The Decision-Making Process Consumers Go Through When They Buy Products and Services - Coursework Example

Running Head: CONSUMER DECISION MAKING THEORY 1.0 Decision Making Theory 1.1 Introduction to Consumer Behavior The subject of decision making has been around for over 300 years and has been a subject of interest to many researchers to date. It is a subject that was invented by early economists such as John Neumann, Oskar Morgenstern and Nicholas Bernoulli who began their interest in the subject with observation of the decision making practices that consumers employ. This has been referred to as the Utility theory and it puts forward the ideas that consumers make their decisions on the basis of a predictable result. (Richarme, 2005). However, according to Loudon and Della, this was an economic approach whose main and sole focus is buying or purchase (Loudon & Della, 1993) The Utility model which is one of the most viable is based on the idea that consumers should make their own choices based on their own preconceived ideas of anticipated results of those decisions. In this view consumers are seen as decision makers who are rational and accountable for their own decisions and who are mainly interested in their own personal interests According to Schifmann and Kanuk (Schiffman & Kanul, 2009). Modern research however gives consideration to many aspects that influence the decisions of the consumers as opposed to the Utility theory that only dwells on rationality. Modern research also recognizes a great deal of many procedures that involve consumption whose scope is way beyond purchasing but which in turn also affect the purchasing process and the consumers decision making process. These procedures include the acknowledgment of a need, seeking out for information pertaining to the decision, weighing and comparing of available options, creating a desire to acquire, the actual purchasing, utilization and disposal. This is a more inclusive outlook of the subject of consumer behavior which has grown progressively from several distinguishable levels in the period that spans the last one century due to available new ways of doing research and exemplary advances that have been agree upon in the recent past (Bray, 2008).However it was not until the 1950’s that the concept of consumer behavior began to come alive in response to the birth of current marketing and started to adopt a more complete view of the procedures that influence the practice of decision making (Blackwell, Engel, & Miniard, 2006). For instance although Coca-Cola may promote its “opens happiness,” concept, it also demonstrates its family-size bottles are available and on sale at a neighboring vendor which may influence a consumer at that neighborhood to make a decision. Research shows that, although conceptual imagery of products are most effective at influencing consumers’ broad goals and attitudes toward a brand and tangible product communications are more probable to unswervingly pressure consumer choice behavior. 2.0 Theoretical Approaches There are various forms of approaches that have been approved in the historical study of Consumer Decision making which are grouped into singular typological categories out of which five key types of categories have materialized. According to Foxall, each of these distinct categories hypothesizes interchanging representations of human beings and accentuates the need to look into obviously different variables (Foxall, 1990) these are; Economic man - is basically the concept of the behavior of man to make rational decisions and the ability to make maximum use of utility using the minimum effort possible. The term “Homo economomicus” was invented to describe this kind of behavior and was according to Persky first used in the 19th century and has oftenly been used to describe this characteristic (Persky, 1995). However for man to behave logically when it comes to economic matters, just as the idea that this approach has put forth suggests, there must be an existence or some sort of awareness as to what alternatives or options he has and also be in a position to place them in their correct order as far as ranking is concerned and also be in a position to choose the best option that is available to him. (Schiffman & Kanul, 2009). But the above is not the case when it comes to analyzing human behavior from a realist point of view since in the real world, consumers rarely have access to adequate information, let alone the right information on which to base their decisions. In most cases, human decisions are made on the basis of other not so rational factors such as societal affiliations and accrue to the values that the society places upon such decisions (Simon, 1997) In addition to this, human beings are mostly inclined towards seeking self satisfaction as opposed to choosing what is best for them (Simon, 1997). This has been described as “bounded rationality or rationality that is self seeking. 2.1 Behaviorist Approach is an approach that recognizes and has proved behavior as being subject to outer actions. This approach to a large extend brought into disrepute psychodynamic approach that was wide spread in the 1920’s when Watson published his famous study into behavior. This approach explains the fact that behavior is influenced by external factors and also that all the acts that living beings perform in their natural setting including judgments, manners and dealings can be categorized as behaviors. Therefore the factors that cause certain actions in human beings can be traced to the external environment. Pavlov Ivan was one of the prominent proponents of this approach between 1849 and 1936, John Watson between 1878 and 1958 and Burrhus Skinner between 1904 and 1990. Ivan was keen on traditional habituation while Watson was able to reject methods that were based introspection. Burrhus on the other hand was the one who invented operant conditioning. The three of them were significantly involved in proposing that empirical methods of the physical sciences can be effective in the study of consumer behavior (Eysenk & Keane, 1990). Various branches of research adhere to behaviorism in one way or the other as much as they may differ with it. Behaviorism however doesn’t describe human behavior fully neither does it explain the diverse reaction mechanisms that are related to human inhabitant’s contact with comparable stimuli. 2.2 Cognitive approach on the other hand relates behavior to interpersonal cognitive abilities where the human being is seen as the information processor (Ribeaux & Poppleton, 1983). This approach sort of imbalanced the earlier power of the environment that is accrued to in Behavioral Approach even though it gives some recognition to the role of the environment and social relations since human beings are in constant search and reception of ecological and societal influences as catalysts of the inner decision making for example the phrase “with Dell you save money” is more effective to a consumer more than yoghurt is healthy (Stewart, 1994). This approach borrows largely from cognitive Psychology of the Socrates, Aristotle and Descartes Era. However it should be noted that it was not until the 21st century that Cognitive psychology came to be recognized as a conventional and practical area of study. This is also the time when the cognitive approach was recognized and was even said to have taken over from behaviorism as the exemplary approach in research. This approach has since developed to suggest linear and even circular portrayals of human behavior and has been described by Foxall as consistent of four strengths namely; its recognition of consumers as inclined to attitudes, needs, wants and motives in decision making, its close ties with common sense, Its ability to bring some sort of unity and agreement in a still juvenile field of learning and the diverse employment of social sciences and humanities in the field of consumer research. 2.3 Psychodynamic is a psychological approach in decision making that was put forward by Sigmund and Stewart between 1856 and 1939 and in 1994 respectively and it is an approach that claims that behavior is reliant to natural or biological control in the sense that it is expressed through via intuitive energy which are not in way related with the earlier suggested conscious rational thinking (Arnold, Cooper, & Robertson, 2005) Different sources of biological energy that influence human behavior have been put forth by various writers among them among them the ego, the Id and the superego. The basis of this approach suggests that behavior is influenced by biological elements as opposed to rational thinking or his surroundings. 2.4 Humanistic Approach is the newest approach of these five which has been put forward by academic writers who are dissatisfied with the cognitive approach and have tried to come up with new research in an effort to try and further exploit and access new ideas in Human consumer behavior. These new ideas have can be describe as humanistic as they are aimed at investigating concepts related to the individual purchasers rather than describe general procedures (Stewart J. , 1998) 3.0 The Most Viable Approach The Cognitive approach and its numerous models seems to be the most viable and most well recognized in general writing on consumer behavior and has often been described as the one that best elaborates consumer decision making processes. 4.0 Word of Mouth Word of mouth (WOM) is one of the most commonly used and accepted means in the world of consumer behavior which plays a significant role in determining consumer behaviors and attitudes (Brown & Reingen, 1987). Word of mouth contact has particularly been a topic of great interest amongst consumers when it come to decision before and after purchase and also in the arena of writers such as the one we have discussed above in approaches. Hypothesis that relates to the subject has specifically concentrated on the representation of the role that WOM plays in the field of product launch at assorted phases of their circulation (Mahajan, Muller, & Bass, 1990). WOM can also be considered to be one the mechanisms via which consumers pass on information and persuasion of their opinions about a product to others (Arndt, 1967). Lastly, but not least, WOM has been recognized as one of the most significant channel of passing on complaints about products (Singh, 1990). However, WOM research as a tool of influence to consumers before and during purchase is often marred with disjunctions and very little interest aimed at understanding the main concepts that affect its use. (Duhan, Johnson, Wilcox, & Harrell, 1997). This paper focuses on the influences that WOM has on consumer Behavior and the choice of WOM in literature that is related to the whole subject of Consumer Decision making Processes. Pragmatic research is also presented herein on the subject. 4.1 Definition WOM is the act of passing information orally from one person to another. These two people act as the “Communicator” and the “Receiver”. The communicator in this case is always perceived as the non commercial advertiser of the product or service (Arndt, 1967). It is of importance however to note that WOM doesn’t have to be focused on a product or service. It could be focused on an Industry or business. WOM is also not necessarily about face to face or oral communication in the literal sense. It could be via electronic devices such as phones which are still mouth to mouth but not necessarily face to face (Buttle, 1998). 4.2 Scope and Significance of Significance of WOM There seems to be an accepted idea in consumer decision making literature that WOM plays a significant role in influencing the thoughts and actions of consumers. According to Whyte, investigations into market diffusions of air conditioners in Philadelphia shows that WOM plays a major role and can only be credited to the exchange of information amongst neighbors in the suburbs through established networks, According to Katz and Lazarsfeld in 1955, WOM was very crucial in the purchase of household goods and basic food products and was twice as efficient as a radio promotion tools and four times as a individual article selling and seven times as efficient as tabloid and periodicals (Bray, 2008). Investigations into WOM have revealed the dominance of personal influence in decision making as far as product choice is concerned. Engel for instance found that 60% of consumers cited WOM as the most influential factor in their adoption of motor vehicle analytical centers (Engel, Blackwell, & Miniard, 1993) On a similar note, Arndt demonstrated that respondents who got optimistic WOM about new basic food commodities were three times more in a position to buy as opposed to those that received negative WOM (Arndt, 1967). WOM derives its power from various sources among them being the confidence that consumers have on information coming from fellow consumers as opposed to media campaigns since it’s very easy to assume that a fellow .consumer would have no commercially motivated interests in distribution of information concerning a product, service or even an organization (Engel, Blackwell, & Miniard, 1993). Debate with either acquaintances or relations also tends to be welcoming and mainly offers some sort of “sustainable belief” for trying some behaviors. Subsequently, WOM is multifaceted and gives space to interrelate and this gives some sort of tailor made stream of information to those that seek it (Gilly, Graham, Wolfinbarger, & Yale, 1998). Thirdly, WOM derives some of its strength from its sensational attribute. This gives consumers a chance to experience the drift of a product experience by asking a person who has had the taste of the product. WOM is also significant to the services sector in the sense that the very characteristics of services of being flimsy and owning manufacture and utilization means that are instantaneous, their perishable nature, variedness, and their need to attract consumer partaking gives rise to the fact that it does not give dealers the chance to give the product to the consumer ahead of the procurement act (Helm & Schlei, 1998). Therefore, services possess a high level of occurrence and reliability when it comes to word of mouth as opposed to products and a consumer can only determine them after obtaining and using (Zeithml & Bitner, 1996). Owing to this, service consumers depend largely on WOM and the privilege of sharing information with other consumers for an experience of taking part in the “sustainable belief” experience (Engel, Blackwell, & Miniard, 1993). 4.4 Characteristics of WOM WOM has varying characteristics ranging from its valence, focal point, point in time, entreat and involvement. 4.4.1 Valence-WOM can either be positive or negative when it comes to marketing. on the negative side is the fact that consumers will always pass on messages regardless of their disapproval such as meager presentation, lack of service, high prices or even unruly sales staff. On the other side are positive reports. However, dissatisfied consumers convey negative reports three times the number of times than they convey positive reports to their friends and relatives. According to Mizerski, consumers are likely to convey negative information as opposed to positive information (Mizerski, 1982). Heath however is of the opinion that consumers do not just display a preference for bad news just for the sake of it rather they do it at the spar of the moment depending on the directi0o of the conversation (Heath, 1996). The good news is that administration strategy can manipulate and determine the direction and frequency of valence and post purchase WOM and retailers can control it. 4.4.2 Focus – WOM is diverse and is not limited only to consumers but extends to other people that the organization comes into contact with such as customers, managers, dealers, competitors, stakeholders and the general public. Its generally the interest of consumers in certain elements of a company that often rises from its actions. It’s similar with the S.C.O.P.E (Suppliers, Consumers, owners. Partners and Employees) model of an organization. Positive WOM indicators in management are used to ascertain the numbers of customers that are satisfied with the performance of the organization with and aim of distinguish prospective customers. The management of most organizations view WOM as a way of attracting customers to the loyalty hierarchy which is a good opportunity to convert prospective customers (Buttle, 1998) The following is a chart of the loyalty Hierarchy ladder (Buttle, 1998) 4.4.3Timing – This is the transition in the decision making part of purchase namely the period that passes before and after purchase These two periods are referred to as input (pre purchase WOM) and output ( Output WOM) (Buttle, 1998). 4.4.4 Solicitation – This is the kind of WOM that is not consumer instigated. It is WOM that is not sought but offered. It could be instigated by a thought or an observation (Buttle, 1998). 4.4.5 Intervention – Companies have realized the role of WOM in their activities and are greatly getting involved in management and stimulation of WOM. Some of the companies have come to consider WOM as one of the most effective marketing tool and the one with the lowest cost (Wilson, 1994). 4.4.6 The Nature of Word-of Word-of-Mouth 4.4.6.1Types There are three basic types of WOM as observed by Richins and Root-shaffer in a study on trends of buying cars. These are; Product reports of information regarding a product, recommendations or expression of outlook relating to a product and individual knowledge which is essentially remarks on product qualities or motive for purchasing the product. WOM therefore serves two purposes in purchase; to enlighten and to influence. 4.4.6.2 Process WOM process flow is two-flow which means that information does not flow one way but is intercepted on the way between the marketers and consumers by opinion leaders who then distribute it through WOM to their friends and apply control (Bray, 2008). Opinion leaders are disseminated in all echelons and clusters of the social order and may be influential on just one topic out of many (Buttle, 1998). This is to say that they are specific on one product or service or even organization. There are for instance diverse outlined features for fashion opinion leaders as there are for basic foodstuffs, community affairs, movies, etc. However Rodgers outlines three traits which he identifies as defining an opinion leader: societal standing, societal involvement and the quality of being multinational (Rodgers, 1971). Robertson however is of the opinion that opinion leaders are not any different from followers (Arnold, Cooper, & Robertson, 2005) (Robertson, 1971). Opinion leaders have also been referrer influentials who are active information searchers on products, are pioneering, more outgoing, more communally vigorous, more trendy and autonomous. The following is a chart showing a multi-step flow model (Assael, 1992) WOM communication as demonstrated in this chart is bi-directional as information can flow from opinion leaders to followers and vice versa (Engel, Blackwell, & Miniard, 1993).This multi directional way of disseminating information has four kinds of results: The high scorer on both opinion leadership and information seeking in the chart above means they are socially integrated. On the other hand are the socially dependent who are not as good at influencers but are good followers. The socially isolated are those whose scores are low both on opinion leadership and information seeking (Reynolds & Darden, 1971) New developments in the arena of Consumer Decision making has given birth to a new concept of Market Mvens or people who have information on numerous diverse categories of products, shops, places and other factors related to markets. These people prompt deliberations with other consumers and then act in response by probing for information on their behalves (Feick & Price, 1987). Other than the above mentioned factors, there are other like conditions such as product categories whereby it’s difficult to change opinions of consumers with strong brand convictions or opinions be they negative or positive, and motives for taking part in WOM, for instance interest in the product category. All the above define the character of WOM. 5.0 The Decision Making Process Having discussed the approaches that are involved in the study of consumer behavior and defined them, this part of the paper will discuss the Decision making process as a final step in the analysis of Consumer Decision Making Theory. Below is a simplified diagram of the Consumer Decision making process as put forward by Dibb and colleagues (Dibb, Simkin, Pride, & Ferel, 1997). There are three main sections in the consumer decision making process namely; the consumer’s decision-making process, the personal behavior determinants and ecological variables that control human behavior. 6.0 The Decision Making Process The decision making process is comprised of five stages namely; acknowledgment of problem, probing for information, weighing or assessment of information, purchase and post purchase assessment . However not all purchase comprise of this extensive process of making a decision. There are several deviations as to the degree to which this process could be followed and this also varies in outline and progression from one circumstance to another. Decisions therefore can be categorized as straightforward and easy or intricate and hard and fall into the following categories as well in this context; routine response behavior, limited decision making and extensive decision making (Solomon, 1993). This category usually carries items that are low risk products and they are purchased frequently, e.g. foodstuffs. Therefore the actual need identification process may not occur in the actual sense and there will be little or no searching of information and brand loyalty may be the main factor in informing the decision of the consumer. With time, this may turn to be consistent without any form of revisiting of information acquired at the beginning. Products such as those related to unfamiliar brands might engage the attention of the consumer to seek information and to deliberate while products such as cars and houses which are not bought frequently will require wide-ranging decision making (Schoefer, 1998). 6.1 Problem recognition This is the starting point of a consumer’s decision making process. This is the point where the consumer identifies a need and seeks to fulfill that need. Immediately the need is identified, the rest of the process is brought into play as the consumer seeks to examine the best ways of bringing the achievement of the goal into realization (Wilkie, 1994). It should however be noted that this process does not come automatically and will depend on two factors; the importance attached to the need and the belief of the consumer that the fulfillment of their need lies within their income. If it so happens that the income of the consumer is below the supplies needed to acquire the item, then there is little chance of any action taking place in that direction (Engel, Blackwell, & Miniard, 1993). Some of the factors that can prompt the process of need recognition are; the personal needs of the consumer such as hunger, thirst, etc, which might rise ti certain levels and turn into a drive. The other factor that can activate need recognition is a peripheral motivation such as a commercial. Also factors such as change in the desires of a consumer can prompt a need. For instance the birth of a baby will automatically trigger the need for baby products. 6.2 Information Search This is the stage that follows the recognition of a need which involves searching for possible ways of meeting the need. It is the second stage in the decision making process and it can be said to be the aggravated stage of the process whereby information that has already created and stored is set in motion (Engel, Blackwell, & Miniard, 1993). It can be internal or external in the sense that consumers c n either search their memory for information about the product such as that obtained from a previous experience with the same or similar product or external, which means that the consumer will seek for information elsewhere other than from his/her memory and this could be from friends, relatives, etc. 6.3 Evaluation of Alternatives This is the third stage where the consumer gets into the activity of searching and analyzing information with an aim of coming to a decision. Four missions are involved here namely; choosing the mode of evaluating data and evaluating it for options that are available, making a decision on which option best suits him/her, assessment of the choices and selection and making a decision (Engel, Blackwell, & Miniard, 1993) 6.4 Purchase The result of stage three is a decision to buy or not to buy. This stage which is the forth therefore relies on stage three and involves the actual action of purchasing the product. The product that the consumer purchases is the one that he/she deems adequate depending on the assessment principles. All factors held constant, once the consumer makes the decision to purchase, then there is no turning back though a consumer may further base their purchase decision on; brand, seller, quantity, timing and payment methods. 6.5 Post-Purchase Evaluation The final stage in the decision making process is the post-purchase which is the stage where the consumer evaluates the performance of the product in the process of using or consuming it. Contentment or discontent of the consumer depends on the expectations that the consumer had. If the performance exceeds the consumer’s expectations then its contentment but if it falls below them then its discontent which is normally psychological and can be controlled. 7.0 Conclusion This paper has outline approaches, the role of WOM as well as the decision making process. But this information is subject to change as research methodologies evolve and new ways of doing things emerge in the current world. 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