KARELIA UNIVERSITY OF APPLIED SCIENCES Degree Programme in International Business LITERATURE REVIEW: CONSUMER BEHAVIOR IN MARKETING

Transcription

1 KARELIA UNIVERSITY OF APPLIED SCIENCES Degree Programme in International Business LITERATURE REVIEW: CONSUMER BEHAVIOR IN MARKETING Research Seminar Ari Stenroos& Adam Lerch Autumn 2014

2 CONTENTS 1 INTRODUCTION CONSUMER BEHAVIOR IN MARKETING Definition of Consumer Behavior Market segmentation and consumer behavior Key factors of consumer s motivation: Needs, Drives and Goals Consumer s Attitudes Consumer s Perceptions CONCLUSIONS... 9 REFERENCES... 11

3 3 1 INTRODUCTION Marketing and consumer behavior have a significant impact in the world. Additionally, management and marketing help people to organize and determine correct strategies for the future development of the business (Strydom, 2005). Moreover, consumer behavior theory gives a clear image and an explanation of the consumers actions in the business environment (Noel, 2009). It can be stated that the purpose of the literature review is to get a clear understanding of consumer behavior theory. I have chosen this topic due to the fact that my thesis research project strongly interacts with behavior of Russian consumers. The theoretical overview of this topic will help me to understand the main elements and factors which have a certain impact on consumer behavior in the business life. 2 CONSUMER BEHAVIOR IN MARKETING 2.1 Definition of Consumer Behavior Even though every person is unique, there are some similarities in consumer buying behavior and they are called behavioral patterns (Cant, Jooste, Plessis &Strydom 2009, 63). These similarities help to unite customers in certain groups and make the marketing process easier. It can be said that consumer behavior is a key element in marketing which defines target markets and marketing mixes (Sandhusen 2000, 217). Without understanding behavioral patterns it is impossible to define correct marketing strategy for the future. In marketing, consumer behavior is complex and consists of various pivotal elements. For instance, according to Deborah, Maclnnis, Wayne D. Hoyer (2008, 5) consumer behavior involves the following components: goods, services, activities, experiences,

4 4 people and ideas. Another important aspect which has a dramatic impact on the consumer decision making process is time: a consumer needs to have an understanding about the value of time and the opportunity cost (Deborah, Maclnnis &Wayne D. Hoyer, 2008, 6). 2.2 Market segmentation and consumer behavior In marketing, understanding consumer behavior helps to divide potential customers in the certain groups. According to Cant, Jooste, Plessis &Strydom (2009, 103) segmentation can be defined as a process of dividing a total market into segments or a target market with consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix. One market segment consists of a group of customers who are united together by similar needs and wants (Brady, Goodman, Hansen, Keller &Kotler, 2009, 334). The segments are introduced to simplify the complexity of the whole target market, but they are strongly generalized and do not cover personal preferences of individual consumers (Brady, Goodman, Hansen, Keller &Kotler, 2009, 334). 2.3 Key factors of consumer s motivation: Needs, Drives and Goals The most important elements which dramatically affect a motivation of consumer are needs, drives and goals. Need is the basic element which provokes consumer to start the certain actions to satisfy the certain desire. Other elements can be considered of the same importance as needs, but need is a key element in chain of needs-drives-goals (Jansson-Boyd, 2010, 116). According to Lantos needs can be defined as states of the felt lack of vital physiological requirements for optimal environment conditions (Lantos, 2010, 5). It should be mentioned that need is only a small impulse for the future actions; there are also other factors which have more influence on the motivation (Strydom, 2005).

5 5 The needs can be divided into two basic groups: utilitarian and hedonic. The major difference is: hedonic needs acquire to satisfy the need with emotional element, but utilitarian are meant to simply satisfy the aroused need and to receive benefit (Lantos, 2010, 5) Abraham Maslow introduced another classification of human needs. Maslow had an idea that all humans try to learn more about themselves and be beneficial for the society. (Kirst-Ashman &Zastrow, 2009, 448). He made the certain hierarchy of needs according to their importance (Hughes, Kapoor &Pride, 2011, 281). The whole hierarchy can be seen in more detail on Figure 1. Figure 1 Maslow s Hierarchy of Needs Source: (Hughes, Kapoor &Pride, 2011, 281). According to Maslow there are several groups of needs which need to be satisfied in order of importance. It can be said that the most important and the most basic needs are physiology needs. Without satisfying the base needs an individual is not able to survive (Steinberg, 2007, 22). Safety needs can be also classified as basic needs. A human being needs to feel secure and protected. Need for shelter, job, and being protected are the most common examples of safety needs. (Steinberg, 2007, 22.). People have a tendency to belong to the certain groups. Stratifying social needs makes humans think that they are important to the society. From psychological perspective individuals like to be appreciated and loved (Smoke, 2005, 123.).

6 6 Esteem needs can be divided to two different groups: self-esteem and appreciation from the other group members. It is a common knowledge that people who have lower levels of needs satisfied are keen on spending and investing money in luxury and expensive goods to show their reference to the certain social status (Smoke, 2005, 124.). The main self-actualization need according to Jarvis (2005, 120) is to find personal fulfillment and achieve one s potential. But before a person can become self-actualized all other lower levels in Maslow s hierarchy have to be satisfied. Need plays the role of the first impulse in decision making process. Figure 2 represented above gives a general image of the consumer steps towards the desired goal based on a need for pair of shoes example. Figure 2 Relationship between Needs, Drives and Goals Source: (Jansson-Boyd, 2010, 116) As it can be seen on the Figure 2 drives plays a roles of an intermediary between Need and Goal. In marketing, drives or motives are action-oriented and show the direction in which a consumer should move to reach a certain goal (Ghosh, 2000, 133). Goal is a result of the motivated behavior towards the need satisfaction Goals can be classified in several groups: generic goals and product-specific goals. Generic goal is a satisfaction of the aroused need with no specific preferences. Product-specific goal is aimed at the satisfaction of the need from the emotional perspective with a concrete product or service. (Jansson-Boyd, 2010, 117.). 2.4 Consumer s Attitudes A consumer attitude can be defined as a certain way of behavior in the certain situation at the certain period of time towards market-related objects (Strydom, 2005). In

7 7 marketing, it is a key point in understanding the decision-making process and determining potential consumer behavior in the certain situation. Attitudes have a certain impact on consumer decision-making process, but might not be a reason of the actual behavior. Having positive attitude towards something does not necessarily mean an actual purchase of the preferred good (Noel, 2009). There are various factors which have influence on the consumer attitude and buying behavior. Basically, it can be mentioned that consumer behavior and the whole decision-making process is strongly influenced by the background of a potential buyer. According to Sandhusen (2000, 221): social class predicts buying behavior. It is a common knowledge that people who belong to the same social class have similar attitudes, needs, wants and demands. Additionally, reference groups play a pivotal role in building the attitude and forming a behavioral pattern (Sandhusen, 2000, 221). Personality also has an impact on the consumer attitude. But it should be mentioned that personalities have a tendency to change over a certain period of time (Hansen, Kanuk, &Shiffman, 2008, 135). Basically, in conclusion, it should be mentioned that there is nothing constant in the consumer buying behavior and attitude. 2.5 Consumer s Perceptions Perception is a phenomenon widely used in consumer behavior theory. The term perception can be defined as a process of interpreting the environmental factors such as smell, touch, vision, sound within the customer s frame of reference (Strydom, 2005). Perception is a complex process which is widely used in theory of consumer behavior. The procedure consists of three main stages: sensation, attention, and interpretation (Askergaard, Bamossy, Hogg &Solomon, 2006, 36). It is important to follow the consumer on the perception path, it helps to understand the possible reactions and analyze the problem from the psychological perspective. The physical effects such as smell, vision, sound, touch have a strong impact on the consumer s perception and marketing strategy (Askergaard, Bamossy, Hogg

8 8 &Solomon, 2006, 36-46). Consumers have a tendency to have an overview of the product just from the physical characteristics and build a complete image about the object. Quality perceptions have a strong impact on the marketing and quality management. Understanding the perception of the quality helps a company to determine the right strategy to attract more customers and maintain the old ones. SERVQUAL is widely used instrument to determine the quality of the service. The main idea of the concept is to understand the ratio between perceived service quality and the actual quality of the service (Dabade, Wankhade, 2010, 3.) It is pivotal to understand that a customer has his own perspective on the understanding of the quality of a service or a product. Quality makes the sales more efficient and keeps the customer satisfied. (Berry, Parasuraman &Zeithaml, 2010.).

9 9 3 CONCLUSIONS The main point of the literature review was to understand the main aspects of consumer behavior. All the elements such as needs, drives, goals, attitudes, and perceptions are the key elements which help marketers to determine the most suitable strategy for a product. Even though there is enough theory on consumer behavior, it does not make the implementation of the strategy easier in the real life. All perceptions and attitudes might vary, and cannot remain constant in long-term (Hansen, Kanuk, &Shiffman, 2008, 135). But understanding of the key elements of consumer attitudes helps to predict actions of the certain consumer groups (Noel, 2009). Basically, it helps to choose relevant target market and to divide it in segments more effectively (Cant, Jooste, Plessis &Strydom, 2009) Segmentation helps to focus on particular target groups and to study market more precisely (Cant, Jooste, Plessis &Strydom, 2009, 103). The main risk while reading and interpreting the consumer behavior is the fact of high level of individualism in the modern society. Majority of people have their own preferences towards various products, as a consequence their consumer behavior can be misunderstood by marketers due to the fact that target groups are highly generalized (Brady, Goodman, Hansen, Keller &Kotler, 2009, 334).Understanding the consumer behavior from the wrong perspective might cause the problems to a firm. There are certain areas which research does not focus on due to the fact that consumer behavior is complex. To understand consumer behavior in more detail it is necessary to understand the psychology of an individual in the first place. Psychological perspective has a dramatic impact on business and consumer behavior theory: analyzing the memory and self-concept phenomena might be the factors to consider in future. Additionally, studying the background of a consumer more precisely is highly recommended due the fact that culture, subculture, lifestyle and social class have a dramatic influence on an individual.

10 10 In my personal opinion, consumer behavior should be studied and analyzed in more detail each time. Consumers are individuals and their personalities might also change or be affected by the reference groups or other external factors (Sandhusen, 2000, 221).

11 11 REFERENCES Askergaard, S., Bamossy, H., Hogg, M., Solomon, M., Consumer behavior: a European perspective. UK: Pearson Education Limited. Berry, L.L., Parasuraman, A., Zeithaml, V. A Delivering Quality Service. USA: The free press New York Brady, M., Goodman, M., Hansen, T., Keller, K. L., Kotler, P Marketing management. UK: Pearson Education Limited. Cant, M., Jooste, C., Plessis, P., Strydom, J Marketing Management. South Africa: Juta and Company, Ltd. Dabade, B., Wankhade, L Quality Uncertainty and Perception: Information asymmetry and management of quality uncertainty and quality perception. Germany: Springer-Verlag Berlin Heidelberg. Deborah, J., Maclnnis, Wayne D. Hoyer Consumer behavior. USA: Cengage Learning, Inc. Ghosh, B Human Resources Development and Management. India: VIKAS Publishing house PVT Ltd. Hansen, H., Kanuk, L.L., Shiffman, L.G Consumer behavior: an European outlook. UK: Pearson Education Limited. Hughes, R., Kapoor, J., Pride, W Business. USA:Cengage Learning, Inc. Jackson, F Perception: A Representative theory UK: Cambridge University Press Jarvis, M The Psychology of Effective Learning and Teaching Jansson-Boyd, K Consumer Psychology. UK: Bell and Bain Ltd., Glasgow. Kirst-Ashman, K., Zastrow, C Understanding Human Behavior and Social Environment. USA: Cengage Learning, Inc. Lantos, G.P Consumer Behavior in Action Real-life Applications for Marketing Managers. USA: The Copy Workshop. Noel, H Consumer behavior. Switzerland: AVA Publishing SA. Sandhusen, R Marketing. USA: Barron s. Smoke, K Company Officer. USA: Cengage Learning, Inc. Steinberg, S An introduction to communication studies. South Africa: Uta and company Ltd. Strydom, J Introduction to Marketing. Republic of South Africa: Paarl Print.