Consumer Behavior and Independence - Term Paper Example

nsumеr Dесisiоn-Mаking - Ехtеrnаl Fасtоrs Name: Student name: Unit name: Coordinator’s name: Table of contents Contents Executive Summary 2 Introduction 4 External influences 6 Cultural Factors 6 Culture and societal environment 6 Cultural trends 7 Religious and ethnic influences 8 Age and gender 8 Social class 9 Social Factors 10 Reference groups and Opinion leaders 10 Family 12 Psychological Factors 13 Attitudes 13 Innovativeness 16 Public Policy – Consumer protection 16 Conclusion 17 Executive Summary Consumer behavior is a study that touches on almost every aspect of an individual’s life. From the time an individual wakes up, brushes their teeth (most probably with the same Colgate toothpaste used by the parents and family members when growing up); and breakfast eating in their favorite Kellogg’s cereal; to the time they go to sleep, that is, after setting the alarm on their Sony radio (Hayden, 2009). In this report, we are going to use a hypothetical case of the Monster Energy drink customer whom we are going to call George. George is a college student aged 22-years-old who is a full-time student, but works part-time. Like most energy drink consumers, he has an open mind and likes trying new things. Furthermore, he tends to adopt new products while in their life cycle. However, like most young consumers, not employed full-time, he was not in a position to buy the products often yet he craves for it (Karded, Cronley & Cline, 2014). Consumers acquire an item and use it in some manner. For the case of George, he uses it to boost his energy levels when it comes to day-to-day activities. Therefore, his energy drink is consumed in one use and this influences the behavior of others (Hayden, 2009, p. 12). Satisfied consumers like George give positive reviews of the product and thus, encourage others to adopt it. Thereafter, consumer behavior gives focus to what occurs after the consumer uses the product. In the case of George’s Monster Energy Drink, Monster Beverage Corporation invests a huge sum of money on the production and puts into consideration the element of recycling the end product. As such, there are consumers who relate with environmental sustainability efforts. Hence, these consumers identify with these companies and they are most likely to purchase their products (Hayden, 2009, p. 13). This report looks at the external factors that influence and impact the decision making process of consumers concerning Monster Energy Drink. Reference groups are also investigated, and their impacts when it comes to consumer decision-making process are also observed. Family life cycles are also relevant in this case, and we are going to look at the dynamics of husband-wife decision-making process. Monster Energy Drink is the product chosen for this study, and it is important to understand whether it is for affluent or non-affluent consumers. Social class categories are also discussed and possible strategies of segmentation need to be identified for the markets (affluent/non-affluent). Another section observed in the report is the relevance of culture and core values. The social categories under investigation are mobility, affluent consumer, middle-class consumers and non-affluent. Since it is an Australian study, the core values that impact on the culture of shopping patterns in the country are put into consideration. Subculture is also a relevant aspect considered in consumer behavior studies that includes Generation Y/Generation X/Baby Boomers/Elderly consumers. A view of consumer decision-making is vital for this study because it answers the question under investigation. In addition, opinion leader’s relevance with regard to product chosen is noted. Also, the importance of innovativeness is discussed, in detail, to give the reader a clear view of aspects introduced in the paper. Lastly, public policy, legislation, advertising, pricing and consumer ethics are also discussed in this study. After all the above issues are stipulated, a conclusion is given to enable the reader catch on the most important points concerning consumer behavior. Introduction According to Sandhusen, consumer behavior is a study that looks into when, why, how, and where people do not or do buy products (2000, p. 218). Belch and Belch also define consumer behavior as the activities and process engaged by people in searching for, selecting, purchasing, using, evaluating, and disposing services and products in order to satisfy their desires and needs (2007). Lastly, consumer behavior is not only buying things since it embraces the study regarding how not having or having things affect our lives, how our possessions influence our feelings concerning ourselves and that of each other, which means our state of being (Solomon et al., 2006). Several factors have been known to impact on consumer’s behavior concerning their decision to buy products or services; and are grouped into the following conceptual domains: External influences (individual’s cultural background) a) Firm’s marketing efforts (product, promotion, price, and place) b) Consumer’s culture (religion, reference groups, ethnicity, social class) Internal processes, which includes individual’s reason for making the purchase a) Psychological processes (attitudes, motivation, knowledge, perception) b) Decision making (problem recognition, information search, judgment, decision making) Post-decision processes (consumer’s expectation, which looks at whether the product lived up to it) a. Purchase b. Post-purchase behavior The research looks at the external factors like consumer’s culture, which have a direct impact on psychological processes, internal and other factors. All lead to different consumer decisions. For example, there are certain religions that do not eat beef and other meat types (Hayden, 2009, p. 13). This aspect of religion impacts the attitude of consumers when it comes to decision making process of buying the product; or consumer’s age impacts their ability to perceive products that are fast-moving in television commercials. The concept of habitual decision making fits for the purchase of a can of Monster Energy Drink and follows the following criteria: Frequent Purchasing Familiar Product Class and Brands Low-Cost Products Little Thought, Search or Time given to Purchase Low Consumer Involvement. In most instances, this kind of purchase does not require the consumer to use much effort when it comes to decision-making process since it is less comprehensive compared to buying a car. However, the process affects the consumer in various ways, which will be discussed below. As such, the model used by consumers in the decision making process is the input process, which draws on external influences; since it serves as a source of information. According to the Fishbien model, the overall attitude of a person towards an object is derived from his feelings and beliefs concerning various object attributes (Schultz, 2006). External influences They give focus on various factors that have an impact on consumers who identify with those needs that give them satisfaction and the products and services they will need to satisfy the needs (Schiffman., O'Cass, Paladino & Carlson, 2013). The two major categories of these forces are: the firm’s effort; and those factors that make up the culture of the consumer. The marketing efforts are forces that are fairly uniform, regardless of the needs individual and consumer’s background and comprise price, product offered for sale, places offered for sale, promotion choice. Cultural Factors Culture and societal environment When it concerns consumer behavior, culture is an important aspect that gives readers an understanding on an individual’s needs and behaviors. Throughout the existence of an individual, h/she will be influenced by his friends, family, cultural society or environment all which teach him concerning their cultures values, common behaviors, and preferences. For any brand, it is vital to understand and take into account cultural factors, inherent to each market or situation that looks at adapting its product and market strategy. Culture plays a role in the habits, expectations, perception or behavior of consumers. Talking about culture, in the West, colleagues and friends commonly invite each other for a drink. But in Japan, this is not the case. Inviting someone home is not a usual thing among the Japanese because it does not fit their local customs. This kind of gathering among the Japanese is to be conducted in a restaurant. Monster Beverage Corporation is a brilliant example that adapts to specificities of each market and culture around the globe. The company is aware of the importance ascribed to have an offer with products that are specific to the needs and tastes of their consumers who come from different cultures. Cultural trends As we are aware, culture is learned, shared, a system of values, attitudes, and beliefs that are symbolic that shapes and influences behavior and perception of consumers. The “Bandwagon effect” or cultural trends are those things widely followed by people and are amplified by their popularity and due to social pressure; an individual is bound to conform or comply. When people follow the trend, more and more people will want to follow the product or service because it has become trendy. For a specific group of people, a set of expected norms and behavior need to be investigated in order to understand them. All consumers have certain attitudes and will have value for certain objects since they have belief systems that are unique and hence, define their group. Additionally, culture influences how we perceive and process information (Schiffman., O'Cass, Paladino & Carlson, 2013). This aspect of cultural trends affects consumer’s behavior and shopping habits in relation to the release of new products or service or becoming a source of innovation for brands. Social pressure is another aspect that looks at the desires of Generation X to conform or have a sense of belonging to a group. They also have a desire to follow the fashion trends that come about or others are due to the high visibility aspect provided by media stations. Thereby, consumers like George become influenced either unconsciously or consciously by the trends present in the society. For example, Monster Energy Drink are becoming trendy among members of Generation Y (echo boomers or millennium generation) thus, is a global cultural trend, which they have grown in an environment saturated with media publicity. As such, the Corporation has been able to understand how the environment influences the socio-cultural aspects of this age cohort. Religious and ethnic influences The aspect of religion has been able to provide individuals with a set of beliefs and values that are structured. This guides their behavior and thus, has helped them in making choices. For instance, in the United States, a religious group known as Amish does not believe in using modern technology. In George’s case, he is in-love with Monster Energy Drinks and being a college student he uses the product to increase his energy levels. To college students, this is an easy to compensate for their lack of sleep especially during examination periods. The cross-promotional tactics of integrating their products is applied by many energy drink companies and this has enabled them reach their consumer base. Examples are sporting events like NASCAR or the X-games; and using popular music icons; and even the use of defiant names, which means companies have become creative. Age and gender George’s age group has many young men and women who are innovators. They have the enthusiasm and take risks in trying out new ideas and products. Their willingness has enabled many companies like Monster Beverage Corporation to succeed since they have people willing to participate in their experimental studies. The energy drink market looks at those consumers more receptive to the purported effects of the beverages. The most users of this drink are the Generation Y adults who are mostly in their teen years since they believe in the veracity of claims ascribed to the energy drink. Therefore, the corporation makes advertisements that target this young generation and also includes gamers, hip-hop crowds and extreme enthusiasts of sports. Social class This concept implies that, in the population, there are those who have more wealth, power, and the opportunity compared to others who do not have due to their social hierarchy. People in different social classes have different consumption patterns and desires with regard to products and or services. According to some consumers, it is important to associate their consumption of products and services with their social class. Behavior and buying habits are ways associated with the identification and belonging of individuals to social classes. To some individuals, they go to the extent of engaging in conspicuous consumption while others use certain products that indicate their status in society. Social classes normally do not always buy the same product; or choose a vacation in the same destination; do not watch same TV programs and shows; magazines read are different; their hobbies vary, and the retailers stores visited are different because of their foundation and counterexample. For example, energy drinks are highly priced, but corporations producing these products have found ways of attracting large crowds of teenagers. They have events that call for individuals to buy products with tickets that will give them access to certain parties sponsored by Monster Energy Drink. Therefore, the social class targeted is the middle social class. A brands social perception or that of a retailer plays a role in the purchasing decisions and behavioral patterns of consumers. Furthermore, social class changes a consumers buying behavior and to the lower class, consumers become more focused on the price of the product. Upper class shoppers are more attracted to elements like features, innovation, quality, and even social benefit obtained from the product compared to the lower class that have no money to spare on such luxuries. The energy drink is for affluent marketers and is ascribed to the theory of the trickle-down effect that is mostly ascribed to class influence. It is commonly noted that the lower class people like to copy the trends adopted by the upper class people. For example, clothing styles adopted by upper class people become popular among with other social class groups. This theory is true due to the aspiration from the lower class people to be able to raise their social standing through emulating the upper class people. Also, majority of them accept the influence from the upper class because they lack cultural knowledge when it comes to making their own judgments of what is acceptable and what is not. Social Factors Reference groups and Opinion leaders When a group of consumers identifies with and wants to join is called a reference group; since they directly or indirectly affect the behavior, desires, lifestyles and or habits of consumers. For example, if ever a young man has ever dreamed of being a professional basketball player or any other sport that becomes his reference group. They have a significant impact on product and service consumption since they convey information to an individual concerning products and services other should or should not consume. This group of people is a set of people with whom individual consumers have been able to compare themselves in developing their own behavior and attitudes. For this myth to be true, individuals who consider themselves similar to their reference groups or peers will take advantage of information shared concerning a product or service. For George, he perceives himself to being similar to his fellow college students. College students are viewed as stylish and trendy people in the society. As a result, the energy drink is something trending and thus, young people have no power to resist. As a result, young people are motivated by their peers and friends in college to take the energy drink as an energy booster. Monster Energy Drinks has been able to hire celebrities to pitch the product of the company. This has influenced the image of an individual has on himself and his behavior. In the reference group certain roles have been identified and include: The initiator is the one suggesting to the consumer to buy the product or service The influencer is the one who influences the consumer’s buying decision by giving his point of view concerning the product, brand or service The decision- maker is the consumer or another person (leader) who has the last call by choosing the product or service to buy The buyer is the final person who eventually buys the product. People with expertise in certain areas are known as opinion leaders (influencer or initiator). For most consumers, the opinion of these people is important, and they respect these people to the extent of asking for their opinion before they can make the decision to buy a product or service. For example, a specialist of information technology has a great deal of knowledge with regard to computer brands. As a result, the purchases of these people lie at leading trends. For instance, an IT specialist has the latest and greatest tech products, and his opinion is likely to carry the weight for them more than an advertisement. In the world of today, opinion leaders are reached through network analysis by using special software’s. For example, Orgnet.com was able to use the sophisticated techniques available that was able to unearth links between Al Qaeda terrorists (Campbell, 2004). Family For the consumer, the family is the most influencing factor that forms the socialization environment, which an individual is able to evolve, acquire values, and shape their personality. In addition, they also develop opinions and attitudes on subjects like social relations, politics, his desires, and society. Under the consumer behavior topic, they determine the habits, brand perceptions and the kind of products he buys. As we grow, some people maintain the same habits and patterns of consumption of products and services. Family perceptions and habits have a strong influence on consumer buying behavior. For instance, a person who has never drunk Coke during their childhood stage has fewer chances of buying it when they grow older. This is because their parents described the drink as one filled with sugar, which is not good for their health. As such, marketers should create products or services that are able to be seen or visualized as family brands. The life cycle stages vary according to purchase, disposable income and requirements of the purchase. Many people have been fond of following the classic family life cycle stages. However, for consumer they take a different direction that looks at their priorities and undergoes various life cycle changes in varying stages. The attitude one ascribes towards his life also takes a turn and changes rapidly. For example, teenagers are bothered with their appearance because they want to please their peers, which include having fun and building a career in their life. A career person, who is married, and in their mid-ages, is bothered about their financial security; for the future of his family and includes buying a house. Parents who have young children are concerned about their children’s future and comforts. Therefore, it is evident that in all these stages, their pattern of spending varies. As a result, in family life cycles stages, their priorities that concern spending of money changes. For the teenagers, they have a carefree nature that reflects ego-centrism that has driven many Generation Y consumers to buy items that have minimal benefits in their lives. Yet, the same products or times, it brings complication. For this case, the family life cycle falls under the full nest III, which encompasses children between 14 and 22 years old. Psychological Factors Attitudes In most instances, attitudes do not always give prediction to an individual’s behavior. For instance, many consumers seem to have a positive attitude toward energy drink products. However, this positivity does not result in persuading consumers to make a purchase of the device. On the contrary, majority of the consumers will look at other values like the time they will learn to understand the device. Additionally, it is highly priced and hence, it is risky to consume such a drink in public. Moreover, the attitude of consumers is bound to change over time since they have gained access to additional information. For example, George is a teenager who is exposed to new and current information, but his evaluation of Monster Energy Drinks might change any time. However, if he gets a positive review of the device on either Consumer Reports that publish independently, scientifically conducted reviews of numerous services and products; and even publications like Which this might shift his evaluation to an upward trend. The positive attitude of George would mean that he is more likely to purchase the energy drink due to the advertising related to the product. The structural models of attitude include: i. Tricomponent Attitude Model (The ABC Model) Affect (Emotions): this implies, the way a consumer feels about an attitude object Behavior (Conative component that encompass behavior and intention): this is the intent of a consumer to do something in relation to an attitude object Cognition (Beliefs): consumer’s thoughts on an attitude object ii. Multi-attribute Attitude Models Theory-of-reasoned-action (TRA) Model Theory of Planned Behavior (TPA) iii. Theory of Trying-to-consume Model iv. Attitude-towards-the-ad Models The attitude of George towards purchasing the energy drink shows how the product has functions related to his values and lifestyles-expression and knowledge (Hawkins, Best & Coney, 2004). It is evident that the attitude function value of George buying the energy drink is that it conveys his lifestyles. Furthermore, this is a way of him gaining knowledge, which he learnt through cognitive learning. This encompasses cognitive dissonance and attribution theories. According to the product under study, it is evitable that the Multi-attribute Attitude Model is applied by George. He assumes that an attitude is dependent on several attributes and the common elements discussed are beliefs, object attributes, and importance weights. The Fishbien Model of influencing the attitudes of consumers is applied by Monster Energy Drink and uses the multi-attribute attitude models. The Attitude-towards-behavior Model is the specific model under scrutiny because it captures the attitude of an individual towards acting or behaving in respect to the object. In this case, it is the Monster Energy Drink and it has been able to correspond more closely to the actual behavior of the age cohort under study. Attitude forming among many consumers takes the problem-solving process that entails a consumer forming his beliefs towards the company. Later, feelings are formed, which leads to the purchase of the product or brand, which is a more realistic process that follows standard steps when it comes to decision-making processes (Solomon., Bamossey, Askegaard & Hogg, 2006). This is typical of a purchase with high involvement since the amount of involvement assigned to the attitude of drinking Monster Energy Drink has influenced on George’s stability and consistency when it comes to purchasing of the energy drink. The reason for this is because it is difficult for marketers to change the attitude of George concerning the product. During George’s research, he was able to process a lot of information, the product offers attributes all of which were evaluated and led to a reasoned decision making process concerning the energy drink brand to purchase (Solomon, 2004). Innovativeness Consumer innovativeness is a personality trait that reflects on how well an individual reacts to a new product, service or marketing mix change. The types of innovativeness include: high and low on innovativeness. High are those consumers willing to try out new products, services or brands being offerings. While, low on innovativeness are those who are reluctant and unwilling when it comes to trying of new products, brands or services offerings. The importance of innovativeness to a marketers target segment is the degree of receptivity towards a new service, brand or product and or towards changes made in the marketing mix, communication and distribution (Kardes, Cronley & Cline, 2014). Secondly, helps marketers understand their consumer segments by looking at the most receptive people in trying new products, brands, or services. This is in order to assess the segments targeted, which would be most lucrative for their companies and businesses. Lastly, innovativeness has been able to predict and forecast diffusion rates and the adoption of new products and services for the company. Public Policy – Consumer protection The Australian government plays a role in consumer behavior by stipulating government interventions like regulation, incentives, consumer education, handling complaints and encouragement of self-regulation of the industry. Under the Food Code in Australia, caffeine is expressed as a permitted substance for use in kola-type beverage, as a food additive. However, caffeine addition to foods is regulated under certain Food Code standards. Consumer education is where the government is creating awareness to the public concerning the product in order to enable the government to make wise decisions of buying a particular product or service. Regulation concerns consumer legislation and government where consumer avenues are investigated to seek redress because the agencies are places where consumers can be able to turn to in the future. This will give focus to deregulation, privatization and corporatization. Incentives provided by the Australian government include advertising standards and codes and the green marketing and advertising. These aspects are friendly to the environment since they aim at promoting the health of people through the use of reusable and eco-friendly products. This has been adapted by many companies because they are fighting against global warming. Therefore, they use nutritional labeling of products to give an overview to consumers of what is present in the product studied. Conclusion The report has given a descriptive and critical analysis of the external factors that impact and influence consumer decision-making process. As a result, it is evident that the reference groups, opinion leader, sub-cultures and social class are aspects considered and explained in detailed, in this report. The product analyzed in this report is the Monster Energy Drink, which is a drink used by many Generation Y members because of the development in technology faced around the globe. Innovativeness is also a concept that was able to be discussed by giving the importance ascribed to consumers. Lastly, the Australian government also contributed to the development of consumer behavior through the use of public policy. 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