Consumer Decision-Making Processes
The holiday season is upon us again, and it is the biggest season of the year for retailers. American consumers will buy an average of around $700 on goods and services related to the holidays, which equates to the range of $224 billion. Analysts further break down the market between those who are of relatively limited financial means and just try to survive the holidays, and those who spend $978 on average (PWC, 2014). But how do consumers go about making their purchase decisions? Whether rich or poor, or what holidays a person might celebrate, there are some basic fundamental principles in the consumer buying decision making process that can help marketers to make the best decisions possible.
The Consumer Decision-Making Process
There are five basic elements to the consumer decision-making process: problem recognition, information search, alternative evaluation, purchase decision, and post-purchase behavior (Consumer Factor, 2015). Each of these plays a critical role in this process, as will be described. The first stage is need recognition. Need recognition is the first and most important step in the process. The sensation of need can be triggered either by internal or external stimuli. Basically, internal stimuli reflects either running out of something and deciding that it needs replacing, or simply identifying something that is missing. This can be as simple as feeling hungry and deciding that food is required, or something like feeling discomfort when sleeping and coming to the conclusion that you need a new pillow. External stimuli is often seen as marketing, for example marketing messages that whet your appetite. An obvious case of this would be a company like Starbucks or Cinnabon that pumps aromas so that when you walk by the store, the aroma stimulates a craving. But external stimuli can be more complex, for example if people you know have acquired something, and recommend it to you. You may not think you have any need at all, but enough peer influence and the next thing you know you have a Magic Bullet gathering dust on your kitchen counter.
What defines a need can have a significant influence over purchasing decisions. For example, the degree of need can influence the budget and the time frame for purchase. This is precisely why wealthier people spend more on holidays than others — the difference in cost and the difference in disposable income help to frame the need. Maslow’s hierarchy of needs is one framework by which needs can be understood. People will, usually anyway, make rational decisions, and meet the lower-order needs first. Thus, a paycheck usually starts with rent and food. Purchases that speak to esteem or self-actualization can only come when those first, lower-order conditions are met (NetMBA, 2010). There are other frameworks that can be used to understand need as well, including one framework that breaks down needs into three categories — functional needs, social needs and the need for change, which are roughly analogous to the levels on Maslow’s hierarchy.
The next step is the information gathering process. Prior to any purchase, a consumer will go through some sort of process of gathering information. This can be anywhere on a continuum from informal and quick to formal and long, depending on the type of product. The continuum is usually described as a high involvement product to a low involvement product. A low involvement purchase is typically one to which the consumer gives little thought. There are many reasons for this — either the product costs little relative to income, or it is a routine purchase, or the consumer has done the research for prior purchase of this product. A routine purchase might be a can of beans, a low dollar value purchase would also be a can of beans. But buying a new computer is not normally a low involvement purchase. Unless, for example, at some point in the past bought a Mac, and have never really put much thought into it after that –you just went out and bought a new Mac. Changing this particular purchase decision from a high-involvement one to a low-involvement one was one of the strokes of marketing genius that Apple has exhibited.
No matter how much or little information a person wishes to gather, there are a number of different sources that they can turn to. The sources of information are broken down into internal and external. Internal information is that which the consumer already knows, for example from past information searches or prior consumption. If you know what a Big Mac tastes like, it makes the decision not to buy one all that much easier, for example. External information can come from any number of external sources — family, friends, advertisements, sales reps, the Internet or product reviews. High involvement purchases will usually involve a number of different sources, including several external ones, whereas a low involvement purchase might have a very brief search. The information search process will inform the next two stages of the consumer decision-making process.
The third stage is the evaluation of alternatives. For most purchases, the information search will have yielded several viable alternatives to meet the need that the consumer has identified. The third stage involves evaluating those different alternatives. The consumer will have a list — usually informal — of the criteria that will be used to make the decision. The alternatives will be evaluated against these criteria. This is typically an informal process, except for high-detail people and high-involvement purchases. In many case, there will be one or two defining variables on which the consumer is unwilling to compromise. These can be defined by the consumer internally, or sometimes they can be defined by external forces. In the process of evaluating the alternatives, the consumer will weigh the alternatives against the critical criteria. The goods/services that meet the most important criteria are known as the evoked set, while the goods/services that do not meet the criteria are known as the inept set (Consumer Factor, 2015) For example, the consumer may determine that for a new set of tires, price and safety are both important. Different tires will be evaluated on those measures, but ultimately the consumer may feel that one of those measures is more important that the other. So the weight of the different attributes and the weight of the different products on those attributes is typically how this informal process works.
It is worth noting that new technologies have altered some of these processes somewhat. Haubi (1999) notes that interactive decision aids, sort of like virtual sales people, can be used to spur consumer decision making, in part by informing and in part by increasing the immediacy of the decision. Moreover, consumers may rely more on product reviews by their peers when shopping online. Plus, there can be a delay between the 3rd and 4th steps, for example when a good is placed in a cart, left there for an extended period, only to be purchased months later because it was still in the cart, creating a new source of external stimulus to kick-start the decision-making process anew, but in a way that short-circuits the rest of the process.
Mobile has a strong influence as well. Risker (2015) notes that mobile lowers some of the barriers to purchasing, including the barriers to gathering information and with pre-stored payment information there are barriers to purchasing as well. But most importantly, it lowers the physical barriers that once defined the shopping experience. Even with computers, one typically had to be in front of a computer screen, and mobile has done away with even that requirement. With lower barriers to online shopping, the nature of the consumer-decision making process changes, becoming shorter and less rigorous, even for high-involvement purchases, taking people very quickly from the first stage to the fourth.
The fourth element of the consumer decision-making process is the purchase decision. The purchase decision is typically made on the basis of the analysis of alternatives, but can be altered at the last minute by surprise new information. There can also be a change at this point if there is a problem with payment or making the purchase. If a consumer needs something now, and the product/service of choice is unavailable, substitution is likely to occur.
The fifth element of the consumer decision-making process is the post-purchase behavior. This affects the perception of the purchase — and by extension the product and brand — and therefore should be ignored by marketers. The consumer is likely, for example, to evaluate the purchase on the basis of the original need. This is a tricky area for marketers, because if the product does not fulfill the need, that could be a product issue, or an issue somewhere else in the decision-making process, but it will almost always reflect on the product. A product can be removed from the next evoked set of alternatives if it fails to meet consumer expectations. For marketers, this stage is critical because a satisfied customer is a loyal customer. In fact, if there is an opportunity to salvage a customer relationship by handling problem swell, that usually breeds the most loyal customers of all (Homburg & Furst, 2005).
Factors Influencing this Process
There are a number of other factors that influence the consumer decision-making process. Determining need and evaluating alternatives is related to motivations and values. One’s motivations for making a decision are going to be a primary determinant, for example of the cost of a purchase. Someone whose needs are entirely pragmatic is likely to pursue a low cost item, but someone buying a gift may be doing so more for prestige or esteem reasons, and therefore may specifically opt to spend more, or seek out a particular brand. So one’s motivations — what is the need that needs fulfilling, can have substantial influence over this process.
Attitudes are another key element, particular during the evaluation of alternatives. Attitudes are often internal information, meaning that consumers have pre-determined attitudes about certain products or brands. Some people choose sports teams simply because that is the family’s team. Some people feel a particular way about a brand, regardless of whether that emotion — attitude — has any rational basis. In many instances, external forces forge attitudes as well. Peer groups are especially important in the formation of attitudes, as in determining fashion trends, and what purchases are deemed acceptable. Companies can also try to create particular attitudes. Tesla wants its buyers to identify as being at the cutting edge of environmental stewardship. Apple had a multi-year campaign to convince consumers that its products were cooler than Microsoft’s — product attributes were seldom discussed in the spots; they were entirely about creating attitudes among members of the company’s target market.
Attitudes can be exceptionally powerful, specifically because they are not rooted in rational analysis. It is one thing to weigh specifically and deliberately the pros and cons of different alternatives, but attitudes are emotional. They are difficult to counter — one can easily counter a price or other tangible fixed attribute, but attitudes are intangible, nebulous and much harder to counter. A good example of how sticky attitudes are is with American cars. They earned such a poor reputation in the 1970s and 80s that no matter how well they make their vehicles today, many consumers are rigid in their subjective attitude that American cars are poorly-made.
The type of message will also influence consumer-decision making. The type of message is particularly important during the evaluation of alternatives, and the research stage. A message that resonates with consumers will put a product into the evoked set, and a message to which the consumer does not response can put a product into the inept set. Effective marketing would have a message powerful enough to move a product from the inept set to the evoked set. What messages are effective is dependent not only on the product and its category, but on the individual consumer as well. The role of the marketer is to understand a target consumer well enough that the message can be crafted in a manner that resonates with the target market.
Family and culture are also significant influences in the consumer decision-making process. Family is primarily an external influence, whereas culture is an external influence. Culture defines the sort of values and product preferences on aggregate such that most members of a given culture will be fairly predictable in their response to certain products/services/messages. Because different cultures behave differently with respect to how the acquire and process information, and in terms of the values that they have, there are significant implications for marketers with respect to how to handle different cultures. There is considerable debate about the idea of localized marketing, or marketing to specific communities, versus having a global marketing strategy (de Mooij, 2011).
Lastly, it is important to remember that the consumer buying process can be influenced or derailed by aspects relating to purchase and post-purchase. First, it is important to make purchasing easy, and that includes everything from payment to price to delivery. It is with substantial consternation that books and electronics stores noted consumers would visit their stores, and then make their purchase at home on Amazon — Best Buy undertook the challenge and has been able to counter this phenomenon, but this buying pattern had sent a signal to Best Buy that it was inhibiting the purchase decision in some way, prompting this response (Solomon, 2014). Another example is with smartphone shopping. Apple made a point to only offer a handful of models, only superficially different. The purchase decision is much easier than trying to choose from any of a hundred Android phones — Apple encouraged the purchase decision not with its product attributes but with a competitive advantage in the decision-making and shopping processes.
Post-purchase is also important — knowing that you will get great service at one store and mediocre service at another can tilt the decision. Back to smartphones — it’s easy to get your iPhone serviced, good luck figuring out how to get a Samsung serviced. So post-purchase attributes matter for people. Car companies often tout resale value of their new cars as an attribute, for this reason.
There are many different elements to the consumer decision-making process. The process begins with identifying a need, and then moves to the information search. The goods are divided into an evoked set and an inept set, with the former coming into consideration of the sale. Consumers have a few select criteria by which they make their decision, and the marketer has an opportunity to define these criteria while simultaneously framing their product as the best with respect to those criteria. But ultimately, the purchase and post-purchase need to be streamlined and attractive to the consumer as well.
Plus, there are number of different factors that influence these processes. For example, culture, peer and family groups, the mode by which shopping is done, the message that the marketers convey, the attitudes that the consumer has are all different factors that can influence the purchase decision, and that the marketer must exert an influence over in order to shift the decision-making process towards their product or service.
De Mooij, M. (2011). Consumer Behavior and Culture. Sage Publications.
Haubi, G, (1999) Consumer decision-making in online shopping environment: The effects of interactive decision aids. University of Calgary. Retrieved November 23, 2015 from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.196.378&rep=rep1&type=pdf
Homburg, C & Furst, A. (2005) How organizational complaint handling drives customer loyalty. Journal of Marketing. Vol. 69 (3) 95-114.
NetMBA (2010). Maslow’s hierarchy of needs. NetMBA.com. Retrieved November 23, 2015 from http://www.netmba.com/mgmt/ob/motivation/maslow/
PWC. (2014). Holiday shopping spend forecasted to be down in 2014. Price Waterhouse Coopers. Retrieved November 23, 2015 from http://www.pwc.com/us/en/press-releases/2014/us-holiday-outlook-press-release.html
Risker, T. (2015). Mobile’s disruption to the holiday shopping season: retail and e-commerce. Radium One. Retrieved November 23, 2015 from https://blog.radiumone.com/mobiles-disruption-to-the-holiday-shopping-season-retail-ecommerce-trends-2015/
Solomon, J. (2014). Best Buy tells Amazon: Take that. CNN Money. Retrieved November 23, 2015 from http://money.cnn.com/2014/11/20/investing/best-buy-earnings/
The Consumer Factor (2015). The consumer buying decision process. The Consumer Factor. Retrieved November 23, 2015 from http://theconsumerfactor.com/en/5-stages-consumer-buying-decision-process/
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