Understanding and Applying Consumer Behaviour Theories is Essential if Companies are to Succeed in the Marketplace

UNDERSTANDING AND APPLYING CONSUMER BEHAVIOUR THEORIES IS ESSENTIAL IF COMPANIES ARE TO SUCCEED IN THE MARKETPLACE.

DISCUSS THIS STATEMENT, USING EXAMPLES OF CONSUMER BEHAVIOUR THEORIES COVERED IN THIS MODULE TO SUPPORT YOUR ARGUMENTS.

Consumer behaviour is concerned with the all the factors that determine the consumption activities and purchasing decisions of a consumer (De Mooij, 2003. Some of the activities that consumers perform when engaging with a producer include: identification of a need, searching for information, identifying and analysing alternatives, developing interest or intention to purchase, purchasing, consuming and disposing. According to utility theory, a consumer is a rational economic agent who makes decisions regarding his or her consumption activities based on needs and the availability of resources or income (Mihaela, 2015). He or she maximizes utility by choosing the largest bundle of goods with the least budget. There are various factors that determine this consumer behaviour, including attitudes, interests, preferences, psychological factors, the environment, benefits of the product, and demographic factors.

Various theoretical models have also been developed to examine how these factors influence the consumer’s buying behaviour. One of the most important models is the consumer decision making model. Others include economic man model, psychodynamic model, cognitive model, humanistic model and behaviourist model. Understanding these theories and how they can be applied to influence consumer behaviour are important if companies are to succeed in the marketplace. This essay argues that understanding consumer behaviour theories and application gives companies the opportunity to develop marketing approaches that meet consumer needs and preferences, leading to consumer satisfaction and loyalty in the highly dynamic and competitive business environment. Bagheri (2014) proposes that managers who want their companies to become successful should develop marketing strategies that target the existing and potential customers. Consumer behaviour helps them to understand the needs and preferences of those consumers.

One of the basic arguments in support of this statement is that consumer is king in business, and organizations should satisfy them in order to survive. With the rising level of competition in the business world, consumers now have a wide range of sellers to choose from, and each company should strive to provide the best products and services to meet their needs and retain them for a long term and successful business relationship. For example, Brosekhan and Velayutham (2005) suggest that consumer buying behaviour is an integral part of marketing strategies in organizations, and all marketing and business activities of companies should be focused on satisfying the consumer.

Bagheri (2014) also suggests that companies should develop different products according to the specific needs of the consumers in order to create a positive impression and satisfy the consumer. This view is related to the positivist model of consumer behaviour which shows proposes that there is only a single truth that is objective so as to enhance the use of human reason in decision making (Brosekhan and Velayutham, 2005). For example, consumer personality factors influence the decision making of consumers. Brosekhan and Velayutham (2005) propose two types of consumers based on personality factors: risk averse and innovative consumers. Risk-averse consumers tend to seek sufficient information about a product before buying in order to be certain before buying it. Therefore, companies that provide convincing and sincere information to such consumers are likely to satisfy retain them; hence becoming successful in the competitive business environment.

Consumer behaviour is also important for companies because it enables them to develop products that meet market trends and dynamics in order to remain relevant in the competitive market. This point is illustrated by the Bagheri (2014) who indicates that social and personality factors determine the purchase intention of consumers. The researcher suggests that consumers prefer products that make them look impressive. For example, consumers often follow new trends and fashion in order to achieve personal satisfaction. Furthermore, quiet products are preferred by consumers who want social recognition.

Managers should emphasize on quality, design and appearance of products in order to influence consumer perception. Understanding consumer behaviour also enables managers to learn how customers respond to changing trends and fashion, so that they can adjust their products with the changing consumer needs in the market. New designs and product qualities serve the purpose of improving the image of the company by shaping the consumer perception and influencing their buying behaviour. Brosekhan and Velayutham (2005) believe that consumers are willing to pay the price of products if they perceive that the products they are buying are of high quality. This indicates that it is important for companies to understand the perception of consumers concerning their products so that they can adjust them appropriately to meet the quality and price needs of the consumers. Product quality is also related to consumer satisfaction and loyalty. Siringoringo et al (2013) argues that perceived quality enhances indirect positive influence on loyalty. In this regard, companies benefit significantly by understanding consumer perception on product quality because it leads to improved innovation and development of quality products that satisfy customers and increase their loyalty.

Consumer perception can also be formed through cognitive processes. Consumers evaluate the attributes and quality of the products they want to buy based on intrinsic and informational cues. Companies need to understand and apply the consumer behaviour theories in order to improve the consumer’s perception on product quality. This is based on the information integration theory which suggests that consumers evaluate products by assigning an attribute to each one of them (Dmitrovic and Vida, 2010). However, the authors argue that the process of assigning attributes to products depends on the availability and diagnostic values of information. Therefore, companies become successful in marketing if they provide consumers with information that is convincing and easy to access. In other words, companies should understand the consumer behaviour in order to influence their information cues by providing easily accessible and valuable information through their strategic marketing approaches.

The idea of using information integration to influence consumer perception is also supported by Mihaela (2015) who argues that an integrated marketing process can be used by companies to develop, implement and evaluate persuasive communication programmes. These programmes should involve inside and outside stakeholders. Integrated marketing communication builds a profitable customer relationship in the long run (Mihaela, 2015). The marketplace is currently saturated with homogenous products, and for companies to become successful in such a competitive environment, they should seek to differentiate themselves by communicating messages that illustrate the functional attributes of their products. However, the challenge for companies and marketers is to identify the right channel and manner of communicating such information to consumers in an appealing and convincing way. De Mooij (2003) identifies a divergence rather than convergence of consumer behaviour, which makes it difficult for consumers to develop the right method of passing information to consumers. Companies should therefore understand consumer behaviour theories and application in order to develop persuasive messages and pass them appropriately to consumers.

In the international market, consumers perceive product quality differently due to their cultural differences worldwide (Mooij and Hofstede, 2003). Historical value systems in different countries influence consumer behaviour differently. Learning how these value systems is vital for companies to develop the right integrated information and influence consumer perception positively. For example, consumers choose between fair trade and organic products based on their values, beliefs, feelings and identities (Macak et al, 2014). Companies should conduct a consumer survey to determine where the consumers lie in terms of these cultural orientations that influence their buying decisions. Consumer survey and other market analysis tools are important for understanding consumer behaviour and tailoring products to meet the consumption needs of consumers in different cultural contexts.

Understanding and applying consumer behaviour also enables companies to clarify nationality cues for consumers before they source products from other countries. Companies may make mistakes by buying products from countries that consumers do not like. According to Dmitrovic and Vida (2010), categorization theory in consumer behaviour helps firms to understand the nationality cues of consumers. For example, some subjective cues tend to reflect stereotypes of consumers towards specific products. One of the stereotypes that consumers may develop is that all Japanese electronics are superior. Applying consumer behaviour enables companies to choose the right products that fit into this stereotypic culture, or develop successful marketing communication strategies to change the stereotypes.

In the process of categorizing products, consumers use cognitive approach to assign products to a specific geographic category, e.g. nationality or country (Dmitrovic and Vida, 2010). Categorization leads consumers to show loyalty to products from specific countries. For example, Siringoringo et al (2013) contend that Chinese products are perceived to be of good quality by consumers in Indonesia. By understanding this consumer behaviour theory, companies in Indonesia will import products from china in order to earn consumer loyalty and become successful in the competitive Indonesian business environment. Loyalty can be explained in terms of behaviour and mental state. The behavioural perspective defines loyalty as attitudinal inclination to a specific product or company in preference to other competitors or substitutes. By learning consumer behaviour theories, companies will understand the attitudinal factors that influence consumer loyalty towards products from a specific country. In this regard, the companies can be able to establish a lasting customer relationship by providing customers with product categories that they trust.

Companies also use consumer behaviour theories and application to determine important elements and motivations that influence consumer decision making process. There are various economic, social and psychological factors that influence consumer decision making. Market research enables companies to identify these factors and develop appropriate marketing strategies to influence the buying decisions of consumers. For example, Dumitru (2015) suggests that consumers in Romania face economic inequalities which influence their buying behaviour. While there is a rich class of individuals in the country, most societies are polarized and face problems of chronic poverty. In this regard, consumer behaviour application enables companies seeking market opportunities in Romania to segment the markets appropriately so that the low class society is served with low prices while the high class society is served with quality products.

Mihaela (2015) proposes five values that influence decision making of consumers: social value, functional value, emotional value, epistemic value, and conditional value. Companies need to understand these values in order to segment their markets successfully. The economic value of Romania enhances social values in terms of income level and socioeconomic status. Functional values include the attributes of the product. High class and sophisticated societies look for good quality rather than prices when making buying decisions (Durmaz and Taşdemir et al, 2014). Segmentation in terms of demographics is also important for companies that produce goods and services that target specific demographic groups. Understanding consumer behaviour also enables companies to understand the psychological factors that influence consumer decision making.

Ethical and environmental factors have also been considered in the contemporary business environment as important factors that influence consumer behaviour. Companies around the world are developing innovative and sustainable products to enable consumers to play their part in protecting the environment. Environmental problems, increased pollution and scarcity of resources have led consumers to pay more attention to environmental issues (Turkyilmaz et al, 2014). Environmental concerns have therefore led consumers to demand environment-friendly products. They are becoming more ecologically conscious than ever before. Therefore, companies need to understand consumer behaviour regarding the attitudes and preferences of sustainable products in order t develop sustainable innovations and meet the rising demand of environmentally friendly products. Business ethics concerns have also become key motivators of consumers as they choose the products to buy. Companies should therefore identify the ethical rules on environment and communities that create a good image for the consumers and communities.

Indeed, consumer theories and applications in terms of perception, values, interests, attitudes, categorization, cultural perspectives and ethical concerns have a significant impact on the success of a company in the current competitive business environment. Marketing approaches of companies should be based on buying behaviour of consumers so that they can influence their buying decisions. Understanding consumer behaviour theories and application enables them to achieve this marketing goal. Companies need to understand the psychological, economic, social and demographic factors that influence consumers buying behaviour and decision making. This essay has shown that companies may achieve increased customer loyalty and satisfaction by providing differentiated products and segmenting their markets according to consumers’ demographic and cultural backgrounds, interests and attitudes. Companies should also develop marketing communication strategies that can be used to influence the attitudes and social beliefs of consumers. Understanding consumer behaviour enables companies to develop marketing communication methods that carry persuasive messages and information needed by consumers to make appropriate decisions. Consumer behaviour theories also provide tools and strategies for consumers to align their pricing and quality development to the needs of different consumer segments. Such segmentation strategies are influenced by cultural, social, and demographic and economic status of target customers. Understanding consumer behaviour theories regarding environmental and ethical issues also gives the company an opportunity to improve its ethical and environmental approach, and win more customers as the business world becomes more ecologically conscious.

References List

Bagheri, M. 2014, “Luxury Consumer Behavior in Malaysia: Loud Brands vs. Quiet Brands,” Social and Behavioural Sciences, vol. 130, pp. 316–324.

Brosekhan, A.A. and Velayutham, C.M. 2005. “Consumer Buying Behaviour – A Literature Review,” Journal of Business Management, (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668, pp. 8-16.

De Mooij, M. 2003. “Convergence and divergence in consumer behaviour: implications for global advertising,” International Journal of Advertising, vol. 22, pp. 183–202

De Mooij, M. and Hofstede, G. 2011, “Cross-Cultural Consumer Behaviour: A Review of Research Findings,” Journal of International Consumer Marketing, vol. 23, pp. 181–192.

Dmitrovic, T. and Vida, I. 2010. “Consumer Behaviour Induced by Product Nationality: The evolution of the Field and its Theoretical Antecedents,” Transformations in Business and Economics, Vol. 9, No. 1, pp. 145-165.

Dumitru, M. 2015, “Important elements in consumer’s decision-making process,” Economics and Finance, vol. 22, pp. 780–786.

Durmaz, Y. and Taşdemir, A. 2014, Theoretical Approach to the Influence of Social Class on Consumer Behaviour,” American International Journal of Social Science, Vol. 3, No. 3, 187-191

Macak, T., Regnerova, O., and Toth, S. 2014, “Design of Experiments for Analysis Factors Influencing Consumer Behaviour,” Economics and Finance, vol. 12, pp. 371–378

Mihaela, O.O.E. 2015, “The Influence of the Integrated Marketing Communication on the Consumer Buying Behaviour,” Economics and Finance, no. 23, pp. 1446–1450

Siringoringo, H., Margianti, E.S., Kowanda, A., and Saptariani, T. 2013, “Shopping Behaviour of Indonesian Consumer towards Imported Products,” Social and Behavioural Sciences, vol. 81, pp. 411 – 415.

Turkyilmaz, C.A. Uslu, A. and Durmus, B. 2015, “Antecedents and Outcomes of Consumers, Inward and Outward Environmental Attitudes: Evidence from Turkey,” Social and Behavioural Sciences, vol. 175, pp. 90–97.

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