CONSUMER DECISION MAKING Essay Example
Consumer decision making
The existence and development of any business in the market is highly dependent on the consumer. The demand by the consumer influences a business marketing decision to a huge extent implying that the consumer demand influences the marketing strategy and tactics that an enterprise employs. By understanding the influencing factors of consumer behaviors, a business can be in a position to understand the consumer demands, influence the factors that will promote consumer purchasing and change the unfavorable factors that hinder purchasing while considering consumer satisfaction as the key as the sole goal of the marketing behavior. It is only through providing high quality products at reasonable prices, satisfying the consumer material and psychological needs, and providing complete services that a business is able to earn more customers, increase market share and competitive advantage (Hernandez, Jimenez & Martin, 2011).
There are many reasons that consumers make a decision as to the kind of products that they would like to purchase a certain product or the other. The reasons that influence decisions made by a consumer 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 (Gummesson, Kuusela & Narvanen, 2014). 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 will discuss the influences of the internal and external factors that influence online shopping using Amazon as an example.
The industry overview
The development of the internet for the last two decades has been on the rise and a digital economy that is supported by information technology is as well developing worldwide. This means that the number of internet users have gone up, high speed internet is increasingly available and new technologies for web development are emerging that can help to promote the images of products and services online. This implies that detailed product data and improved services have attracted more people and changed their consumer behavior from their traditional mode to rely on internet shopping (Hernandez, Jimenez & Martin, 2011). Similarly, most companies have realized the change in consumer behaviors and have been forced to change their marketing strategy. Recent research has indicated that internet shopping is on the rise and is popular to many people. A report by the US Department of commerce has also indicated that online shopping has grown in the recent past as indicated by the total sales by companies. For instance, Dell computers made sales worth 18 million dollars in the first quarter of the year 1999 through online shopping; this accounted for 30 percent of its total sales (Gummesson, Kuusela & Narvanen, 2014). It is therefore important for companies to understand internet shopping and its effect on consumer behaviors in order to develop a good e-commerce strategy.
There are many reasons why internet shopping has been on the rise in the recent past; notably being the benefits associated with benefits that the internet provide. Convenience to the customer is a key concept that the internet brings to the customer. To begin with, the consumers do not have to go out to the market to search for the products they need as the internet can help them do the search online on the various sites; in so doing, they are also able to compare and evaluate the different prices for the products available in order to choose the one that suits them. Through the search engines, the consumers are able to access the consumption related information of the product they need as well as the image, texture, sound and any other feature that they consumer may need when selecting the product of their choice (Hernandez, Jimenez & Martin, 2011).
However, there are also potential risks associated with internet shopping such as the payment safety and after sale service. The development of the internet has made internet payment a prevalent mode of payment when purchasing goods. Internet payment thus helps to improve consumer efficiency when doing online business. After sale service is also another challenge that may hinder consumers from shopping online since it is not like the traditional retail service where the after sale service is provided face-to-face especially for goods whose usage is complicated. However, companies have provided solutions to this problem by providing online assistance whereby consumers are assisted to solve such problems (Hernandez, Jimenez & Martin, 2011).
Amazon.com which is the subject of this paper is the world’s biggest, earliest and most successful online shopping retailer. It started with selling books in 1995 after diversifying in 1999 when it started selling clothing, toys, movies and other goods. To date, Amazon has more than 20 categories of products in its online stores. In 2003 for instance, Amazon.com sales were at around 4 billion US dollars with the book sales in the US accounting for 89 percent of the total sales (Gummesson, Kuusela & Narvanen, 2014).
Amazon has benefited majorly from the increase in internet usage, the development of information technology and many people being able to own computers. For instance in China, there are 111 million internet users, 24.5 percent of them purchased goods online and 47.3% have purchased books online in the last half year of 2006 (Sandy & Minjeong, 2009). This trend has shown the potential of internet shopping in such a country and has attracted international companies to invest in that sector. Dangdang.com which operates as Amazon is currently the most famous online shopping retailer for books in China. Dangdang.com that was established in 1999 currently has 210 thousand catalogues of books as compared to Amazon that has a huge database worldwide. Sales report of dangdang.com indicate that its total sales reached 2700 million Chinese Yuan after six years of operation with 4% of the sales being from books (Guo, 2011).
Factors affecting the consumer’s decision process
The factors that influence consumer online shopping behavior may be classified broadly into two: internal factors or dependent variables (altitude, intention, lifestyle, personality, emotions, learning memory and learning). The other set of factors are external or independent variables and include demographics, social class, family, marketing campaign, culture, reference groups and opinion leaders. The external factors directly influence the attitude towards doing online shopping. The marketing campaign which determines the product or service characteristics as well as the website quality directly have an impact on customer satisfaction. However, the internal factors or dependent variables appear in stages in process of making decision when doing online shopping. Consumer satisfaction is key and it occurs in every stage of the decision making process (Sandy & Minjeong, 2009).
While both internal and external factors influences the consumer shopping behavior, the consumer has to make a decision when doing online shopping; this leads to a decision making process. This is a cognitive process that leads to the selection of a series of actions derived from a number of alternatives. The decision making process ends in a final choice which could either be an opinion or an action. This paper focuses on the consumer decision before purchase, during and after purchase of a product or service from Amazon stores. Consumer shopping behaviors may be analyzed by three models namely economic, psychological and consumer behavior models (Guo, 2011). Studies have show that consumers have to go through a five-stage decision making process when making a decision to purchase goods online as illustrated in the figure below.
Whenever consumers intend to buy things online, they have to engage this decision making process. Recent research has found out one major problem with online shopping sites which their failure to engage the consumers in the decision-making process. Understanding the consumer needs and concerns when they are making purchasing decisions can make marketers improve the products and services that they provide. Though the model has five stages, the consumer must not go through all the stages implying that he or she may skip or reverse the stages. For instance, a customer buying a favorite drink recognizes the need and will thus skip information search and go straight to purchase decision (Guo, 2011).
Need recognition is the first stage in the decision making process, the customer recognizes the need to purchase something or responds to some marketing stimulus. The internet provides plenty of information which the marketers use to stimulate the consumer needs. Online retailers do research to determine the needs and concerns of the consumers when making decisions to purchase so that they can support the consumer decision making process. Marketers can conduct interview or collect information from the salespersons to determine the needs of the consumers. In addition, the online retailers may use online and offline promotions to convince consumers to come and purchase their goods.
On realizing the needs, the customers decide to search for the information required. If they already have the information they need may be based from their shopping experience and if the product satisfy their needs, they may decide to do the purchase but if more information is need then they proceed with the information search. This is the point where the external factors influence their decisions. The information may be obtained from personal sources (friends, family and opinion leaders), commercial (retailers, marketing campaigns, advertisers, dealers etc), experiment (handling and examining), public (newspapers and other forms of media). The information can therefore be obtained through many means though the internet is the most convenient and easy (Miyazaki & Fernandez, 2005). Online stores should thus provide detailed information in order to assist the consumer in making the decision. For instance, Amazon provides the customers with book reviews, description and image.
Information search leads the customer to acquiring a variety of information about the product thereby providing alternatives. This leads to the next step which is to evaluate the alternatives in order to decide which product or brand to purchase from the various available alternatives. One important determinant is whether the product has the relevance, affordable price low level of risk. The consumers don’t just compare the product and the prices but they also look at the potential risks in online payment. Online retailers have to provide competitive prices or add value to their product in order to win the price-sensitive consumers. The less-price sensitive consumers will purchase goods if the retailer provides high quality information and boosts the interaction with the consumers (Guo, 2011).
The fourth stage of the process which is purchase depends highly on the existence of a secure online payment method. Studies have shown that more than 60 percent of the online payments do not get completed at the end. Most of the reasons are as a result of the customer not being able to complete the process due to some poor shipping policies and lack of adequate information to help in completing the purchase. Well established online stores like Amazon have well trained personnel who assist the customers to complete the process. This problem is also addressed through online interactivities such as FAQs and instant email messages about payment and shipping procedures.
Post purchase evaluation is the final stage in the decision making process; this stage has a huge impact on customer satisfaction as well as dissatisfaction. This evaluation is determined by the customers’ overall feeling after purchase and experience. If the satisfaction level is high, then the customer feels comfortable and may go back to purchase from the online store in future. Other customers may decide to test an alternative product and may not go for a re-purchase. When the customer is fully dissatisfied with the product, he may be forced to return it to the online store. The marketing team has to persuade the consumer that the product will satisfy him before purchase in order to avoid the customer returning the product (Miyazaki & Fernandez, 2005).
Gummesson, E., Kuusela, H., & Narvanen, E. (2014). Reinventing marketing strategy by recasting supplier/customer roles. Journal of Service Management, 25 (2), 5-5.
Guo, L. (2011). A Research on Influencing Factors of Consumer Purchasing Behaviors in Cyberspace. International Journal of Marketing Studies 3(3): 182-88.
Hernandez, B., Jimenez, J. & Martin, J. (2011). Age, gender and income: do they really moderate online shopping behaviour? Online Information Review, 35 (1): 113 – 133
Miyazaki, A. & Fernandez, A. (2005). Consumer Perceptions of Privacy and Security Risks for Online Shopping. Journal of Consumer Affairs, 35, (1): 27–44.
Sandy, D. & Minjeong. K., (2009). External and internal trigger cues of impulse buying online. Direct Marketing: An International Journal, 3 (1) 20 – 34.
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