The External Factors Influencing the Decisions of a Consumer - Essay Example

Introduction Consumers are the central pillar in any business organization. Demand from customer results in demand and as the laws of demand and supply apply. Therefore, where demand is high, naturally, suppliers find to satisfy the need of the customers. In the modern world, everyone is going 'digital'. It is therefore odd to find any person event peasants in the most rural areas who are not able to communicate with people from far off distances. The most important factor that drives human interactions is communication. The mobile phone is one gadget that appears to be a must have in the modern world. Mobile phones not only help people to keep in touch but also play a myriad of other functions thus making life much easier for people. There are many reasons that consumers make a decision as to the kind of products that they would like to purchase a certain or the other (Blythe, 2008). The reasons that influence decisions made by a customer can be broadly classified into two. These are internal and external influences on the decision making by a consumer. Consumer decision making refers to the process through which consumers identify the needs that they have. The consumers then gather the relevant information. After getting a number of alternatives the final step is to make the purchase of the item. Consumer decision making can also be said to be the actions that a person takes before buying and making of a given product or even a service. It includes the processes, both social and mental that come before and after the actions taken by the consumer. This essay is concerned by factors which are external to consumers and which influence them on the type of phone to buy. Relevant theories and concepts The question as to what influences consumers make decisions has baffled marketer for a long time. Marketers try to play around with different principles of marketing. This also applies to the consumers of products and services. There are therefore many decision making models, strategies and theories which form the basis of the decision process which consumers place reliance on before making purchase and this enables executives who are in the business of marketing to find the best combination so as to impress the consumers and ensure that they purchase their products or services. In purchasing of phones therefore, a number of theories are relevant. Utility Theory Economist agonized over the question over what influences a consumer to make a particular decision. The first rational explanation as to what influence consumer decision making was given by Nicholas Bernoulli. The reasoning by Bernouli was extended by Morgenstern and Neumann and it was given the name Utility Theory. This theory was to the effect that decisions by consumer are based on what the outcome of such a decision is going to be. In this regard, consumers should be seen as acting rationally (Blythe, 2008). Consumers are therefore able to determine with near certainty what the outcomes of their decisions are going to be. In such a case, consumers make the decision that ensures that the decision arrived at maximizes the well being of the consumer. It is also factual that consumers are never completely rational. Consumers at times not able to realize all the elements that enables them to arrive at a given decision. The model, though quite popular, has its own shortcomings. Satisfying Another theory which is applicable is the known Satisfying. This was a theory proposed by Herbert Simon who was a Nobel Laureate. The theory was stated to be an alternative to the previous one and it was also simpler. The gist of the theory is that consumers stop the process of making a decision whenever they get close to where they intended to go to. An example that illustrates this would be a person who is looking for an apartment to let. Based on Utility Theory, a consumer would evaluate the apartments that are available and select the one that best meets his or her needs to the greatest degree. However, following Satisfying model, a consumer would base their decision on the apartment to occupy because it is within the reasonable distance from where they carry out their business or other work. Despite the fact that the theory marked an improvement from utility theory, it still had a number of challenges. The area that required improvement was with respect to prediction. It would be difficult to make use of a decision making paradigm where it is difficult to make prediction as to what consumers would like. Prospect Theory After this theory, there were reports that were presented so that it would be possible to develop a clearer understanding of how consumers make decisions. This third theory was to go beyond the optimization found in Utility Theory and improving on satisfying theory. This led to Amos Tversky and Daniel Kahneman who were the leading psychologist to come with a new theory. This was known as the Prospect Theory (Hoyer & MacInnis,2008). This theory improved on the two previous theories and made use of the strong points of each of the theories. The theory was also able to solve the problems presented by the two previous theories. There were two major elements that were added. One of the concepts was value. This was brought in to take the place of utility which was proposed in utility theory. The second element was endowment. Endowment means that an item is to be considered as being more precious where a person held it to the exclusion of another person. The external factors influencing the decisions of a consumer There are many decisions which are external to the consumer and which contribute to such a consumer making a decision to purchase a product, in this case, a phone. A mobile phone is a device capable of making and receiving telephone calls through a radio link while someone is moving over a large area. This is achieved by connecting to a network which is provided by a mobile service provider. Mobile phones have evolved to provide more than just telephony. Modern phones have a variety of features and services. The modern devices are capable of accessing internet and hence sending emails, photography and wireless communications over short distances though Bluetooth technology are also readily available. The cell phones which offer this wide array of features are known as smart phones. Mobile phones are used for many functions such as conduct of business, staying connected to family members and also taking advantage of the computing capabilities that modern cell phones are offering. Reference Groups Reference groups play an important role on what type of a phone that a consumer chooses to purchase. A reference group refers to a group with which a person identifies with. This leads to a situation whereby such group determines the standard of behaviour to be adopted by members of the group. Individual consumers make use of reference groups so as to compare the thoughts that they have on a certain type or model of a phone with those that the others hold. An individual may have purchased a type of phone and which he thinks that is quite good. Before internalizing the perception that the phone is good, there is a consultation process whereby members of the reference group give their view points on the proposition. An individual therefore makes comparison of his or her perceptions with those of the friends in the reference groups. Perceptions of a reference group have a great influence on an individual making a first time purchase of a given phone (Hoyer & MacInnis, 2008). The same perceptions also come in handy in members of a reference group deciding whether to purchase the same type of phone when the needs arise again. An example would be phones produced by apple which are known as iphones. Some people have come to trust them so much that they are always anticipating the release of a newer model. Reference groups make a person to perceive himself of herself as having achieved a certain status. For a person to fit into a group, the actions of such a person almost always have to be like those of the members of the group that they would like to fit into. A reference group also comes up with values and norms that dictate how individuals carry themselves out. A certain reference group would only be using a certain model of phones and using a different model would make one appear to be out of place. Opinion leaders are very important in determining the direction that a reference group takes. Culture Culture refers to behavioural patterns and patterns of social relations which are characteristic of a given society and this makes such a society to be different from other societies. Culture communicates the kind of values, attitudes and ideals that help individuals in evaluating situations and communicating with each other. When drawing conclusions on culture, it is important that one draws generalizations which are legitimate concerning a given group and one ought not to turn into making stereotypes. The culture of a person provides a point of reference as to what behaviour can be considered to be acceptable. Therefore culture is a set of values that are arbitrary and learned. A culture that lays emphasis on use of resources, success and materialism is likely to influence the taste of phones. People in a society that is highly materialistic would have negative view to people purchasing and using cheap phones. This would mean that a market for the most expensive phones which encompass the latest and cutting edge technology are purchased in high numbers. Socio economic level Socioeconomic level is a very important factor which determines the kind of phones that individuals purchase. The phones on offer in the market come in a wide range. There are phones meant for high end, middle income and also for those people who have the lowest levels of income. In as much as people would get attracted to certain of phones, the financial constraints come into play and denies such people the opportunity to own a phone of their dream. This means that such a person is driven into buying a phone of a certain model or costing so much because of their low purchasing power (Wright, 2006). The different levels in income levels between individuals explain why marketers seek to satisfy the different segments that are represented by the factors of economy. Emerging and third world countries provide an ideal market for the cheapest phones. This translates to such countries enjoying the poorest qualities in terms of phone technologies. Countries that are developed generally provide the higher end market. This results in the quality of phones being provided in such countries being of very high quality. Therefore, marketers determine their niche depending on the amount of disposable income in the pockets of those that they are targeting in their marketing. Promotions by companies As the days go by, almost every person owns a mobile phone. These phones are getting advanced by the day. Many consumers are tempted to purchase expensive phones though they are not able to pay for such phones upfront. Service providers have come in fill the gap. This is done by offering handset at terms which are very attractive. Some companies such as AT&T get into contract with consumers (Wright, 2006). This enables such consumers to access phones at low prices. Upon signing a contract with a certain service provider, the consumer binds himself or herself to continue using the services of such a service provider at the expensive of getting a phone at a low cost. The disadvantage with such an arrangement is that it ties one to the particular service and it is extremely difficult to get service from other competitors who may be offering better and cheaper alternatives. Such promotions help people who are not able to pay upfront to also use a phone and pay for their phones in installments. Where one's status is gauged by the type of car driven, the model of phone used and generally the kind of spending attributable to a person, flexible repayment options are a boon. Advertising has always played a very important role in determining whether people purchase a given product. Having the best strategies to advertise gives an upper hand to businesses. Just like any other products, mobile phones' sales are driven by to a large extent by the kind of advertising that is put in place. Advertisers try to make as catchy advertisement as possible and this drives up their sales. Some companies even go to the extent of hiring professional marketing firms which design the marketing strategy and the company that comes up with the best strategy is surely going to make it big in the phone market. Some phone companies engage in various other promotional activities which serve as avenues for advertising. Many mobile phone companies sponsor certain soccer teams and also other sports. Sports teams enjoy cult like following all around the world. Where a phone company sponsors a club then funs would naturally be drawn to purchase the product from such a company. Fans also tend to purchase products which are endorsed by certain sports personalities who are perceived to have achieved a lot in their respective sports. Mobile phone companies therefore make use of every avenue from sports to social media to shore up their levels of exposure and also sales. Advertizing refers to a form of communication employed in marketing. Advertising is used to persuade and encourage or even manipulate the audience to do a certain thing. The most common use of advertising is to have consumer purchase a given service or product. Mobile phone companies would seek to ensure that there is a huge consumption of their products. Branding is one of the ways to attract consumers. Branding entails associating some product with qualities that are of interest to consumers (Solomon, 2009). Advertising has been influenced by the marketing mix. This was concept that originated a professor known as Jerome McCarthy. The marketing mix has four elements that are considered to be basic. These are known as the four P's. The P refers to the product that is being sold and in this case, a phone. The Second P represents the price. A company must determine how much a product is worth and add some margin before determining the sale price. The third P refers to the Place. Place refers to factors that determine how the product that has been produced will get to the market. A phone company will therefore work out on modalities of channels of distribution, how the distribution is to be organized and how big a market is to be covered. The final refers to Promotion. Promotion refers to the process whereby the marketers reach the targeted market and convince potential buyers to buy the particular products. There are different media that can be used to advertise mobile phones. Wall paintings are often used for advertising and so are flyers, street furniture and billboards. Adverts are also placed on television, radio and cinema. Magazines and newspapers are also other popular media for advertising mobile phones. Commercial placed on television are considered by many people to be the advertising format which has the greatest effect in terms of reaching and influencing customer behaviour (Schiffman, 2008). The high premiums charged for adverts placed on television is testimony to the value placed on that medium. Commercials on television could have a song that listeners get to relate with the product after a short while. Infomercial refers to television commercials which are in long format. Such commercials take about five minutes or even longer. The object of such an advert is ensure that consumer purchase products that they had not planned to purchase in the first instance. Such commercial provides toll free numbers or websites which enable consumers to place their orders. Infomercials rely on testimonials from consumers who have used the products previously and they serve the purpose of demonstrating how a given product is used and explain the types of features that a product has. This is especially important in selling of phones. Government policies and legislation. Government policies would affect whether mobile phones are available in a given market or not. A government statement dictates the political activities that a government intends to engage in. A policy statement refers to a well defined cause of action when the government takes power and how it plans to carry out its agenda through legislation. In many countries, the head of government announces the policy before the Parliament. A policy statement is never binding legally but it serves to bring some commitment for the government and the parliament. The government's policy determines the direction that a government wishes to take. A government would have a policy whereby it seeks to ensure that there is increased consumption of products that are home made (Schiffman, 2008). The government would therefore try to limit the availability of goods which are competitors so as to ensure that the interests of the country are protected at all costs. Such protection could be aimed at promoting innovation since there is a market for products of intellectual property and also create employment. One of the ways that a government would actualize its policy is through legislation. Legislation is usually made by the legislative arm of the government. When a draft law, usually in the form of a bill, is assented to, it gains the force of law. Governments legislate on a wide range of issues. Trade and technology is one of the areas where legislation is very important. The availability and cost of mobile phones would be determined by such legislation. A government would find it more difficult to completely ban certain products. Faced with such a scenario, the government would resort to legislating so as to ensure that the cost of imported products is prohibitive and hence ensure that local products are purchased and the ones that are foreign get little attention to the huge different in cost for products with the same features and functionalities. Reputation of a company The reputation of a company determines the uptake by consumers of its products and services. This is no different with mobile telephony. The mobile phone industry has been to a large extent been dominated by a few players who have dominated the market at different times. The quality of products as perceived by consumers determines the levels of sales. This also determines the decision of many new purchasers of phones. It is much easier for a consumer to purchase a phone from a reputable company than one which is not really known or has a reputation for having substandard products (Schiffman, 2008). Responding to and surpassing the needs of clients is one factor that determines the level of acceptance of a given brand by consumers. Mobile phone Company that unleash many surprises and quite often draw a large following and new customers are more likely to purchase cell phones from such companies since there is already a good name for the company. Samsung has dominated the headlines with its array of latest releases in terms of mobile phones and other devices which have made the customer experience to be excellent. Therefore such a company indirectly influences the decision by potential consumers to purchase its products since it is already a big name and people have come to trust its products. Apple is another company that has a cult like following. The company has a reputation for being creative and innovative and going against the established and generally accepted standards. Therefore, when a company becomes so well known that its name is synonymous with quality and excellence then, this influences to a large extent the decision of a consumer to purchase a phone made by that company. One of the ways that companies make a big name for themselves is having some larger than life individuals being behind their success. Apple had for a long time prided itself as being led by a maverick, Steve Jobs. Customer Service Consumers are very particular about the quality of service offered to customers. Therefore, the quality of service offered by a manufacturer is maintained. This also applies to the length of the warranty and the terms and conditions that have been set. By having customer care representatives that are helpful and friendly to customers, word spread from one person to another and this usually has a very large impact on the decisions made by other consumers whether to purchase a particular brand of a phone or not (Solomon, 2006). Therefore, it is important for a mobile phone company to address all the issues raised by its customers and do so in a timely fashion. Though this would not be considered as advertising in the strict sense, it serves as one of the best ways to create consumer confidence and attract and retain customers. Many consumers like purchasing products which they take back to the sellers or repairers who are suitably qualified. Offering advice as to how to take care of the mobile phones and take advantage of the different features is very important in gain consumer confidence for a company. It is therefore vital that a company should establish a customer care presence in areas where they have a sizable market and this would aid in knowing what emerging concerns are from the consumers. Availability Availability is an important factor in determining the type and model of a phone that a consumer can access and use. The choices of a consumer are limited to what is available in the market. It would be difficult for clients to even know of the existence of cell phones which are not in their areas. Therefore, the array of phones that is at the disposal of consumers forces such consumers to choose only from the available types of phones and thus limiting their choices. Compatibility of the devices with others also determines the level of uptake by consumers. A wide range of phone would use certain parts that are interchangeable. It becomes much easier to buy a phone where one knows that they can use accessory from a different model and also the fact that spares for such phones are largely available. In extreme cases, mobile phones are not available at all and consumers have to contend with the hard situations that their forefathers coped with. However, such cases are greatly reduced and they are only found in developing and least developed nations. Lack of mobile service and handset would therefore determine if people from a certain geographical region would be in a position to purchase and use such equipment. Organization culture The culture of an organization is a great determinant as to what type of phones the members have. The organization such as a mobile service provider would make it a policy that the employees are to use only certain types of phones. This would translate to the fact that sales for such a type of phone would go high. There are instances where mobile service providers double up as phone manufacturers (Solomon, 2006). The other scenario is where service providers are in close collaboration or are subsidiaries of phone manufacturers. An employee of an organization with such a policy would find his or her hands tied with respect to the type of a phone that they can own. There are instances whereby, the members of an organization just develop some kind of culture and adopt a certain standard with respect to phones. This would definitely determine the level of uptake of a particular type of phone. Any new entrant into the organization would have to conform to the practice and hence acquire a given model where they do not already own one. Such organizational behaviour usually develops where the organization wants to distinguish and set itself apart for being the best in terms of service and the conduct of its members. Conclusion Consumer decision making process has been a matter of debate for a very long time. Marketers have been especially interested in the topic as capturing the attention of consumers is what keeps businesses alive and helps them to thrive. There have been a number of theories that have been developed to described and understand the behaviour of consumers. The essay has focused on consumers of the mobile phone. The mobile phone has become a 'must have' device. There are many models in production today and the competition for the market is stiff. The essay has critically examined the factors that influence consumers of mobile phones to purchase them. The factors considered were those that were external to the consumer. It is evident that it is not every time that a consumer makes up his or her decision to purchase a particular product. There are many forces and factors at play and which determine whether and which mobile phone a consumer purchases. The company that one keeps, the policies by the government, and availability are some of the factors that are not in the control of consumers. However, consumers are greatly influenced by such factors whenever and wherever they decide to purchase a mobile phone. The factors that have been considered have their advantages and disadvantages. It is evident that some people would be driven to spend money they do not have so as to impress their peer. However, one fact that remains is that mobile phones still remains one of the greatest developments in human history. Ignorance Some consumers just follow what their colleagues are doing blindly. Some consumers are ignorant of why they need to purchase a particular type of phone and not the other. Consumers might not understand their unique needs and hence determine the right type of a mobile phone which would be the most ideal for them. It is therefore quite important that such consumers would have a little more understanding as to why they are purchasing a particular product and not the other. Purchasing based on advertisement or just to own a phone also leads to bad choices of a mobile phone. Illiteracy could be also be a contributing factor to people purchasing phones that they probably do not need since they are too advanced for their needs. Buying a phone in such circumstances means that some money is wasted and which would have been put into better use somewhere else. 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