Consumer Behaviour, Taking Fuel Efficiency as the Centre Stage - Coursework Example

CONSUMER BEHAVIOR Name: Instructor: Date: Consumer behavior Consumer behavior means the process of selecting, purchasing and consuming services and goods to satisfy day to day wants or needs. Different processes are involved during consumer behavior. At first the consumer finds the type of commodities he or she would want to consume, after which he or she selects the priority commodities that guarantee greater utility. After choosing the commodities, consumers are entitled to making estimates regarding the available funds which he or she can spend (Blythe, 2013). Finally, consumers analyze the prevailing costs of commodities and decide on the commodities he or she should consume. Anticipating Consumer Changes enables us to establish the external factors affecting the process of consumer’s decision-making for a service or product. Clearly speaking, consumer behavior is developing and the automotive companies have to anticipate this development in order to contribute to, or even persuade, these changes. Automotive companies will require taking a glance at their multi-canal approach as they think of the potential marketplace for the sale of cars. With the world going digital, web strategies have been vitally important since the online landscape is evolving swiftly where strong consumer to consumer features like virtual worlds, social networking sites, discussion forums and blogs are emerging (C. L. Tyagi, 2004). These companies will have to strictly focus on environmental evolvements and developing consumer attitudes towards alternative fuel and fuel-efficient cars. As the internet has explained, there are dynamic green issues, which have ultimately affected the automotive industries. Dealer and manufacturer collaboration in integrated lead management and effective retail integration becomes extremely important in satisfying increasingly demanding and sophisticated consumers to retain loyalty. Through personalized communication, these companies need to institute and retain a proper two way dialogue among individual customers. To understand consumer behavior and external determinant factors, we need to deeply analyze customer loyalty, lead management, and web usage, environmental, social and political issues (Solomon, 2006). There are key factors considered by customers when deciding on their final choice of a car they need to buy. These external factors will include, fuel economy, price, safety and reliability. Cash back incentives have been named by very few consumers as being the last in the list of external factors. Being a deciding factor, the relevance of these incentives has declined in the previous years, this being an indication that consumers in the recent markets are less engrossed by gimmicks when car purchases are examined. Consumers in the buying phase are able to make differences concerning how they categorize the external factors that weight their car choice (Charles Eldridge, 1978). A research conducted showed that, additional coverage of warranty was vital to consumers who were far away from the purchase point; 70% of car buyers who were 14 to 19 months from purchase proved this fact whereas 60% of car buyers who were three months within the purchase time stated that additional warranty coverage was vital. This proves that, consumers usually narrow down the external factors that are important to them as the purchase point gets closer. Although the demographic factors like gender and age will account for certain variances e.g. elderly consumers will more likely emphasize on safety and reliability than younger consumers, many buyers over the age of forty are highly concerned about the fuel economy and the environmental issues. Young consumers tend to rate their ability by researching the internet to get information guiding them as an important factor in deciding the choice of a car. In the other hand, women likely rate their external factors more importantly than men do (C. L. Tyagi, 2004). The difference lying among these groups is greatly pronounced by additional warranty coverage, fuel economy, environmental issues, safety, low financing and cash back incentives. Going “Green”: Taking fuel efficiency as the centre stage Environmental issues and fuel efficiency has moved into the heads of consumers and into the automotive industries’ forums due to factors such as fluctuating gasoline prices, global warming and anticipated legislation to reduce carbon dioxide emissions and increase fuel efficiency. Research has showed that more than a quarter of consumers respondent that they are currently leasing or owning fuel efficient cars while approximately half expressed their serious willingness in purchasing fuel efficient cars (Charles Eldridge, 1978). Unsurprisingly, the number of customers willing to buy alternative fuel cars was lower. It has been expressed that, 4% of customers currently possess alternative fuel cars while approximately 15% of customers seriously think or have bought one. Currently, half the owners of alternative fuel cars have named the electric or gas hybrids to be common. Another group of the users of alternative fuel cars named biodiesel vehicles to be second. These alternative fuel markets are expected to remain in transition although too early to speculate since sales have been seen growing. Currently, the ownership of alternative fuel and fuel efficient cars has shown consistency especially across age and gender groups though old consumers tend to be more seriously thinking about purchasing alternative fuel cars. Gas Mileage Consumers have thought about this as an external factor when purchasing a car (Charles Eldridge, 1978). Gas mileage is considered as the car’s fuel economy hence playing a big role in when consumers calculate their overall cost when driving. Although the initial buying price is vital, the ongoing expenditures are often as important as the initial cost. It’s argued that, high fuel expenditures during the car’s life cancels out savings made on the initial price. Loyalties in brands Recent findings on trends of brand loyalty have revealed a Toyota decline along with an increase for Honda and Ford. There are brand loyalists who have been identified concerning their associated influence when purchasing a car. The buyer’s affection towards a brand will vary significantly by age and gender. Women have been found to be most likely brand loyalists compared to men. 60% of women have confessed that they would purchase a new car of similar make as the car they presently own compared to 39% of men (Curtis Darrel Anderson, 2010). The same hold true when we talk about older drivers. With drivers 36 years and older, a minimum of 50 percent decide to stay with the make they already own. Merely 41 percent of car users aged 17 to 35 years old feel the same way. Probable reasons as to why younger drivers would be influenced faster include changing lifestyles, limited experience concerning a given brand, immense peer influence, and becoming extra trend-conscious. Social Class and roles This is a type of rank founded on multiple external factors such as ethnic group, race, occupation, education and income. According to theorists of consumer behavior, social class will be an often indication of the quality and kind of product an individual is likely to purchase. People associated to a low social class tend to uncertainly make purchases such as sport cars, personal hot tubs or cool expensive cars, but individuals of the high class most likely will make such purchases (Marzotto, 2000). Social roles also have a substantial effect on consumer behavior. Many people are entitled to different social roles, which influence what they buy and how they act. For example, an individual may be a businessperson, a parent or a lawyer. Every social role will influence each one in a special way. As a parent, the individual may put more interest in a lesser expensive although high quality car; as a business person, he or she will ensure that he or she gets a comfortable but more spacious car to carry cargo whereas, as a lawyer, the individual will be obliged to purchase an expensive and good looking car. Business people will also ensure that they get cars that can accommodate advertisements designed to promote their business (Marzotto, 2000). Culture Culture stands for a set of ideals, attitudes and values shared within a group of persons. Culture will often determine the manner in which people dress, eat and most likely the cars in which these individuals drive in. The culture of a person will affect the kind of car he or she may buy. For example, Africans may be interested in purchasing pickups and Lorries to enable them cater with their poor infrastructure whereas white people use sport cars due to their well-constructed infrastructure (Beise, 2001). Culture can also be expressed as a pattern of social relations and behavior that exposes a character of certain society, which makes it different from others. Through culture, people are able to express ideas, attitudes and values that assist individuals to exchange their thoughts of a certain issue and evaluate situations. There is importance of view a culture generally thus involving the law applied in it be it a subculture or culture which ensures avoidance of labeling. Since culture is learned or believed to have subjective values, culture for an individual sets a reference frame, which shows the behavior of the individual hence being acceptable. However, in the United States there is a dominant culture that emphasizes on equality among the youth, materialism, use of resources and individualism (Janosi, 1999). There is a clear difference in culture whereby these different cultures have different influence in the type of car they need to expand the international markets. For instance, there are the differences in the type of vehicle Americans will mostly purchase compared to the type of cars the Europeans will also purchase and this always depends on what they mostly do with their vehicle. If the Europeans like travelling there is a possibility that majority of them are having luxurious car. An example is of Europeans whereby they go for extended vacation as a family and in France during vacation there is possibility of finding in the entire country no businesses are taking place. In America things might be just normal. In this case consumers will ensure that they purchase the car they want at a particular time which they are sure they will get full services in France and Europe but in America the consumer is influenced to purchase the car at any time he or she feels like (Noel, 2009). However, many families do not take vacations which exceed one week since they see it better to have continuous vacations over the weekend which carries only three weekends. These mini vacations in most cases influence the car consumers to look for a car which fits in the luxury they want over the series of weekend vacations. In addition to this generalized culture in United States, there should be a concern of subcultures by the marketers. These sub cultures create more differences among the people in the types of cars they require since hence exposing other different influences consumers get when in the mood of purchasing cars. These other influences can involve business oriented people being influenced by the business to purchase for vehicles which are purposely made for the business they are doing and many others (William M. Pride, 2007). Family influences The family has been categorized as the most fundamental group any individual can belong to making it an important external factor in consumer behavior. In a family, purchasing decisions are usually made by numerous members of the family for conformity. In many cases the wife and the husband team up to make vital decisions. Marketers will often aim both the wife and the husband and rarely the children when commercializing their adverts making them appealing to all (Kumar, 2009). For example, when purchasing a car, manufacturers of the automobiles will ensure they capture the will of the wife and the husband in their adverts. Functionality The car functionality is another external aspect to consider in consumer behavior. The person’s individual situation will guide someone to give clues about the kind of car he or she needs. For example, a large family of more than four members should consider purchasing a large four-door sports car for comfort-ability and space. Considering the car’s size and its characteristics e.g. a four wheel drive car will help an individual in areas with conditions warranting such features (Paul Niewenhuis, 2007). Warranty When consumers plan to purchase a car, they examine the warranty carefully. Warranty ensures that any mechanical problems occurring within the period of warranty will be addressed without any expense or cost. Warranty is not guaranteed with old cars since their warranty has already lapsed. Different warranties provide diverse benefits and will last for a given period in years or miles covered. Consumers are keen on these warranties because they guarantee maintenance within a given period of time (Ariely, 2009). The reputation conveyed by a certain automobile company also plays a vital role in the consumer’s decision-making process. Different companies may rate their products differently and therefore comments given by other willing buyers will make the buyer scrutinize the selling company. Price When purchasing a car, many buyers determine the cost that a car will offer by comparing the benefits and features vs. the price tag. For example, a car costing a bit more cash but has the best gas mileage and extra cargo room, most customers would consider the car to be of good value. Based exclusively on that principle, they would be right. However, most customers do not consider all the expenses that go in a car. A site such as Intellichoice.com does a huge 6-Year Ownership Cost projection for new in addition to used cars. Such projections take all of the various factors into account incorporating insurance, fuel, maintenance, repairs, financing costs and depreciation. This totals all of them up over the value of 6 years, and contrasts this to the industry standard for that car’s class (Nijssen, 2000). Considering how far below (or above) the total cost from the average is calculated, enabling the company to place an assessment on the car. Socioeconomic Level The socioeconomic level is another factor which causes a very high influence on decision making to the consumers. The socioeconomic level is related to the marketing of cars in the motor vehicle organizations in that, these organizations have all qualities of vehicles. This is made for the case of the different peoples’ income levels whereby, the persons with low income levels are not prevented from buying cars and at the same time the persons with high income are not limited to the quality of car they want. This has highly caused an influence to the consumer decision making since there is availability of the car they want. For instance, if a motor vehicle organization has new and very expensive cars they advertise them in publications which are read by professionals thus influencing them to purchase these expensive cars since they are their target in the market (Zikmund, 2007). Reference Groups Reference group can also be defined as any group in which a particular person is supposed to be and this can be sixth grade, coworker cohort or even a sorority. The behavior of an individual as a consumer can be largely affected by the group in which he or she is in. in most cases we will find that whenever an individual joins a certain group is easily influenced by the members of the reference group with their behavior hence starts behaving like them. This can mostly be experienced in the teenage groups where the children in that age will always want to be like their friends who are influenced through pear pressure. It is the group in which there is a specific behavior among the members in it and this behavior is easily identified. These groups put forth incredible influence on the consumers on the decisions they make for the purchase of cars (Gitman, 2008). The influence to each and every individual can either be indirect or direct to them. In marketing and research there are three different types of reference groups which include: normative, comparative and status. Comparative is used by the individuals whereby they compare their feeling about the car or any other commodity they want to purchase and the thoughts of their friends about the same. For example, the consumer might have gone with a friend to evaluate the type of car he/she wants whereby the customer sees what he/she wants. Before making final decision, the friend he/she had has to be given a chance to evaluate the choice and also give his/her perception (Paul Niewenhuis, 2007). Moreover, the individual can now do the comparison of his/her perception with that of friends thus coming up with the final choice. According to the way I understand reference groups, I think it greatly influences the decision made by the consumer in purchasing the commodity. The second reference group is the status and it operates as a function of status. An example is when someone wants to join a certain group he or she has to adopt the behaviors of the group members. In the same way if an individual views the reference group as a foundation of the status is probably going to mold the actions expressed by reference group members. The last reference groups set up values and norms that control the individuals’ behavior. For instance, the reference group of high school age dining out (McCarthy, 2007). The reference groups because an influence to the customer in the choices they make. To express this there is the example of two automobile companies whereby we have companies M and N. The car products attained in M are desirable than those in organization N yet through research the cars from N are of high quality than those of M. The values and norms of the groups might be suggestive to go for choices in company M. For clear explanation, we have the company M which seems to have very presentable products and company N does not. This shows that the influence of the reference group might keep changing with time hence company N might be discovered to produce the best products compared to company hence becoming popular. The reference groups can mostly be applicable in institutes and in this the influence is brought about by the managers through the exercise of opinion leaders. There are two types of these leaders of reference group which involve formal and informal and they cause an influence to other peoples’ opinion by expressing their own opinions (Ariely, 2009). In the institutes and big organization where the reference group is mostly used which causes an influence on the type of organizational car is to be bought, the managers seek their advice from the opinion leaders since there is a believe that the opinion leader has a very great knowledge than any other person in the organization/ institute. Another example is the advertisements set in the local newspapers. Many of the readers of these newspapers get to be highly influenced by the adverts immediately and directly (Beise, 2001). However, frequent buyers in a certain organization can be recognized and rewarded by being sold for the next car at a discount which causes an influence to the consumer. The discount will make him or her to have a feeling that if next time he or she comes back will also be rewarded thus remains to be a customer to that certain organization. The organization can also result in to other many sales due to the rewarded customer who can keep advertising unknowingly about organizations’ product (car) and in this case another consumer will be influenced through that. These remains to be a continuous process whereby there are the permanent customers who will keep visiting the organization and when they realize that there are new cars brought in the organization they inform their friend who visits the organization to purchase them if they really please them (Charles Eldridge, 1978). Whenever there are new product an influence arises among friend who get it from the same organization. Household A household is an occupation of a unit by certain individuals. For instance, there are households in United State which are approximately 80 million whereby in each different believes, characteristics and leadership abilities exist. However, in the households is where the consumers are easily influenced by the other members of the household on the decisions they make when they want to purchase a car. The influence can be out of desire to get one which is better than that for another person in the household, the consumer can also be influenced by the advice he/she gets from the family members in the household and can also be influenced by the desire of show off and competition among the family members (Gitman, 2008). In addition, the consumer in household can be influenced in the decisions they make by the activities they usually do as a family. For example, the household might have been going out during holydays and they have always had a problem of transport so in this case the consumer will major on the cars which can accommodate the whole household. Environmental Environmental factors are the issues which are caused by the surrounding of the consumer and they cannot be controlled not to happen. An example for these factors can be the condition of the weather of the place the consumer lives. If the place is mostly rainy the consumer can be easily influenced by this factor whereby his/her decision making of the type of car to purchase can be based on these conditions. This is because the consumer does not have the power to control this weather (Paul Niewenhuis, 2007). The environmental factors can easily be differentiated from the internal factors since the consumer can have a total control over the internal factors while cannot control the external factor. However, to cope with the external factors the consumer has to anticipate, understand and respond wisely to these external factors by managing well the internal factors such as; if they want to purchase a car, the consumer has to purchase the four will drive cars which can survive and serve well in the areas which are in most cases rainy. Some of the environmental factors which are involved in customer influence in decision making of the type of car to purchase include; economical, technological, legal, socio- cultural, political and geographic or physical factors (C. L. Tyagi, 2004). These factors are well discussed below according to the influence they have in consumers as follows:- Economical Economically the consumer will be influenced by the ability he/she has in terms of money i.e. if the consumer earns small amount of money he/she will go for the cheap car especially in maintenance and fuel consumption. The economic activity level will also influence the decisions to be made by a consumer willing to buy a car (Charles Eldridge, 1978). Technological The consumers are influenced in making decision of what kind of car they want by the current technology which has brought about many different designs. The manufacturers of the new designs have different qualities of the different designs of the cars and this can cause an influence in the decision making of the consumer. This can also influence the buyer since due to an increase of technology has lead to a decrease in movements hence the buyer can decide to look for a car which can be easily sustained even after staying for long without being in use (Charles W. Lamb, 2008). Legal The buyer will be influenced to buy a car by environmental population which should be under certain rules on the vehicle. Also the consumer will be guided by the rules set on safety measures (Curtis Darrel Anderson, 2010). Socio-cultural People usually have different living styles and the living styles greatly cause an impact on the decision made by consumers on the car to purchase. There are also customs which influence the decisions made by consumers on the cars to buy (Gitman, 2008). Political Politically, the consumer choice can be influenced by the policies set on the export, manufacture and importation of the cars whereby if there is a favor in any of the three to them they will go for it. Policies governing establishment of foreign manufacturing plants can be included. Taxes also help the consumers in deciding what kind of car to buy. The government stability influences the conditions of a country in future which also helps a customer in deciding on the car to buy (Janosi, 1999). Geographic There are many different types of people who with different abilities and are interested in having cars either for luxury or for working. Depending on the ability the customer has, influences the customer to get the car which can fit him/her. In this the roads which have rough service can also be included (Kumar, 2009). Resale value Majority of the car consumer talk about getting a car with a resale value which is high when in the moods of getting a new one. Although most of them might not know the way the resale value is measured they are always right about it. Since depreciation of a new car in the first five years is a big expense to the owner, we find that it is better to ensure that during purchase the consumer has to be careful while making a choice and deciding on the kind of car to buy. In other words, it can be very costly for the consumer to purchase a car and it depreciates within a short time since even if it is made again its value will keep declining. When a consumer chooses a vehicle/car with better resale value, will be able to enjoy using it and also it will spare him or her some more money (Marzotto, 2000). Financing Decision making of a consumer is also largely contributed to and influenced by the car financing. For instance, the consumer should choose purchasing a car by leasing it or through a loan of he or she does not have cash at hand. The consumer should also consider the interest rate the loan will be charged or will be making to the seller. There might be a factory rebate when buying the car or available incentives to buy. On the other hand, it might not be necessary for the consumer to give some amount as a down payment since it is paid by some people to reduce the amount paid monthly. In comparison of the two, the customer or consumer is able to make a decision on the type of payment to make and the car to buy thus being influenced by the mode of payment (Nijssen, 2000). Conclusion While using the concept of diffusion of innovation which entails the process in which innovations especially in automobiles spread from one social group or locale to another. The different external factors discussed above points out that not all people will welcome into their way each and every innovation (Beise, 2001). Each and every person will react differently concerning different models of cars, their impact to the society and its effects to the society. Depending on the nature, age, the social status of an individual, he or she will be able to see or hear about an advertisement about an upcoming innovation in cars, understand it and finally catch up with it or even fail to accept the upcoming innovation. This is why different people will choose a certain type, model or make of a car regardless of external factors either warning of upcoming dangers or bringing benefits (Beise, 2001). References Ariely, D. (2009). Predictably Irrational: The Hidden Forces that Shape Our Decisions. New York: HarperCollins Publishers. Beise, M. (2001). Lead Markets: Country Specific Success Factors of the Global Diffusion of Innovations. UK: Springer. Blythe, J. (2013). Consumer Behaviour. NY: SAGE. Bryan Foss, M. S. (2001). Successful customer relationship marketing. London: Kogan Page Publishers. C. L. Tyagi, A. K. (2004). Consumer Behaviour. UK: Atlantic Publishers & Dist. Charles Eldridge. (1978). Choosing tires for better gas mileage. wisconsin: University of Wisconsin--Extension. Charles W. Lamb, J. F. (2008). Essentials of marketing. NY: Cengage Learning. Curtis Darrel Anderson, J. A. (2010). Electric and Hybrid Cars. NY: McFarland. Gitman, L. J. (2008). The Future of Business: The Essentials. NY: Cengage Learning. Janosi, P. E. (1999). Factors Influencing the Demand for New Automobiles. USA: American Marketing Association. Kumar, S. R. (2009). Consumer Behaviour And Branding: Concepts, Readings And Cases. India: Pearson Education . Marzotto, T. (2000). The evolution of public policy: cars and the environment. USA: Lynne Rienner Publishers. McCarthy, T. (2007). Auto mania: cars, consumers, and the environment. USA: Yale University Press. Nijssen, E. J. (2000). Creating Customer Value Through Strategic Marketing Planning: A Management Approach. UK: Springer. Noel, H. (2009). Basics Marketing 01: Consumer Behaviour. NY: AVA Publishing. Paul Niewenhuis, P. E. (2007). The Automotive Industry and the Environment: A Technical, Business and Social Future. UK: Woodhead Publishing. Sharma, A. K. (2006). Consumer Behaviour. USA: Global Vision Publishing Ho. Solomon, M. R. (2006). Consumer behavior: buying, having, and being. USA: Pearson Prentice Hall. William M. Pride, O. C. (2007). Foundations of Marketing. UK: Cengage Learning. Zikmund, W. G. (2007). Exploring marketing research. USA: Cengage Learning. Read More