Consumers are the users of goods or services produced by manufacturers. Consumers face a lot of decisions each day regarding the type of product or brand to use, and the best place to get the product. Learning about consumer behavior has assisted me in understanding the process through which people obtains, consume and dispose goods and services. On the other hand, business owners always try to understand the consumer behavior since it assists them in formulating perfect marketing strategies, which in return result to increase sales thus more profits (East, Wright, & Vanhuele 2008). While selecting the type of product and services to use, consumers always undergoes a number of processes. To start with, the consumer finds the type of product to consume. Secondly, a selection is done based on products whose utility is high. Thirdly, the consumer looks at a price of the product or service and compares with the available money that he or she is ready to spend. Finally, the consumer makes an analysis based on the available money, the prevailing prices of the product or service, and makes a decision on which commodity to purchase (Shah 2010).
From my learning I came across many factors that affect consumer behaviors to purchase goods and services. These are cultural factors, social factors, personal factors, and psychological factors. From an entrepreneur point of view, understanding the consumer behavior assists in designing of a marketing mix plan in aimed at encouraging consumers to purchase more. According to Armstrong and Kotler, development of a correct distribution strategy is essential for every business. Distribution strategy helps businesses to concentrate and utilize the available resources and opportunities to realize profits and become competitive in the market (2008). A perfect marketing mix is made up of four components, price, product, promotion, and place, also known as the 4Ps. Figure 1 is a representation of a marketing mix model. On the other hand, the study of consumer behavior assisted in learning the psychology of how consumers think, debate, and make selections between different alternatives. Secondly, the study shows how the environment influences the consumer’s decision to buy or not to buy a product.
The Australian Government initiated the Consumer Best practice model in an effort to protect consumer’s rights in the electronic commerce. The industry associations adopted the code of conduct to guide on their trade and act as a self-regulatory framework to protect consumers. All the businesses working in the electronic commerce environment need to adopt these rules concerning the best Practice model in order to protect the rights of consumers. Through the adoption of the code of practice, the benefits are consumer rights protections, consumers can easily access the information concerning the market prices and can be able to carry out online shopping in the overseas markets. The only disadvantage of using the BPM is that it is expensive to adopt, and the business must follow policies as defined by the treasury (Australian government, 2003).
Figure 1: the Marketing Mix Mode showing 4Ps
Theories of consumer behavior
A lot of theories have been derived concerning the consumer behavior. Out of the many theories two were of great importance to me regarding this discussion. These are the psychological influence on consumer behavior and social factors on consumer behavior theories.
Psychological influence on consumer behavior
In this theory psychology influences the consumer’s decision to purchase a product based on an individual perception, product motivation and values, personality, self and lifestyle, and consumer attitudes and beliefs. Perception is the process through which an individual finds, organizes and interprets given information regarding a product of service. Psychologically, an individual must be attentive while making any selection in order to avoid any distortion. Secondly once a selection is made, the consumer should possess the ability to retain it no matter what the situation (Solomon & Russell-Bennett 2010). In the present day business environment consumers are exposed to a lot of information due to the increased use of internet services. This has changed the consumer’s perception from the olden ways into modern methods whereby, an individual has the ability to get all the information about a product or service. Although internet shopping is more convenient and time saving, it also poses some risks especially when the commodities are to be imported from external markets (Tan 1999).
The theory also gives the consumer’s decision to buy a commodity based on the product motivation and values. Marketers should motivate their potential consumers through increasing the value of their products in order to attract more buyers. Business involves making use of crazy ideas to generate profits using innovative marketing strategies like those adopted by various leading business corporation. A business should have good value for its customers since most entrepreneurs aim at creating good customer relationships by understanding customer needs, developing value-creating strategies, and planning complex marketing programs that ensure full customer satisfaction. In return from these the business is capable of capturing customer’s value and gaining through profits, more sales, and loyalty from customers. . Figure 2 shows a marketing model for creating customer value in an organization.
Figure 2: Marketing process model
In addition I see motivation as the core reason why a customer may prefer on commodity to another. According to Kotler and Armstrong, customers get satisfied from the services offered they in return bring about rewards to the business resulting to company growth. On the other hand, entrepreneurs should approach customers and make them products and brands offered in their organization (2011). Creating customer value and motivating customers enables an organization to retain most of its consumers and also acquire more. Customer motivation is achieved through promotions, and advertisements. In an effort to achieve sales and marketing targets, businesses are faced with a lot of challenges, threats and opportunities that occur in an effort to motivate consumers. In the present environment consumers have the freedom to chose when, how, and where to purchase a brand. In order to fully motivate consumers and understand their behavior the new model of the marketing mix is used. This model makes use of interactive promotions through either live promotions or through the websites Launchfire Interactive 2008).
Psychological theory also uses the factors of personality, self and lifestyle in understanding consumer behavior. Personality is an individual’s behavior that determines the perceptions of doing things. Personality is characterized by personal traits, attitudes, manners, and behavioral patterns. According to Solomon & Russell-Bunnett, consumer’s ability to purchase a commodity is determined by consumer’s personality (2010). On the other hand, consumer lifestyle plays a significant role in making a decision on the type of commodity to purchase. All efforts and activities in a business should have unity and focus on giving customers what they demand. If customers prefer to have constancy in service, the business should ensure that, if the customers are price sensitive, the businesses should offer fair prices, if customers focus, or are delighted more on reliability and variety, then the businesses should unify its efforts and resources toward delivering that. Businesses operate to attain growth through profits; thus, the operations should be cost effective (Lewis, & Slack 2003).
Social factors on consumer behavior
Another theory that influences the consumers’ ability to buy is concerned with the social influences on consumer behavior. Social and cultural factors determine the ability of consumers to purchase different commodities and use different services. Consumer behavior on the issue of social factors is affected by the reference group, culture, the family, and roles and status. Culture tends to drive the buyers behavior with regard to the norms and society beliefs. Culture is capable of affecting the consumer behavior, and eventually affects the marketing mix of a product. Due to the evolving nature of different cultures, the business people should define better ways of monitoring the social-cultural environment. The main causes of culture changes are development of new technologies, shortage of available resources, shifting populations, changing values, and customs derived from other cultures (Solomon & Russell-Bennett 2010). Family members strongly influence the buyer’s ability, which has made marketers search for roles played by different people in a family, that is, father, mother and children. If for instance the buying decision in a family is made by the father, then marketers opt for advertisements and promotions that target men more than any other group (Shah 2010).
On the other hand, social factors are determined by reference groups. Reference group influences the buyer’s decision in the following ways. First is the type of information the buyer gets from them, utility creation, and value-expression. On the issue of information, people always seek information about a certain brand from professionals since who have expertise on using either a product or service. Alternatively buyers will have more trust on people who work in industries that produce certain brands since they have total information regarding the brand. In addition, the method a certain expert uses to determine the suitability of a product is the same that individual consumers use while purchasing the same product. On the issue of utilitarian influence, a consumer tends to purchase a brand in order to satisfy fellow workmates or friends preferences. These are the people who the consumer has close social interaction with. Moreover, consumers purchase decision is also influenced by the family members in an effort to satisfy the needs that the family members expect from him or her. Finally, value expression influences buyer’s decision in the following ways. To start with buyers purchase products that will create a good image for the others. Secondly, a consumer would like to be associated with a certain group by buying a product that the group likes regardless of its price. Finally, by buying a certain brand an individual thinks would make others have a different perspective towards him or her (Management Study Guide 2012).
The last factor influencing consumer behavior under social factors is the social class. Different people belong to different social classes depending on their financial status, family backgrounds, cultural believes, and norms. People who come from wealthy families always purchase expensive and luxurious goods since they have enough money to spend. Social class determines values, interests and behaviors of certain people in the society, which are not restricted to the amount of income earned. Social class will influence the type of commodity a buyer should possess but has little or no impact on price changes. Moreover, individual’s income level determines the amount of money to use for a given commodity, considering the social class one falls under. According to Solomon & Russell-Bunnett (2010), both the social class and the income level helps in determining the purchase of luxuries and symbolic brands. Social class has a great influence on fashion since people purchase products depending on the available fashions. The new generation has developed a tendency of watching fashion shows on television in order to get updates on the new available fashions in the world. These advancements have overtaken the olden ways of doing business due to the availability of the internet and media talks towards the same (Kalb 2004).
Consumers are the source of profit for an industry; therefore, their environment should be well looked at to avoid certain incidences, which might be of risk to them. The organizations working in the electronic commerce have no option than to follow the consumer best practice model. The consumers making use of the e-commerce should be protected the same as the other forms of commerce. When dealing with the overseas market, this code is critical because the goods supplied to consumers are checked for damages and other risks by the commonwealth department. In addition, consumers can easily identify and locate the source of the products they are using, because all the suppliers are registered and their information is on the internet. Adoption of the law can also pose some of the shortcomings, in the case where the consumer represents misleading information concerning a certain organization leading to its closure (Hynes et al, 2010).
In general the modern marketing practices have overshadowed traditional ways. Marketers are striving to implement various changes in their businesses that would assist them win more consumers, but the current environment is changing at a faster rate than they can imagine. On the other hand, the effect of environmental, social and governance (ESG) factors have brought about many challenges in the business environment. Society has a great influence of purchasing of goods and services as seen from the above discussion. Moreover, the government regulates all business operations regarding production, promotions, buying, selling and disposal of products. According to EIRIS (2009), ESG factors assists in identifying the source of financial crisis, and the government issues have greatly affected risk management in various institutions.
From learning about consumer behavior I came up with the following recommendations. These recommendations show how marketers should perform their marketing processes differently in order to attract more customers. First consumers need to possess quality products but at an affordable price. Business people should come up with operations that ensure quality brands are manufactured at low costs so as to cater for their consumer demands. Secondly the government should be on the forefront to cater for consumer demands. The Federal government is responsible for the health of consumers and the improvement of the businesses. It is their duty, therefore, to ensure that suppliers take to the market products, which will not harm the consumers. In so doing, the government should introduce a mandatory code to for those businesses operating in the electronic environment and those who do not respect the customer rights. Those organizations that violate the code should receive a penalty according to the Australian law regulations, and this is a fair deal since they pose health risks to the consumers. Those corporations that are in breach of the voluntary and mandatory codes are face the penalties of having to write to the Commonwealth minister an explanation as to why they have inferior products. The Commonwealth minister has the mandate of either closing the industry or fine them an amount not less than $1.1 million (Goldring, n.d).
Thirdly, consumers and marketers should adopt the modern e-business practices. Some of the businesses working in the electronic environment have little concerns on the consumer rights and ends up exploiting them; therefore, the federal government should introduce a mandatory code to stop this behavior. Businesses who fail to comply with the law have to face the penalties from the Federal with accordance to the Australian consumer law, which is a best step to regulate those suppliers who trade substandard products to consumers. Those corporations, which do not adhere with the codes, are liable for criminal conviction and fines, the industries are closed and forced to pay for damages and losses incurred by consumers. The suppliers who have the voluntary recall have to notify the commonwealth minister and incase the recalled goods were already exported to notify consumers overseas and the Commonwealth minister of the incidence (Australian government, 2010).
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