly all individuals and families pass through an entire lifecycle that is useful in understanding their purchasing patterns. It is also very important to note that the family life cycle stage (stage of the family include the newly married, couples, singles, old married etc) also determines the final decision of the consumer’s spending behavior (Strydom, 2004). An adult develops from a young and single individual who then becomes part of a married couple without children. The couple then gets children and forms a part of a large family before graduating to older married couples. Understanding the family life cycle is vital for marketers due to the fact it helps in defining target customers. Physical appeal of the restaurant Physical external variables External variables refer to all those factors in the surroundings of the business that may influence a consumer’s decision to have a coffee at any restaurant. They include location of the sign leading to the restaurant and its design, availability of ample and secure parking, availability of complementary stores, and general appearance of the area and design of the entrance. Visible sign leading to the place of coffee is very important. A visible sign, with well decorated advert might influence a cappuccino lover to branch and enjoy a cup of coffee even if he/she was not planning to. The same principle applies to physical fitness site (gym). A restaurant and gym without clear demarcation may bring the sense of insecurity to the customers. It is no doubt that the best cappuccino sites or physical exercise sites are found in large cities or large urban centers. In this regard, some of the customers do not depend on public transport. Therefore, parking space is a vital factor to consider when starting one of these businesses. Consumers might be forced not to walk into a cappuccino shop or a gym site due to inadequate parking space. The general appearance of the area is highly praised by most customers. However, this should be complemented by good entrance to the sites. Most customers prefer cappuccino and physical exercise sites that are characterized by well-designed entrance and exits plans. Interior variables and their influences on consumer behavior An interior variable refers to all those factors inside the store that influence consumer’s decision making. They include availability and shade of lighting, type of background music played, floor type and pattern, color schemes employed on the wall and shelves, scents prevalent in the room, width and design of the aisles, temperature in the sites and presence or absence of air-conditioning, general cleanliness of the sites. Most of the customers appreciate lightning in gym sites as this makes them feel relaxed and comfortable. Playing music at the gym sites also influences most customers due to its ability to bring the relaxation capacity to the gym users. Layout and design variables and their influences on consumer purchasing Layout and design variables refer to all those factors relating to the placement, layout and design of the store space. They include space design and size, placement of equipment and workstations, location and size of waiting areas, furniture and dead areas. Most consumers of coffee prefer site design that will that give them the freedom to enjoy their drink with freedom comfort. Crowded places are not appreciated by most coffee customers as this will not guarantee confidentiality. The placement of equipment and work station should be splendid according to a majority however they felt that the equipment and workstations invaded into the customers’ personal space. This will increase the chances of customers deciding whether to have a cup of coffee in the site. To most customers, they will rather go for coffee or gym sites that can accommodate even their friends as opposed to those that specifically accommodate them. Income and Social class A basic understanding of the consumer behavior starts from comparison of what one’s social class would buy in the same circumstance. It is essential to note that a consumer belongs to a specific social class, which in the end will affect the decision that she or he will make in the process of making purchase decision of the product (Green, 1976). Economically, people with high income will tend to associate themselves with high-prized products irrespective of how good the product maybe (Deaton & Muellbauer, 1980). Just as educational status, economic status in terms of income as well as wealth has a big influence on an individual’s behavior, so does the social status determine the individual’s mentality (Deaton & Muellbauer, 1980). They associate quality with price which in most cases is not true. On the other hand, those individuals with middle and low income go for either quality or compare the price of the product with an alternative, through the processes of decision making. All these statuses respond to specific social class, which have the same characteristics in terms of education, income and the social standards. Opinion leadership The role models in the society or an individual’s life may contribute the choices that one makes in life. These choices may become very clear especially when making purchase on a product. Opinion leadership is a process whereby one person, also known as the opinion leader, automatically influences the choices, actions or opinions and attitudes of other people, who are in this case known as the opinion seekers (Green, 1976). The market situation provides both the opinion leaders and the opinion seekers, whereby the opinion leaders are those who are believed to have used the product. They are also those who are believed to have the perfect knowledge about the product. If the opinion leader gives a wrong and/or low information or opinion of the product, automatically the consumer’s decision will be affected negatively. On the other hand, if the opinion of the opinion leader embraces the product, the consumer’s decision will be affected in a positive way. Moreover, their judgments are taken seriously and may affect the decision made by the consumer during buying process. It is important to note that information is very vital in a market because the consumers will be swayed to buy products that they believe they have full information. This is the vital role that opinion leader play as they give a more advanced information about the market. In the product market, a consumer may come with a pre-formed opinion of the product based on opinion or reaction of the person or a role model. Therefore, the opinion leader of a product determines to some extent the decision that a consumer makes when buying a product. Religion Religion represents the shared beliefs, customs, behaviors, practices and attitudes which a more common to a specific religious community. Religion often forms the background of an individual. The religious background of an individual, therefore, may affect what the consumer purchases and what not to purchase. More importantly, certain products are not consumed by some religious groups thereby affecting the attitude of the consumer towards that product (Hoyer and McInnis, 2001). Religion has not received much attention from consumer researchers. This is because of the assumption that religious influences on consumption process are indirect and that religion does not exist in the theories of consumer behavior. However, the fact is religion plays a vital role in consumer decision making. Despite the fact that religion can be one of the factors that may influence the buyer’s decision to purchase the product, it is within the producer’s power to make the product in such a way that they suit the requirement of almost all the religious groups. Religious values not only provide an individual with some form of actions and spiritual rituals, it also gives the individual with a standard and a general world view. Each and every religion is characterized by sets of laws that determine everyday purchases and habits. Therefore, the decision to buy the product is very vital in consideration to religion. Marketing activities The aim of every marketing strategy is to capture as much as possible the attention of the customer. Marketing has been used in many occasions by many firms via the use of several marketing mix which are aimed at changing the social behavior of individual and also to create awareness. Marketing activities involves creating awareness of the product, increasing the appeal of the product to suit the customer’s expectations, performing research and development on the product and provisions of discounts among other activities aimed at convincing the customer to buy a product. Since the drive to buy is motivated from the inner feeling of the consumer through a mental judgment of the product, it is important for producers of the product to have the customer judgment of the product in mind. Extensive marketing activities may influence the decision making process of the consumer. This is because they increase the appeal of the product, thereby increasing the chances of the consumer to purchase the product. It is, therefore, that the seller in the market increases the marketing activities if the aim of the seller is to maximize sales and increase the profit margins. This includes expanding the product mix so as to improve the suitability of the concerned product in the market (Green, 1976). The most important principle for marketers is to realize the principle of consumer rationality which gives the consumer the power to choose between one or more goods and services from the variety available in the market (Sokolowski, 2011). Some consumers of coffees and the gym are willing access the service with certainty that while they might not be subjected to the best available price on the prevailing market conditions. That is, the price that a cappuccino customer is likely to pay is signficatly less to the price that he/she would have paid to the substitute (Engel, Kollat & Blackwell, 1968). This is a fact because many sellers strongly indicate in their adverts that while no retailer can provide the lowest price on all times, they provide the lowest price on the market. Therefore, the rationality of the consumer constitutes the interest of the consumer. This rationality is what is influenced by adverts and marketing that is being undertaken by the producer (Engel, Kollat & Blackwell, 1968). Reference group behavior Reference group is the group that a consumer wants to be identified with or is already a member. The social status of a person makes him or her to be in a group. This is because the human being is characterized by social nature such that each and every individual is associated with a particular group (Sokolowski, 2011). The group characterizes what the person wish to accomplish in life, beliefs, values and set of norms which are all for the persons mutual goals. It is important to note that consumer behaviors mostly are controlled by the group setting (Solomon, 1995). The consumer wants to buy what can be approved by the group that she or he is identified with. Reference group can affect the behavior of a consumer through the following means: i. First through the attitude of the group, that in this case encompasses pride, status, standards among others, which directly affect the psychological behavior of the consumer (Green, 1976). ii. Nature of the group in terms of the frequency of interactions and the cohesiveness. This may include the instances of the family, classmates, playmates, etc. with whom the consumer interacts with more frequently (Green, 1976). iii. Nature of the product in terms of how unique it is and its visibility maybe the yardstick of identification of the reference group thereby influencing how the consumer makes decisions when it comes to purchase of the product (Green, 1976). The reference group also becomes the basis of comparison of an individual in terms of values, style and preferences. During the processes of deciding what to buy, these attributes become manifested in an individual’s choice of the product, which tend to reflect that of the group (Robertson, 1970). Conclusion Globalization is taking shape in every corner of the world. Individuals tend to have the same needs and requirement hence the need to understand the concept of consumer behavior. Consumer behaviors are actions that a person takes in purchasing and using products. That is, consumer behaviors include both mental and social processes that precede actions such as product choices, value addition to consumers and consumer purchasing power. Consumer decision making is psychological in nature. Consumer theory helps economist to relate consumer behavior based on the available market variables to the final decisions made by the consumers to consume a product through making purchases (Sokolowski, 2011). This makes the theory an important tool for the marketers, companies and economists in analyzing the consumer behavior, which will eventually shape the market. However, the fundamental understanding of the consumer’s rationality through the ability to make critical decisions gives the consumer the power to come up with his or her optimal choice (Sokolowski, 2011). At the same time, consumers are often faced with some constraints, hence the choice they make are aimed at maximizing their utilities. References: Alex Flekel, 2013.Five steps of decision making process. Business 2 Community Belk, R. W., Askegaard, S., & Scott, L. M. (2012). Research in consumer behavior: Vol. 14. Bingley, U.K: Emerald. Blythe, J. (2008). Consumer behaviour. London: Thomson Learning. Deaton, A., & Muellbauer, J. (1980). Economics and consumer behavior. Cambridge: Cambridge University Press. Dr.Sujana Adapa, 2012.Consumer behavior.UNE business school, Australia Engel, J. F., Kollat, D. T., & Blackwell, R. D. (1968). Consumer behavior. New York: Holt, Rinehart, and Winston. Engel, J.F., Blackwell, R.D and Miniard, P.W. (1995). Consumer Behavior. 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