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Factors affecting buying behaviour

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Factors affecting buying behaviour

  1. 1. A Take- Home Assignment for EC 50011 Market Planning in a Global Environment In considering the development of international consumer markets it is important to take into account factors influencing buying behaviour Submitted To Dr. Sushil Mohan University of Dundee Submitted On March 2012 By Luu Thi Huong Giang 120000829 Swapnil Mali 120004897 Katharina Weber 120006194
  2. 2. Contents List of figures 1. ... 2. Consumer market and consumer behaviour.....................................................................1 3. Factors influencing decision making.................................................................................2 3.1 Cultural influences....................................................................................................3 3.2 Social influences.........................................................................................................3 3.2.1 Reference groups............................................................................................3 3.2.2 Family influences............................................................................................4 3.2.3 Social class......................................................................................................4 3.3 Personal influences....................................................................................................4 3.4 Pschycological influences..........................................................................................6 3.5 Buyer...........................................................................................................................7 4. Conclusions...........................................................................................................................8 References...............................................................................................................................9 Appendix.................................................................................................................................11
  3. 3. List of figures Fig. Number Name of figure Page No. 1 1 2 The consumer buying process 2 3.1 Internal and external factors in decision making 5 3.2 6 3.3 8
  4. 4. EC 50011 Market Planning in a Global Environment 2012 1. Introduction When travelling through different countries, one can recognize that one and the same product known from home sometimes appear to have different a brand name in another country. For example, someone who is craving for ice cream during a hot summer day could experience relief from the famous ice cream brand n the UK, India, or Vietnam. The same ice cream would be found in Germany as Langnese, as Frigo in Spain, and as Eskimo in Romania. In order to understand why companies make use of different brand names we have to realize that the core of marketing aims at satisfying the needs of customers. These needs and wants of costumers are influenced by many factors which influence the consumer buying behaviour. In the following we will take a deeper look at these factors and explain why they need to be taken into account when developing international consumer markets. Fig. 1: 2. Consumer Market and Consumer Behaviour Consumer markets are the markets of products and services which are purchased by individuals or households for their own consumption (Tutor To U, n.d.). The mental and social processes to make purchase decisions are called consumer behaviour. For marketers, it is essential to understand the needs of customers as it helps a company to develop the marketing strategy which is advantageous over competitors who have not identified these needs (Lancaster & Massingham, 1993). When a firm wants to expand to new countries it is necessary that it recognises the different factors that can influence whether a customer is interested in a product. 1 Influences on buying behaviour in international consumer markets
  5. 5. EC 50011 Market Planning in a Global Environment 2012 The consumer buying process is divided into five steps: Need Recognition, Information Search, Evaluation of Alternatives, Purchase, and Post-Purchase Behaviour. Need Recognition is the perceiving of the unfulfilled desire. So marketing helps customers to recognize the imbalance between present status and preferred state. Then customers start information search, by recalling their memory or using external sources such as internet, TV, newspapers, friends, etc. After having acquired some alternatives, customers compare the value and the attributes of products so that finally they come to the decision to purchase the most attractive option they have. At this step, marketing determines which attributes are the most important in influencing a consumer's choice. The final step is post-purchase, at which the consumers compare the experience of using the product to their expectations of the product's performance, or they do further purchases. It is common that the consumers can experience concern or anxiety about their purchasing decisions. Consumers might experience the uncomfortable psychological state of purchase would have been preferable (Festinger, 1957). To avoid that consumers will switch to a different brand as a result, aftersales services (ads, follow-up calls, guarantee, etc.) should be used by marketers to convince the customers that they have made the right decision. Information Evaluate Purchase Problem or need Purchase Option Search Decision Fig. 2: The consumer buying process 3. Factors in decision making Decision making is a process dependent on many factors which vary from person to person and also from region to region. Consumers are living in a society which follows its own culture and values. Personal preferences again change with age, lifestyle, income, and psychological factors. 2 Influences on buying behaviour in international consumer markets
  6. 6. EC 50011 Market Planning in a Global Environment 2012 3.1 Culture influences According to Kotler behaviour. Brewster, Sparrow, and Vernon (2007) define distinct way of life with common values, attitudes and behaviours that are transmitted over time in a gradual, yet dyna and already has a large impact on children as they grow up. People growing up in an individualistic culture may hold different aspirations, values, and needs than people who live in a collectivistic culture. Whereas individualistic cultures focus on achieving personal goals, collectivistic cultures centre on family and group well-being (Hofstede, n.d.). However, cultural values can change over time and have to be watched by marketers. One example is the change of the role of women in most Western societies. Simply ignoring cultural factors can be costly for firms. As for example Starbucks had to palace because it clashed with the Chinese cultural value of protecting this nation symbol (Reuters, 2007). 3.2 Social influences Consumer buying behaviours are clearly affected by social influences such as reference groups, family members, and social class. 3.2.1 Reference groups values, opinions, attitudes, and behaviour patterns (American Marketing Association Dictionary, 1995). They can be divided into different forms: Aspiration reference group: It is a group of people against whom one tends to compare oneself (Perner, n.d.). Many international firms have chosen celebrities as their spokespersons or performers in advertisements1. 1 Recent researches have shown that there was a 20% increase on the sales of some brands upon starting an endorsement deal and the stock of some companies has increased by 0.25% on the day the deal was announced (Crutchfield, 2010). 3 Influences on buying behaviour in international consumer markets
  7. 7. EC 50011 Market Planning in a Global Environment 2012 Associative reference group: The group to which one actually belongs (a group of friends, co-workers, a club, etc. s linked to appropria (Wayne & Deborah, 2009) Dissociative reference group: The group to which one maintains a distance due to differences in values or behaviours. The store brand name Gap because many younger people wanted to dissociate from parents and other older people (Perner, n.d.) 3.2.2 Family influences behaviour resulting from consumer socialization, family life cycle and family decision making. Consumer socialization: Family plays an essential part in the processes through which family members acquire the skills, knowledge and attitudes necessary to their functioning as a customer in the marketplace (Consumer behaviour, n.d.) Family life cycle: Every individual has to go through a family life cycle. Each stage determines different purchasing behaviours. Newly married couples show more interest in travelling services while the full-nest households tend to be greater interested in quality and timesaving products. (Family life cycle, 2010). Family decision making: There are two types: spouse-dominant (decisions are made by either wife of husband), or joint decision making (both wife and husband are responsible for making decisions). Recently the role of children as decision-makers has changed significantly. Many firms have tried to capture the market of which target customers are children. It is well known that Disney has been particularly good at interactive promotional marketing (Buyer behaviour, n.d.) 3.2.3 Social class Social classes are determined by occupation, income, education, wealth, and other variables. People within a given social class tend to possess the identical buying behaviours, which make it easier for marketers to place target in specific social class. For example the consumers in lower classes tend to be more brand loyalty than wealthier consumers (Rofianto, n.d.). 3.3 Personal influences Every person is different and so is buying behaviour. This is because of different factors such 4 Influences on buying behaviour in international consumer markets
  8. 8. EC 50011 Market Planning in a Global Environment 2012 as age and sex of consumers, occupation and economic circumstances which again influence the lifestyle of consumers. These factors can be divided as internal and external factors. Personality is not just about what a person is, but also about what a person wants to be. Internal Memory Way of thinking External Media, Mouth publicity, Feedback Fig. 3.1: Internal and external factors in decision making . A simple example is that men purchase different things than women. Studies proved that women tend to spend more than men (Pant, 2011). Therefore, special care should be taken when marketing women products which allow companies to generate extra profit. Younger generations prefer spending over saving (Mathur & Moschis, 2007) and tend to spend more on technological products than on other things. As per life cycle, preferences do change too. E.g. undergraduates go for casual wears over formal wears. This shows the importance of demographic studies of the market in order to do better marketing. The economic life cycle is another aspect to be considered. It was observed that many people shifted to lower priced packaged food during recession. They found that the food was really better than they expected. This made them to stick with the same product even after recovery (Consumers and economic trends, 2011). External factors depict the personality a consumer would like to achieve. E.g. consumers think that cars may reflect personality. Even if a person is happy with a small car, he may opt for a bigger one. In day to day life some decisions are taken as per the situations which are called situational effects, the circumstances surrounding our purchases that may strongly 5 Influences on buying behaviour in international consumer markets
  9. 9. EC 50011 Market Planning in a Global Environment 2012 impact our decision-making process (Higgins, n. d.). When a man goes out on a date with his partner, he will prefer to spend more and tries to make his day more luxurious than a routine one. So in order to earn more profit, studies of these internal and external factors are necessary. 3.4 Psychological influences The four key psychological factors which influence consumer behaviour are motivation, perception, learning, and memory (Kotler & Keller, 2006). Motivation is the process that initiates, directs and sustains goal-oriented behaviours. A motive can be defined as a drive to satisfy a need (MMC Learning, 2009). Maslow's Hierarchy of Needs simplified suggests that we need to satisfy a lower level need before we are motivated to satisfy a higher level need. Marketers try to understand the specific needs of their consumers so the consumers will prefer their products over those of competitors. Self- actualization needs Esteem Needs Social Needs Safety Needs Physiological Needs Figure 3.2 Perception is the way in which people, select, organize and interpret stimuli in order to acquire a meaningful picture (Lancaster & Massingham, 1993). What information we perceive out of the large pool of information depends among others on our current beliefs and Customers even distort information when they are not coherent with prior beliefs about products and brands in order to reduce cognitive dissonance (Festinger, 1957). Support for this effect comes from a study (Russo, Medvec, and Meloy, 1996) which found that already the weakest form of a brand preference, i.e. a developing preference in the absence of an 6 Influences on buying behaviour in international consumer markets
  10. 10. EC 50011 Market Planning in a Global Environment 2012 existing preference, can result in a confirmation bias towards that brand. If for example a foreign chocolate fabricant wants to enter the UK market, it has established competitor which consumers might still prefer despite the better quality of the foreign brand. Learning occurs whenever people act. It is the change in behaviour resulting from experience (Kotler & Ketler, 2006). and is satisfied with it might again choose the same brand when in need of another electronic device. -term- memory. The challenge for marketers is to create good experiences to establish their brand in Even though it is costly and time intensive to study how psychological factors are influencing the buyer behaviour, they are unavoidable for marketing success when developing international consumer markets. 3.5 Buyer Whereas some day to day buying decisions are done within seconds, other decisions like buying a car take a lot of time. These behaviours can be classified as high and low risk decisions (see Appendix, Table1: Purchasing situation and buyers decisions). All the above mentioned factors affect buying behaviour. From the marketing point of view, firms must consider all these aspects and try to market their product accordingly. On the basis of research conclusions, marketing strategy is formed by the firm. But at the end of the day it is the consumer who is going to react in his unique way to these factors and decides what to buy and what not. 7 Influences on buying behaviour in international consumer markets
  11. 11. EC 50011 Market Planning in a Global Environment 2012 Perception Marketing Research Inforamtion Culture Strategy Choices Beliefs Preferences Consumer Society Communication Personality Fig.3.3: Influencing factors in buyers/ consumers decisions 4. Conclusions Each person has his / her own behaviour towards the purchasing process; however they are influenced by certain factors. Those influences can be environmental influences (cultural, social influences) or individual influences (personal, psychological influences). The cultural values are shared between people in a society and affect them gradually over time. Besides, the society has one belongs. Each individual also has their own effects varying from age and sex or the process of perceiving, learning, motivating and memorizing. Those factors affect the consumer buying decision so they should be considered. The buyers themselves are the decision makers and the most important factors in the consumer market. When a firm wants to enter a foreign market, the local customer behaviour is probably different from the customer behaviour they are dealing with in the home country. As a result, it is important for the marketing manager to take into account all those factors, helping them to develop the marketing campaign in the international market and to improve the product to fully satisfy customers which ultimately leads an increase in sales. 8 Influences on buying behaviour in international consumer markets
  12. 12. EC 50011 Market Planning in a Global Environment 2012 References American Marketing Association Dictionary, 1995, viewed 18 March 2012,<http://www. marketingpower.com/layouts/Dictionary.aspx?dLetter=R> Brewster C., Sparrow P., & Vernon G. (2007), International Human Resource Management (2nd ed.). In, The impact of national cultures (pp.13-38). Buyer behaviour - case study: influence of children on buyer behaviour, viewed 18 March 2012, <http://tutor2u.net/business/marketing/casestudy_%20buyers_children.asp> Consumer behavior, viewed 18 March 2012, <http://www-rohan.sdsu.edu/~renglish/370/ notes/chapt05/>. Consumers and economic trends, January 2011, Consumer spending habits and thrift in an uncertain global economy, Viewed 19 March 2012, <http://blog.euromonitor.com/2011/01 /qa-the-thrift-lifestyle.html> Crutchfield, D., 2010, Celebrity Endorsements Still Push Product, media release, 22 Setemper, viewed 18 March 2012, <http://adage.com/article/cmo-strategy/marketing- celebrity-endorsements-push-product/146023/> Family life cycle, 2010, media release, 29 January, viewed 18 March 2012, <http://american- business.org/347-family-life-cycle.html> Festinger L., 1957, A theory of Cognitive Dissonance Theory, Evanston, IL: Row and Peterson Higgins, n.d., Principles of marketing: An applied, collaborative learning approach, viewed 19 March 2012, <http://www.principlesofmarketing.com/Full.htm> Hofstede G.(n.d.), National culture dimensions. Countries, viewed 19 March 2012 <http://geert-hofstede.com/national-culture.html> Kotler P. & Keller K.L., 2006, Marketing Management 12e, Chapter 6, Pearson Prentice Hall. 9 Influences on buying behaviour in international consumer markets
  13. 13. EC 50011 Market Planning in a Global Environment 2012 Lancaster G & Massingham L., (1993), Essentials of Marketing, Second Edition, McGraw- Hill Book Company Mathur A.,Moschis G., 2007, Baby boomers and their parents, Page 110, viewed 19 March 2012 MMC Learning, 2009, Multi Media Marketing, Buyer Behaviour, Viewed 19 March 2012, <http://www.multimediamarketing.com/mkc/buyerbehaviour/> Pant P., July 2011, Women Trail in Budgeting and Saving, viewed 19 March 2012, < http://budgeting.about.com/b/2011/07/19/women-trail-in-budgeting-and-saving.htm> Perner L., n.d., Consumer behavior: The psychology of marketing, viewed 18 March 2012, <http://www.consumerpsychologist.com/> Reuters, 2007, Starbucks finds imperial palace a forbidding market, Viewed 19 March 2012, <http://www.reuters.com/article/2007/07/14/us-china-starbucks-idUSPEK13229420070714> Rofianto W., n.d., Social class, culture and consumer behavior, viewed 19 March 2012, <http://rofianto.files.wordpress.com/2010/05/cb_week_09_social-class-culture-and- consumer-behavior.pdf> Sproul s.,1991,A buyer behaviour framework for the development and design of software agents in e-commerce, viewed 19 March 2012, <http://www.emeraldinsight.com/journals.htm?articleid=863689&show=html>. Tutor To U, n.d., Types of Markets, viewed 19 March 2012, <http://tutor2u.net/business/marketing/market_types.asp> Wayne D., Deborah J., 2009, Consumer Behavior, viewed 18 March 2012. 10 Influences on buying behaviour in international consumer markets
  14. 14. EC 50011 Market Planning in a Global Environment 2012 Appendix Table 1: Purchasing situation and buyers decisions New Purchase Frequent purchase High Risk Unstructured process, trying Structured process, risk out new things, extensive reduction by opting familiar information needed brands Low risk Unstructured process, Very structured process with minimum information long decision time, all needed, generally go with feedbacks taken into account others or market trends 11 Influences on buying behaviour in international consumer markets

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