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The difference of consumers

decision-making process for


low and high cost products
Michael Charalampous
Due Date: 26/11/2015
MK 3159 Consumer Behavior

MK 3159

Consumer Behavior

MICHAEL CHARALAMPOUS

Contents
Introduction......................................................................................................................................4
Literature review..............................................................................................................................4
External-other factors..................................................................................................................5
Consumer psychology.................................................................................................................5
Motivation................................................................................................................................5
Perception................................................................................................................................6
Memory....................................................................................................................................7
Consumer characteristics.............................................................................................................7
Cultural....................................................................................................................................7
Social.......................................................................................................................................8
Personal....................................................................................................................................9
Buying decision process..............................................................................................................9
Types of consumer decisions.....................................................................................................10
Routine Response Behavior...................................................................................................10
Limited Problem Solving.......................................................................................................10
Extended Problem Solving....................................................................................................11
Case study......................................................................................................................................11
Instant coffee..........................................................................................................................11
Bicycle...................................................................................................................................12
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Market implications.......................................................................................................................13
Market implications for instant coffee...................................................................................13
Market implications for Bicycle............................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

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Introduction

It is common understanding among many economical analysts, that consumption of


goods in a global scale has been increased with a steady rate for the past years, and it is still
growing especially in many of the so called developing countries. As a result, one of the most
important fields in marketing is the consumer decision-making process. This fact triggers the
companies to base their sales on the analysis of the consumer buying behavior. However, this
behavior is consisted by the desires and needs of the buyer and is affected by many factors that in
many times alter the decisions of the consumer. As John C. Mowen explains, Consumer
behavior is defined as the study of the buying units and the exchange processes involved in
acquiring, consuming, and disposing of goods, services, experiences, and ideas. Therefore, the
target of this project is to present and analyze the process under which a buyer decides to acquire
a low cost product and how this differs when it concerns more expensive goods. First of all, in
order to understand how people decide to consume goods, some of the main consumption
theories will be presented. Additionally, a case study of a low cost good such as instant coffee
and a more expensive one such as bicycle will be observed in an analytical way. Finally, the
results of the case study and the implications for marketers are also demonstrated.

Literature review

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The model of consumer buying behavior on which this project based, is StimuliOrganism-Response Model, (Kotler et al., 2009). This model that is demonstrated in figure 1,
tries to explain all the external and the internal factors that influence the final purchase decision.

Figure 1: Stimuli-Organism-Response Model

External-other factors

The external factors, called also stimuli, are divided into two categories, the marketing
and others. Marketing factors include product, price, place and promotion and are decided by the
selling strategy of each company. The Other factors concern the economical, political and
cultural environment of the buyer.

Consumer psychology

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Motivation
Although, there are many motivational theories, Maslows need theory is the most
widespread one. According to this theory, the needs of people are divided into five categories
that are arranged in a hierarchical manner. The lowest need in the pyramid is the strongest. When
it is satisfied the next higher need becomes the motivational force. For example, a person who is
thirsty would not think about his/her external appearance (esteem level) until his/her thirst is
satisfied first. The need pyramid is demonstrated in figure 2.

Self
actu
aliz
atio
n
Esteem
Belongingness
Safety
Physiological

Figure 2: Maslow needs pyramid

Perception

Perception is the process by which people organize and interpret the information
attained by their surrounding environment. Subsequently, it is an important factor for
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marketing strategy as peoples behavior is based on their perception of the surrounding


environment and not on reality itself.

Memory
The memory is basically a process in which the information attained by a person is
stored. It is a crucial element of marketing as it is important for a customer to remember the
product of a company. Consequently, it is important to understand the fundamentals of human
memory. First of all, after achieving, the information gets encoded and stored. This is done by
connecting the information to already existing memories. For instance, the names of the brands
that are connected to peoples personal experiences come first into mind.

Figure 3: Memory Process

Consumer characteristics

Cultural
The cultural characteristics of a person influence also its consuming behavior and so it is
crucial to be taken into account in marketing analysis and strategies. These characteristics are
divided into the general culture, the sub-cultures and the social classes. Solomon claims that

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culture is the personality of a society which determines the ethics and values of a society, but
also its distinctive objects. Therefore, culture could be defined as a blend of shared rituals, norms
and traditions among the members of a group called society. Consequently, the people that
belong to the same culture appear common consuming behavior. Also, De Mooij assumes that
people that live in the same region and speak the same language belong to the same culture.
However, though the cultural factors are passed through one generation to another, they are
continually changing as new habits are added over time. Additionally, the different subcultures
which are subgroups that belong in the same national culture also influence consumers behavior
as they have similar characteristics in sectors like age, region and race. Another structure that
dictates the cultural consumer characteristics are the social classes. Despite the belief that the
social class of a person is depending on the persons income, the truth is that it is determined also
by the society that the person belongs to.
Social
As Mowen citied, groups are a set of several individuals who are interacting with each
other and are sharing a common goal or need. Furthermore, in marketing a great deal of
importance is given on the so called reference groups. A reference group has a significant impact
on a persons thoughts feelings and actions which is divided into three types: informational
which describes the acceptance of information from other, normative that concerns the
compliance with expectation of others and comparative-value-expressive which is the
identification with values of others (Solomon, 2011).
Moreover, another group that has an extreme influence over peoples consuming behavior
is the family. So, many decisions are made by the family as a group and not by individual. In this
point, it should be taken under consideration the fact that the needs and mostly the expenditures
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and as a result the consumption of goods in a family are specified by the number of people that
form the family. As a result, the influence that the family exercises among its members is a
complex variable that depends on the family size, the ages and the sex of its members. In
addition to that, consumer behavior varies over the family life cycle based on income and family
composition.
Personal
The personal characteristics of a consumer refer to the persons lifestyle, age, selfconcept and other. For instance the consumers age is an important variable as the person likes
other things when is young and other when is middle-aged. On the other hand, the self concept
factor regards the image that someone has for him/herself such as his/her appearance. This factor
is extremely valuable for marketing as it could make a person buy special products. Finally,
according to Mowen the lifestyle describes how persons live their live. For instance, how they
spend their leisure time or even their money.

Buying decision process

Consumer decision-making process is the process with which a consumer decides which
product to purchase. It consists of five stages: need recognition, information search, evaluation of
alternatives, purchase and post-purchase evaluation. It is obvious from the five stages that the
process of buying begins before the acquisition of the product itself and continues even after that.
So, the stages could be grouped in a pre purchase phase, the actual purchase and the post

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purchase phase. However, it is not obligatory that every consumer passes through all the five
stages.

Figure 4 : Consumer Decision Buying Process

Types of consumer decisions

In an effort to comprehend the decision process, it is necessary to know that there are
different types of consumer decisions based on the level of involvement, low or high, in the
transaction. The key factor is that these types explain the fact that not every customer passes
through all the stages of the decision process. More analytically the types of consumer are the
extended or extensive problem solving, limited problem solving and routine response behavior or
habitual decision making.
Routine Response Behavior
At first, this type of behavior is also called habitual decision making as the consumer puts
only a little (or not at all) effort in order to decide which product to buy. It is a low involvement
behavior. This is accomplished by making the purchase into a matter of routine and as a result
the person spends the minim time needed on the decision. Sometimes, the person does not even
recognize that he selects the specific product. A typical example for habitual decision making is
the shopping for cigarettes, where the individual usually buys the brand he is used to.
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Limited Problem Solving


Secondly, the limited problem solving behavior is also a low involvement behavior. It
describes a consumer who has already some experience about the requested product and as a
result he searches for information about it in a limited way. Hence, this kind of behavior makes
the forthcoming transaction more simple and straightforward.
Extended Problem Solving
On the other hand, extended problem solving is a high involvement behavior in all of the
stages of the decision process. First of all, the consumer collects all the possible information.
Then he evaluates very thoroughly all the alternative choices. This kind of behavior is used
especially in high cost products such as a car or house.

Case study

The main goal of the project is to analyze the marketing strategies that a company should
follow in order to attract customers in the case of two products: instant coffee and bicycle. With
the first glance, an analyst could observe that on one hand instant coffee is a low cost product
that concerns an everyday habit and on the other hand bicycle is a more expensive product.
Taking this under consideration, I am going to make a market analysis of both products.
Instant coffee
First of all, the buyers of this product try to fulfill a psychological need such as the need
to stay awake. Moreover, coffee is a drink that exists as a habit in many cultures worldwide. This
fact widens the number of prospective buyers of the product. Additionally, the manufacturing

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companies of coffee have persuaded people over the years with targeted advertisements that their
product has become an everyday necessity. As a result, consumption attitudes towards coffee
usually follow peoples beliefs for the product, making .coffee a high-frequently purchased and
low cost product that people tend to consume quickly. Consequently, consumers want to spend
limited time searching for their delight making their decision time shorter. This is the main
reason, combined with the fact that a coffee drinker expects high quality product, that the
consumers show stronger attitudes towards specific well-known brands (starbucks). Finally,
buying coffee is categorized as a low involvement purchases because it does not include any
great customer, financial, social and psychological risks. In such case, it is not worth customers
time and effort to search information about brands and to consider the wide range of alternatives.
Therefore, as a low involvement purchase, belongs to the limited process of decision making.
Hence, coffee is a product that addresses consumers with routine response behavior as first
comes their belief for the product and then their habit to consume a specific brand.
Bicycle
On the other hand bicycle is a product that is more expensive than coffee. Also, it has a
longer lifecycle as it is a product that lasts and as a result is not frequently repurchased.
Nowadays, with the advance of technology, bicycles have become more high-tech and more
specialized, based on the users needs. Hence, a detailed market research for this product is
necessary, as consumers actively search in order to evaluate and consider alternative brands by
applying specific criteria such as in our case portability in the means of transport, the strength of
materials and the weight. As a result, purchasing a bicycle is a high involvement move. This
assumption is also strengthened by the fact that the consumption of bicycles is affected by the
culture, personal and perspective factors of a buyer. Consequently, it has higher risk than buying
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coffee. Thus, consumers of bicycle indicate an Extended Problem Solving behavior, as the
consumer buys not the most famous brand but the brand that satisfies their needs.

Market implications

The final target of this project analysis is to present the strategies that the firms that
produce the certain two products should follow in order to increase their sales. As the two
products address different types of consumers, their firms should also follow different strategies.
Market implications for instant coffee
As instant coffee has buyers with habitual decision behavior, the companies that sell it
have to make an intensive distribution network. The reason for this is that as coffee is bought
frequently and in big quantities, the number of selling points has to be as big as possible so as not
to interrupt the habit of consumers. Also we should not forget that people have a constructive
memory, which means that they do not recall whole facts but they have to unit small fragments
of memory. This fact forces the manufacturing companies to use extensive advertising of coffee
products so as to be used as a reminder to consumers that coffee is necessary. Moreover, the
price strategy of coffee brands should be consisted of price offers and free samples so as to
attract the habitual consumers and introduce to public the quality of their product. Finally, as the
age of buyers is a key factor in consumption of coffee as younger people do not stay so brand
loyal as older people, the new brands should target them.
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Market implications for Bicycle


On the other hand, bicycle is a product of high cost and high involvement. As a result,
the firms that produce bicycles should invest a lot in training their selling employees, as their
role in promoting the bicycles to the customers is important. Unlike coffee firms, in this case,
there is no need for a large distribution network as products are bought less frequently.
Furthermore, advertisements should inform the customers with the details of the different
bicycles in order to help the consumer to make a choice. Finally, as high price stands for good
quality in the mind of the majority, the value for money perspective should become the logo of
these firms.

Conclusion

To conclude, as global consumption getting larger, the marketing strategies help the firms
to analyze the consumption behavior in order to become more competitive and increase their
profit. This project tried to analyze using the SOR model the behavioral pattern of the types of
consumers that buy instant coffee and bicycles. The goal was to provide the firms with potential
strategies that would attract more buyers. Though the research conducted with the use of two
products the results tried to be presented in a more general way so as to be able to be
implemented to other products too. Finally, it is crucial to understand that marketing provides to
a company powerful techniques in the search of financial success.

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References

De Mooij, Marieke (2004); Consumer behavior and culture Consequences for Global
Marketing and Advertising; SAGE Publications Inc.
Ghingold and Wilson; Buying center research and business marketing practice: meeting the
challenge of dynamic marketing; Journal of Business & Industrial Marketing, Vol. 13 No. 2
(1998); pp. 96-108.
Jansson-Boyd, Cathrine V. (2010); Consumer Psychology; Open University Press McGrawHill Education.
Koklic, M, & Vida, I 2011, 'Consumer strategic decision making and choice process:
prefabricated house purchase',International Journal Of Consumer Studies, 35, 6, pp. 634-643,
Business Source Complete, EBSCOhost,.
Pervin, S, Ranchhod, A, & Wilman, M 2014, 'Trends in cosmetics purchase: Ethical perceptions
of consumers in different cultures. A cross country comparative study between South Asian and
Western consumers', Journal Of Customer Behaviour, 13, 1, pp. 57-72, Business Source
Complete, EBSCOhost.
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Solomon, Michael (2011); Consumer Behavior Buying, Having and Being; 9th edition;
Pearson Education.
Solomon, Gary, Soren, and Markaret (2006); Consumer Behaviour A European Perspective; 3 rd
edition; Prentice Hall Financial Times.
Sorina-Raula, G, Liviu, C, & Georgeta-Mdlina, M 2008, 'THE ROLE OF ADVERTISING IN
THE PURCHASE DECISION PROCESS', Annals Of The University Of Oradea, Economic
Science Series, 17, 4, pp. 895-900, Business Source Complete, EBSCOhost.

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