The BASICS OF THE BUYER DECISION PROCESS

Published Date: 23 Mar 2015

The report highlights the various factors affecting Ford Motor company's sales. Just like any other multinational companies, Ford depends on characteristics affecting consumer behavior, which are psychological, personal, cultural and social factors.

The report looks in to the buyers decision process, which is an important process by which every individual goes through before purchasing a product. It involves recognizing a need, collecting information, evaluating the different alternatives, purchasing the product and the consumer's post purchase behavior as per their satisfaction levels.

The four types of Consumer Buying Decision Behaviour are also explored. These four types are complex, dissonance-reducing, habitual, and variety-seeking buying behaviour.

This is a report about the stages on which a consumer adopts a certain a product to their daily habits. This also shows the different rates of adoption due to the different characteristics of  the consumers and the products.

FORD COMPANY: OVERVIEW

Based on a survey (Appendix A) we initiated, we found that Ford is a popular vehicle of choice in the United Arab Emirates.

The Ford Motor Company is an American multinational automaker residing in Dearborn, Michigan. Henry Ford was the founder automaker and integrated on 16th June 1903. Ford is the second largest automaker in the U.S. and the fifth-largest in the world based on annual vehicle sales in 2010 (Schmitt, 2011). Ford was the fifth largest automaker in Europe, at the end of 2010 and is ranked eighth in the 2010 Fortune 500 list (2010).

The companies automotive brands includes Ford and Lincoln and owns a small stake in Mazda in Japan and Aston Martin in the UK. Ford Motor Company sold Jaguar and Land Rover to Tata Motors in March 2008. Also, Ford sold Volvo to Geely Automoblie, in 2010 and at the end of 2010, it discontinued the brand Mercury.

Ford Middle East - U.A.E

In the 1940's, Ford first appeared on the Arabian Peninsula, with the famous F-1 pick-up truck, also identified to most Arabs, as the Red Truck or the wanette (2011). Ford put forwards uniquely designed and affordable vehicles for the world's varying lifestyles - from the Model T to latest favorites like the Mustang in the United States, the EcoSport in South America and the Mondeo in Europe (2011).

CHARACTERISTICS THAT AFFECT CONSUMER BEHAVIOUR

Internal characteristics that determine our behaviour: Psychological and Personal factors.

Psychological Factors

Motivation

A motive is a need that directs a person to look for fulfillment of the need. According to Sigmund Freud, people are unaware about "psychological forces shaping their behavior" (Kotler, 2007). Human urges, which are not acted upon, reappear in dreams.

Abraham Maslow presented the concept of the hierarchy of needs:

Perception

Perception is the way one looks at a significant picture of the world. And the three perceptual processes - selective exposure, distortion and retention - emphasize that as consumers are daily exposed to numerous advertisements, Ford marketers must work hard to grab its potential customers by creating appealing advertisements to consumers with a common perception about the brand: high quality and economical.

Learning

A person's mannerisms are influenced through one's varying experiences. Learning occurs through the interplay of drives, stimuli, cues, responses and reinforcement (Kotler, 2007).

Beliefs and attitudes

The consumers' beliefs and attitudes towards a particular brand creates a brand image which will affect buying behavior.

Personality and self-concept

Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to their own environment (Kotler, 2007). A consumer's personality will influence their buying behavior; Ford consumers identify with the brand's personality of long-standing reputation.

Personal Factors

Age and Life cycle Stage

"People change their tastes in food, clothes, furniture, and recreation over time. Buying is also shaped by the stage of the family life cycle…"(Kotler, 2007).

UAE is a fast moving country where everyone needs to have a car - from the lower level to the highest level employees. The population consist more of males than females.

Therefore, more males are interested in buying cars than females and 'the average life expectancy is 75 years, higher than any other Arab country' (2003). The 15-65 age group has a male/female sex ratio of 2.743, so there are more people of this age group buying cars.

Occupation

A person's salary affects the amount of goods he/she can purchase. Blue collar workers tend to buy cheaper cars or choose a cheaper alternative. In contrast, white collar workers can afford to indulge on more expensive vehicles.

Economic situation

A person's economic situation will affect their product choice and buying behavior.

External characteristics that represent the environment in which the individual behavior takes place: cultural and social factors.

Cultural Factors

Culture

Culture is a set of beliefs, attitudes, values, and practices shared among a similar group of people. One's culture will influence their buying behavior. For example, vehicle and horse racing are quite significant in Arab culture.

Sub Culture

Every culture includes subdivisions that differentiate one identity from another. Sub cultures can include racial groups, nationalities, religions and geographic location.

Social Class

One's social standing can also dictate their buying behavior. In the UAE, it is not uncommon for most high-class families to own more than three luxurious cars.

Social Factors

Household types

A person's family can have a strong influence on that person's buying behavior.

Groups

Reference groups are groups a person is not a member of but have a 'direct or indirect influence on the person's attitudes or behavior' (Kotler, 2007). On the other hand, aspirational groups are groups one wishes to be a part of. Membership groups are groups to which a person is personally a member of and has a direct interaction on that person's mannerisms. Opinion leaders are often looked up to because of their 'special skills, knowledge, personality or other uniqueness' (Kotler, 2007).

Roles and Status

Every person is included in a particular group or organization. A person's role and status will dictate the amount of responsibility and activities to be performed as anticipated by their peers.

BUYER DECISION PROCESS

Every buyer faces a decision process when they are about to purchase an item that requires some thought and consideration. These items usually include expensive and luxurious products like cars. There are so many different brands of cars; all of which offer different features, designs, models. So how do customers make their buying decisions?

The buyer's decision processes are the stages that the buyer goes through in order to make a choice on what products or services to purchase. The buyer's decision processes include:

Need or problem recognition

The first step in the buyer's decision process is when the buyer recognizes a problem or need. The problem or need recognition can be activated by either internal or external stimuli. There are many reasons why people want cars: for transportation, as a response to marketing efforts (advertisements), or to even be accepted in social groups.

Information search

Once consumers have identified their need, they will automatically try to solve it by searching for information about various product or services that can satisfy their needs. These aroused consumers will either have a highlighted attention that is when they become more receptive to the information related to the desired product or service. Or they would go in to an active information search in search of the product's key attributes such as Brand, quality and features.

When the consumers actively search for information, they look into various search types:

Internal search:

This occurs when the consumers remember any information about their or other people's experiences with that product or service. However, this type of search is not reliable due to the fact that the consumer's emotions about that product may influence their buying decision.

External search:

These include personal sources such as family and friends; these types of sources have a direct influence on a person's buying decision. While the public and commercial sources, use advertisements, sales people, radio, and television to promote the product or service to the consumers.

Ford Motor Company does it best to promote its cars to the customers by advertising on popular programs worldwide, and by uploading articles about the features of their cars on their website.

Evaluation of alternatives

Once consumers have obtained enough information, they start an evaluation process, where they use the information to judge the different brands selling the same product. In the automobile industry, there are many brands for consumer to evaluate from which include: Ford, Toyota, Honda, GM, and many others. Consumers look into car features (design, engine size, and cost) or they might even test-drive other car alternatives before making a decision. Therefore, it is up to the consumer to use the information that they have obtained to evaluate the various companies.

Purchase

The evaluation of the alternative brands leads to the actual purchase of the product. This only happens once the customer has performed a cost-and-benefit analysis of each alternative brands, and will now purchase the good that the consumer assumes has the highest value.

Post-purchase

The last step of the buyer decision process is the post-purchase behavior, which is when the consumer takes further action based on their experiences and satisfaction level of the product. The Ford Motor Company practices customer relationship management; the company usually stays in contact with their customers to know more regarding their dissatisfactions or satisfactions with their recently purchased car. These comments from consumers can be used to make adjustments to their car, which then helps to improve the company's delivery of satisfaction.

This is the most important step as the consumer's help the company to improve their standards and satisfy the customers.

BUYING DECISION BEHAVIOUR

There are different approaches to buying a product or service, and the consumer can be as involved as they wish. "Consumers are likely to be highly involved when the product is expensive, risky and important to them or to others whose opinions they value. Cars, houses, luxury goods and education are likely to be high involvement for a consumer." (Philip, K et al. 2007, p. 256)

Listed are the following approaches to buying a good or a service:

Complex buying behaviour

Consumers are highly involved in the buying decision process and recognise significant differences between brands. For example, when buying a camera, a professional photographer would be able to recognise the difference between a 10.1 and 12.3 megapixel camera.

Because cars are generally expensive and are an investment, potential buyers do research before they purchasing one. Cars, as well, have many technical specifications that buyers need to familiar themselves with. Here are factors a buyer would consider:

Cost- can the consumer spend money on exotic cars or prefer something more economical, like a second-hand car?

Payment method - should the car be paid in cash or can be paid in instalments?

Engine size - different car companies offer different engines sizes.

Customisation - can the car be customised? Ford allows customers to view, through their website, standard and optional features of their desired vehicle.

Dissonance-reducing buying behaviour

Consumers are highly involved in the buying decision process but do not see significant differences between brands. Consumers, with this behaviour, tend to buy for convenience.

Picture a consumer at a supermarket deciding on which brand of electric toothbrush to purchase: Brand A's electric toothbrush has straightforward features and costs around AED 30.00. On the other hand, Brand B's electric toothbrush is priced at around AED 50.00 for special features such as a 2-minute timer and specific-purpose brush heads. The consumer purchases Brand A instead because it costs less and believes that a normal brush head would be able to perform just as well as a special brush head. After buying it, however, the consumer might experience post-purchase dissonance after hearing great reviews about Brand B's specific-purpose brush heads and realises that the extra AED 20.00 might have been worth it.

To reduce such dissonance, Brand A's marketers should continue to communicate with their customers to hear their complaints, suggestions and, prove to the consumer that they made the right choice in buying their product.

Habitual buying behaviour

There is low-involvement on the consumer's part as they purchase goods out of pure habit. The consumer fails to see any significant differences between brands, especially when consumers are buying a low-cost product, such as vegetables, salt, etc. The consumer's buying mentality is to be familiar with a certain brand; so it is not being loyal to a particular brand but being accustomed to it.

Variety-seeking buying behaviour

The consumer's mentality is to purchase goods in a trial-and-error basis: they switch from one brand to another when dissatisfied, hence, there's low-involvement and consumers recognise significant differences between brands.

When buying a laundry detergent, the consumer has to buy from one brand first, test it out, and move on to another brand when it does not suit the consumer's personal preference.

Sidharta Roy discussed that challenges faced by marketers is to make their products that stand-out and satisfy customers to prevent them from switching to another brand. Roy states that this can be achieved by offering prices lower compared to competitors, trial samples, special deals, coupons, and work harder in their advertising efforts. (2007)

BASICS OF THE BUYER DECISION PROCESS

The rate of adoption is defined as: the relative speed with which members of a social system adopt an innovation. It is usually measured by the length of time required for a certain percentage of the members of a social system to adopt an innovation (Rogers, 1962). There are 5 stages in which a typical consumer delve into when learning about a new product. This is called the Adoption Process which is the mental process through which an individual passes from first learning about an innovation to final adoption. And adoption as the decision by an individual to become a regular user of the product (Kotler, 2007). Here are the 5 stages:

Awareness

The consumer have heard of the product but doesn't have enough information about it.

Interest

The consumer will look for facts about the product.

Evaluation

The consumer weighs on whether it's practical to buy the product or not.

Trial

The consumer will try to use the product limitedly to estimate its worth or usefulness.

Adoption

The consumer decides to incorporate the product on his/her daily habits.

Individual Differences in the adoption of Innovations:

Each consumers have different personalities and backgrounds hence there is diversity in their role in a society. Differences in responsibilities affects the buyers' readiness in trying new products therefore they are categorized in different adopter categories

Innovators

Innovators are those who help get exposure of the products but they are a minority in the market. They are those who are more bold than other consumers who tries new ideas quite easily.

Early Adopters

Are the opinion leaders to the rest of the market. Opinion leaders are those who affects the opinion of other strongly. They adopt new ideas easily but they are more cautious than the innovators.

Early Majority

They are more likely to be considered as a "Typical Consumer" and are estimated to be 34% of the consumers. They are not considered leaders like the Innovators and the Early Adopters but they adopt new ideas more than the late majority and the laggards.

Late Majority

This group is more skeptical than the last 3 mentioned and will only buy a products once majority of the population have accepted it.

Laggards

This group mistrusts change and adopts only after the product is no longer considered an innovation but more of a tradition.

Influence of Product Characteristics on the rate of Diffusion:

The characteristics of products of a product affects its distribution and also the rate of adoption among consumers. Some products takes so long to be accepted by the public and others are more easily accepted by the consumers given these five characteristics given by Everett Rogers:

 Relative Advantage

An innovation must be presented as a development from the products currently used. This is measured to the degree on which product is more superior than the other. Aesthetic, practicality and technological advantage can serve as the basis of innovation.

Compatibility

When an innovation is attuned with existing norms and traditions this will boost its chances of rapid adoption.

Complexity

Complex products tend to be adopted more slowly and requires more work from both the consumers and producers.

Divisibility

The degree to which a new product can be used for trial purposes increases the rate of adoption.

Communicability

This refers to the degree on how it shows the relevance of the product to the consumers. The more important it is to the consumers the faster a product will be adopted.

REFERENCES

2003, Average Life Expectancy in UAE Rises to 75 Years UAE, Retrieved 2 March, 2011, from

2010, Fortune 500 2010: Fortune 1000 Companies 1-100 - FORTUNE, Retrieved 1 March, 2011, from http://money.cnn.com/magazines/fortune/fortune500/2010/full_list/

2011, Ford Middle East - UAE - Ford Brands', Ford Middle East, Retrieved 1 March, 2011, from http://www.me.ford.com/servlet/ContentServer?cid=1178859765406&pagename=FME/DFYPage/Ford-Default&c=DFYPage&site=FME

27 April, 2009, Consumer Buying Decision Process, Retrieved 27 February, 2011, from http://www.thesmartmarketing.co.cc/index.php/basics/13-consumer-buying-decision-process

Dictionary of marketing. (n.d.). Retrieved from http://www.medialine.de/deutsch/wissen/dictionary-of-marketing.php?snr=124

http://www.uaeinteract.com/docs/Average_life_expectancy_in_UAE_rises_to_75_years/7752.htm

Kotler, P., Brown, L., Adam, S.,Burton, S., & Armstrong, G., 2007, Marketing, 6th edn, Pearson Education Australia

Kotler, P., Brown, L., Adam, S.,Burton, S., & Armstrong, G., 2007, Marketing, 7th edn, Pearson Education Australia

Rogers, E. M. (2003). Diffusion of innovations (5th ed.). New York, NY: Free Press.

Roy, Sidharta, 2007, Variety seeking buying behavior, Retrieved March 1, 2011, from http://www.citeman.com/1644-variety-seeking-buying-behavior/

Schmitt, B. 2011, Hyundai 4th Largest Automaker, Overtakes Ford, Retrieved 1 March, 2011, from http://www.thetruthaboutcars.com/2011/01/hyundai-4th-largest-automaker-overtakes-ford/

BIBLIOGRAPHY

Consumer Buying Behaviour, n.d, Retrieved February 26, 2011 from http://www.learnmarketing.net/consumer.htm