CONSUMER LOYALTY

AND THE DECISION

MAKING PROCESS

HERBERT THWEATT, D.B.A.

PurposeThe purpose of the project is to examine and present

Consumer Loyalty and the Decision Making Process.

Analysis of the Consumer Decision Making Process

Consumer decision making is the cognitive process of selecting a course of action

from among multiple alternatives. Reason, J. (1990). Common examples include shopping

and deciding what to eat. Decision making is said to be a psychological construct. This

means that although we can never "see" a decision, we can infer from observable

behavior that a decision has been made. Therefore we conclude that a psychological

event that we call "decision making" has occurred. It is a construction that imputes

commitment to action. That is, based on observable actions, we assume that

people have made a commitment to effect the action. In general there are three

ways of analyzing consumer buying decisions.

They are:

Economic models - These models are largely quantitative and are based on the

assumptions of rationality and near perfect knowledge. The consumer is seen to

maximize their utility.

Psychological models - These models concentrate on psychological and cognitive

processes such as motivation and need recognition. They are qualitative rather than

quantitative and build on sociological

factors like cultural influences and family influences.

Consumer behavior models - These are practical models

used by marketers. They typically blend both economic

and psychological models.

Complex Decision-Making and Store Choice

In Consumer Behavior Complex decision-making are consumers evaluating brands in a detailed

comprehensive manner. Complex decision making can be conceptualized as the process of problem

solving in meaningful and important, but complex, dynamic and partially opaque situations. This process is

open to a number of cultural influences, among them educational practices, environmental predictability,

and power distance.

Usually the consumer’s choice of store comes first and influences the choice of brand. Also,

the consumers will often make a brand decision in the store when shopping. In such cases, store choice

conditions brand choice.

Complex decision making should incorporate consumer evaluations of brands as both

objective entities and subjective symbols. The store choice depends on the degree to which the

consumer’s image of the store relates to his or her purchasing and shopping need.

Categorization of Brand, Purchase and Post-Purchase Evaluation

The consumer compares the brands and products that are in their evoked set. How can the marketing

organization increase the likelihood that their brand is part of the consumer's evoked (consideration) set?

Consumers evaluate alternatives in terms of the functional and psychological benefits that they offer. The

marketing organization needs to understand what benefits consumers are seeking and therefore which

attributes are most important in terms of making a decision. Marketing organizations evaluate how brands

are performing, examines if they are maintaining a competitive edge, determines how successful brand

communications have been, challenges their continued relevance to the consumer and

makes recommendations on what branding might accomplish in the future. The

objective of brand evaluation is to assist organizations in building a more

differentiated, relevant and consistent brand experience.

Brand:

Purchase:

In many cases the solution chosen by the consumer is the same as the product whose evaluation is the highest.

However, this may change when it is actually time to make the purchase. The "intended" purchase may be altered at

the time of purchase for many reasons such as: the product is out-of-stock, a competitor offers an incentive at the

point-of-purchase (e.g., store salesperson mentions a competitor’s offer), the customer lacks the necessary funds

(e.g., credit card not working), or members of the consumer’s reference group take a negative view of the purchase

(e.g., friend is critical of purchase). Sandhusen, R. (2000). Marketers whose product is most desirable to the

consumer must make sure that the transaction goes smoothly. For example, Internet retailers have worked hard to

prevent consumers from abandoning online purchase (i.e., online shopping carts) by

streamlining the checkout process. For marketers whose product is not the consumer’s

selected product, last chance marketing efforts may be worth exploring, such as offering

incentives to store personnel to "talk up" their product at the checkout line.

After buying a product, the consumer compares it with expectations and is either satisfied or

dissatisfied.

Satisfaction or dissatisfaction affects:

1. consumer value perceptions

2. consumer communications

3. Repeat-purchase behavior.

Many firms work to produce positive post purchase communications among consumers and contribute

to relationship building between sellers and buyers.

Cognitive Dissonance. The feelings of post purchase psychological tension or anxiety a consumer often

experiences.

Firms often use ads or follow-up calls from salespeople in this post purchase stage to try to convince

buyers that they made the right decision.

Post-Purchase Evaluation:

Societal Implications of Brand and Store Loyalty

A recent IBM survey of 30,000 people uncovered several trends that speak to the dawn

of a new day in consumerism. Some 90% of those polled are changing what they spend to

some degree. That may seem like a no-brainer but consider, however, that 90% of the general

population is not facing hard times. What's happened is that our psychology has shifted to a

place where we're all worried and feeling pinched even if we're not in reality.

The biggest revelation from the IBM survey is that 30% of those polled have become what are

called "shifters." That means they have absolutely no store or brand loyalty; they just want the

most for their money wherever they can get it. Of course, that also means 70% are still brand

and store loyal, but the best deals will obviously flow to the 30%. Howard, C. (2009).

Definition of Perception and the Process of Consumer Perception

In philosophy, psychology, and cognitive science, perception is the process of attaining awareness or understanding of

sensory information. The word "perception" comes from the Latin words perceptio, percipio, and means "receiving, collecting,

action of taking possession, and apprehension with the mind or senses." (Oxford English Dictionary)

Perception is one of the oldest fields in psychology. The oldest quantitative law in psychology is the Weber-Fechner law,

which quantifies the relationship between the intensity of physical stimuli and their perceptual effects. The study of perception

gave rise to the Gestalt school of psychology, with its emphasis on holistic approach. What one perceives is a result of interplays

between past experiences, including one’s culture, and the interpretation of the perceived.

In marketing perception is defined as "the process by which an individual receives, selects, organizes, and interprets

information to create a meaningful picture of the world".

The selective perception process Stage Description:

Selective exposure – consumers select which promotional messages they will expose themselves to.

Selective attention – consumers select which promotional messages they will pay attention to.

Selective comprehension – consumers interpret messages in line with their beliefs, attitudes,

motives and experiences.

Selective retention – consumers remember messages that are more meaningful or important to

them.

The implications of this process help develop an effective promotional strategy, and select which

sources of information are more effective for the brand.

Consumer Perception Theory and Marketing Stimuli

Consumer perception theory is any attempt to understand how a consumer's perception of a product or service influences their behavior. Those who

study consumer perception try to understand why consumers make the decisions they do, and how to influence these decisions. Usually, consumer perception

theory is used by marketers when designing a campaign for a product or brand. However, some people study consumer perception in order to understand

psychology in a much more general sense.

Marketing Stimuli are any communications or physical stimuli designed to influence the consumers. A new marketing stimuli tool for analyzing

consumer perception is The BrandAsset Valuator (BAV) is a database of consumer perception of brands created and managed by BrandAsset Consulting, a

division of Young & Rubicam Brands to provide information to enable firms to improve the marketing decision-making process and to manage brands better.

Brand Asset Valuator and BAV also describe the Y&R group managing the database.

BAV measures the value of a brand along four dimensions: "Differentiation," "Relevance," "Esteem," and "Knowledge." Differentiation and Relevance

build up to "Brand Strength." Esteem and Knowledge are used to calculate "Brand Stature." BAV defines these terms as follows:

"Differentiation" quantifies the brand's point of difference.

"Relevance" how appropriate the brand is to you.

"Esteem" how well regarded the brand is.

"Knowledge" an intimate understanding of the brand.

"Brand Strength" describes the brand's growth potential.

"Brand Stature" describes the brand's current power.

BAV's database is based on data on 30,000 brands across 400,000 consumers in 48 countries through 240 studies. (BAV Technologies: 2008 info)

Consumer Process of Perception

In general psychological terms, perception is our ability to make some

kind of sense of reality from the external sensory stimuli to which we are

exposed. Several factors can influence our perception, causing it to change

in certain ways. For example, repeated exposure to one kind of

stimuli can either make us oversensitive or desensitized to it.

Additionally, the amount of attention we focus on something can cause a

change in our perception of it. (Lee Flamand, eHow)

Societal Implications of Information Processing

The problem is that consumers who are not involved reflect the profile of Krugman’s passive consumer with low

awareness of the issues, little processing of information regarding these issues, and little or no consideration of alternative

solutions.

A few studies have been conducted to identify the consumer who would be involved with societal issues. Studies of

political involvement indicate that those least involved have the exact same profile who are older, less educated with lower

income.

The prominent three groups who have a role in increasing involvement

with societal issues among those least involved are:

Business

Government

Consumer groups

At times, companies have a constructive role. Consumer groups have played an active role in trying to

increase awareness of and involvement in key issues. (MKT 645 ILG page 121).

Nature of Consumer Situational Influences

Situational Influences are temporary environmental factors that form the

context within which a consumer decision activity occurs at a particular time and

place. The following are five environmental/situational influences:

1. physical surroundings

2. social surroundings

3. task definition

4. time

5. antecedent states

Situational Influences on Product Attitudes, Choice and Decision Making

Physical Surroundings – are the concrete physical and spatial aspects of the environment encompassing a consumer attitude

or activity such as choice and decision making. Marketers have control over some of these, such as atmospherics.

Non spatial:

music

aroma

lighting

noise

humidity

weather

Spatial:

density/crowding

store location

store displays

Social Surroundings – deal with other persons present who could have an impact on the individual consumer's behavior; the effects of

other people on a consumer in a consumer activity. Example you are in a store looking at personal hygiene products. An attractive classmate of the

opposite gender sees you and stops to chat. Would this encounter affect what brand you choose? Would you delay the purchase?

You are walking through the mall and something in the lingerie store looks interesting. Would you stop to further investigate if you are with

your best friend, or if you are with your mother?

The following can be classified as group influences:

culture

subculture

social class

reference groups

family

Task Definition – reflects the purpose or reason for engaging in the buying or consumption behavior.

The following are Task Definition examples:

shopping for a birthday gift

shopping for bread and milk

shopping for an interview outfit

using a computer at home

using a computer at work

Time and Temporal Perspective – deal with the effect of time on consumer behavior.

Examples:

you have a job interview lined up for next Wednesday and need an interview outfit

you will be graduating in two years and will need to find an interview outfit before then

Antecedent States – features of the individual person that is not lasting or relatively

enduring characteristics. These features are the following:

Momentary moods are such things as temporary states of depression or high excitement.

(Moods are transient feeling sates that are not tied to a specific event or object.)

Momentary conditions are such things as being tired, feeling ill, and so on. (‘SyKronix,”n.d.)

Usage of Situational Variables in Marketing Strategy

Again, physical surroundings and social surroundings – are often used as situational variables in marketing

strategy as mentioned previously in this project. A consumer attitude or activity such as choice and decision making

can be greatly influenced by marketing Firms. Marketers can and do control the following as part of overall strategies:

music

aroma

lighting

noise

humidity

density/crowding

store location

And store displays.

Factors Influencing the Consumer's Decision Making

ProcessCulture is one of many factors that influence consumer decision making. Simply culture is defined as our

attitudes and beliefs. As an individual growing up, a child is influenced by their parents, brothers, sister and other

family member who may teach them what is wrong or right. They learn about their religion and culture, which

helps them develop these opinions, attitudes and beliefs (AIO). These factors will influence their purchase behavior

however other factors like groups of friends, or people they look up to may influence their choices of purchasing a

particular product or service.

Reference groups are particular groups of people some people may look up towards too that have an impact

on consumer behavior. So they can be simply a band like the Spice Girls or your immediate family members.

Opinion leaders are those people that you look up to because your respect their views and judgments and these

views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your

decision on what computer to buy.

The economical environment also has an impact on consumer behavior; do consumers have a secure job and a

regular income to spend on goods? Marketing and advertising influence consumers in trying to evoke them to purchase a

particular product or service. People’s social status will also impact their behavior. What is their role within society? Are

they Actors? Doctors? Office worker? And mothers and fathers also? Clearly being parents affects your buying habits

depending on the age of the children, the type of job may mean you need to purchase formal clothes; the income which

is earned has an impact. The lifestyle of someone who earns $250,000 would clearly be different from someone who

earns $25,000.

Also character has an influence on buying decision. Whether the person is extrovert (out going and spends on

entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types

of purchases made. Ultimately, the following four factors sum up those that most influence consumer decision making:

1. Personal

2. Psychological

3. Social

4. Cultural

Attitudes in Developing Marketing Strategy

Understanding consumer attitudes play a great role in developing market strategy. Consumer

attitude is the following:

A learned predisposition to respond to an object or

class of objects in a consistently favorable or unfavorable

way.

Shaped by our values and beliefs that is learned.

Consumer attitudes are taken into account and seriously

evaluated during the process of developing market strategy.

This information influences the development of advertising and

promotion of product or services.

Attitude Reinforcement and Change in Consumer behavior

Consumer attitudes can be reinforced and change via market

strategy. Approaches to changing consumer attitudes include:

Changing beliefs about the extent to which a brand has

certain attributes.

Changing the perceived importance of attributes.

Adding new attributes to the product.

Changing Attitudes of a Consumer towards Social Issues

There are many examples of changing attitudes of consumers towards social issues. The following example concerns

McDonald’s Corporation and its attempt to change consumer attitude via a new marketing strategy. Taken from the

International Journal of Marketing Studies and titled “McDonald’s New Communication Strategy on Changing Attitudes and

Lifestyle” (2.1 New Campaign Objectives).

According to the current situation, McDonald’s designed a new communication campaign to change the dietary

behaviors of a large number of people, including potential health-oriented customers and frequent junk food users.

McDonald’s new communication

Campaign called “Happy Exercise and Love Touch Health (HEALTH)” project, in

partnership with the World Health Organization (WHO), nutritionists, local

communities, fitness centers and various media channels, etc. This

campaign initially is planned to be carried out in U.S. during one year

and later it will be brought into effect in other countries all over the world

adaptively.

McDonald’s HEALTH campaign includes organized, communication-based interventions aimed at different groups of

people and social marketing efforts that include communication activities. McDonald’s are to take more social responsibility to

serve for two Objectives:

1) To change the image of McDonald’s from the junk food restaurant to become friendly and healthy food restaurant.

This objective has a purpose to attract those who are health-oriented and pay much attention on healthy foods and healthy

lifestyle, enlarging the market.

2) To change behavior of the existing consumers who are keeping on taking only junk foods, persuading frequent fast

food users to change their lifestyle by buying balanced meal with McDonald’s traditional foods and new healthy foods together.

Clearly, McDonald’s nutrition promoters are facing some major challenges because achieving and maintaining wide-scale

positive dietary change is a complex and formidable endeavor. Moreover, for positive change to occur, McDonald’s need to

design nutrition messages that attract attention, make sense, and help to encourage change in people’s established attitudes

and behaviors to the target audience in a scientifically precise, yet practical and motivating manner. McDonald’s will concern

much more on how people interpret particular messages in the media and on what types of messages are more effective with

which types of target audiences from the perspectives of communication and psychology (Deng, T 2009).

Methods of Measuring the Lifestyle Characteristics

Traditionally market researchers focused on various demographic, psychographic, and lifestyle schemes

to categorize, describe, and measure lifestyle characteristics of consumers that may or may not in engage in

the decision making process .

Demographic Method:

Demographics or demographic data are the characteristics of a human population as used in

government, marketing or opinion research, or the demographic profiles used in such research. Note the

distinction from the term demography . Commonly used demographics include gender, race, age, income,

disabilities, mobility (in terms of travel time to work or number of vehicles available), educational attainment,

home ownership, employment status, and even location. Distributions of values within a

demographic variable, and across households, are both of interest, as well as trends

over time. Demographics are frequently used in economic and marketing research.

Psychographic Method:

Psychographic are any attributes relating to personality, values, attitudes, interests, or lifestyles. They are also

called IAO variables (for Interests, Activities, and Opinions). They can be contrasted with demographic variables (such as

age and gender), behavioral variables (such as usage rate or loyalty), and firmographic variables (such as industry,

seniority and functional area).

Psychographic profiles are used in market segmentation as well as in advertising.

Lifestyle Scheme:

Lifestyle is a term to describe the way a person lives, which was originally coined by Austrian psychologist Alfred

Adler in 1929. The current broader sense of the word dates from 1961. (“Online Etymology Dictionary,” 2010) A set of

behaviors, and the senses of self and belonging which these behaviors represent, are collectively used to define a given

lifestyle. The term is defined more broadly when used in politics, marketing, and publishing.

A lifestyle is a characteristic bundle of behaviors that makes sense to both others and oneself in a given time and

place, including social relations, consumption, entertainment, and dress. The behaviors and practices within lifestyles

are a mixture of habits, conventional ways of doing things, and reasoned actions.

Changing Lifestyle Trends of American and Global Consumers

One example of American and Global lifestyle consumer trend is the launch of McCafé a coffee-house-style food and drink

chain, owned by McDonald's. Created and launched in Melbourne, Australia in 1993 by McDonald's Licensee Ann Brown,

("McDonald's Opens First McCafe in U.S." 2010).

The chain reflects a consumer trend towards espresso coffees. Reports indicated that McCafé outlets generated 15%

more revenue than a regular McDonalds and, by 2003, were the largest coffee shop brand in Australia and New Zealand.

The chain spread to 13 countries by 2002, with the first one in the United States opening in Chicago, Illinois, in May 2001

when there were about 300 worldwide. In 2007, the chain expanded to Japan as part of McDonald's efforts to boost sales with

healthier soup and sandwich offerings and reach out to new customers who favored traditional coffee shops. Despite being a

relatively small part of McDonald's overall strategy, there are currently 1,300 worldwide.

McDonald's is introducing a coffee line called "McCafé" nationwide in the United States. Unlike in other countries,

"McCafé" is just a drink, not a full coffee shop due to space limits. In August 2008, McDonald's expanded their McCafé concept to

South Africa, where the McDonald's franchise is already a household name and one of the largest fast-food chains in the country.

Theories of Personality used in Describing the Consumer

American psychologist Henry Murray (1893-1988) developed a theory of

personality that was organized in terms of motives, presses, and needs. Murray

described a needs as a, "potentiality or readiness to respond in a certain way

under certain given circumstances" (1938). Theories of personality based upon

needs and motives suggest that our personalities are a reflection of behaviors

controlled by needs. While some needs are temporary and changing, other needs

are more deeply seated in our nature. According to Murray, these psychogenic

needs function mostly on the unconscious level, but play a major role in our

personality.

Murray's Types of Needs

Murray identified needs as one of two types:

Primary Needs

Primary needs are based upon biological demands, such as the need

for oxygen, food, and water.

Secondary Needs

Secondary needs are generally psychological, such as the need for

nurturing, independence, and achievement.

List of Psychogenic NeedsThe following is a partial list of 24 needs identified by Murray and his colleagues. According to Murray, all

people have these needs, but each individual tends to have a certain level of each need.

1. Ambition Needs

Achievement: Success, accomplishment, and overcoming obstacles.

Exhibition: Shocking or thrilling other people.

Recognition: Displaying achievements and gaining social status.

2. Materialistic Needs

Acquisition: Obtaining things.

Construction: Creating things.

Order: Making things neat and organized.

Retention: Keeping things.

3. Power Needs

Abasement: Confessing and apologizing.

Autonomy: Independence and resistance.

Aggression: Attacking or ridiculing others.

Blame Avoidance: Following the rules and avoiding blame.

Deference: Obeying and cooperating with others.

Dominance: Controlling others.

4. Affection Needs

Affiliation: Spending time with other people.

Nurturance: Taking care of another person.

Play: Having fun with others.

Rejection: Rejecting other people.

Succorance: Being helped or protected by others.

5. Information Needs

Cognizance: Seeking knowledge and asking questions.

Exposition: Education others.

Influences on Psychogenic Needs

Each need is important in and of itself, but Murray also believed

that needs can be interrelated, can support other needs, and can

conflict with other needs. For example, the need for dominance may

conflict with the need for affiliation when overly controlling behavior

drives away friends, family, and romantic partners. Murray also

believed that environmental factors play a role in how these

psychogenic needs are displayed in behavior. Murray called these

environmental forces "presses." (Cherry, 2010).

ConclusionFirms that create various global brands should understand consumer behavior well. Consumers make

complex decisions all the time and are aware that there are choices in product, price, placement, and

promotion… and want in these hard times the best value and satisfaction for our dollars. Additionally, we truly

do purchase brands for both utilitarian and emotional reasons and we do select and make choices based on

brand and store loyalty.

Understanding the Process of Consumer Perception is a vital component in marketing strategy.

Consumer perception information contributes to a Firm’s understanding of how customers react to Marketing

Stimuli and make or not make buying decisions. New consumer database tools are available to assist

companies/marketers with information, example BrandAsset Valuator (BAV), with consumer perceptions of

brands enabling firms to improve the marketing decision-making process and to manage brands better.

Additionally, firm’s that best understand consumer perception will bring the most successful products to market

via stimuli created specifically to promote them.

Marketers also understand that situational influences are factors that can drive consumer buying decisions.

Companies study demographics to better understand consumer lifestyles and personalities. Firms use social surroundings

data like cultural, sub cultural, social class, and family to best position products and services. The most successful marketers

also research and understand cultural values and use this knowledge to better deploy situational influence tactics.

Marketers influence consumer decision making by collecting information that examines social class, lifestyle, cultural,

and cross cultural data. Their Companies are then able to influence our attitudes and buying behavior by offering us

experiences that reach us as human beings and can stimulate our senses. Industry leading Companies influence consumer

household decision making with market strategies that speak to us personally, psychologically, socially, and culturally with

results that enhance their bottom lines and our perception of their products.

At the end of the day the impact of lifestyle and personality in the decision making process is much to

do about market segmentation and micromarketing. Today’s Firms maximize profits by developing products

and services to meet the needs of specific segments rather than to mass markets. Market segmentation by

analyzing demographics, psychographics, and Lifestyle Schemes aid Companies in their unending strategies

to target the right consumer with the right product.

References Reason, J. (1990). Human Error. http://www.ask.com/wiki/Decision_making

Sandhusen, R (2000 http://en.wikipedia.org/wiki/Consumer_behaviour

Howard, C. (2009). http://clarkhoward.com/liveweb/shownotes/2009/01/28/15004/

(Oxford English Dictionary) http://www.oed.com/ Retrieved 2010

(Lee Flamand, eHow) Consumer Perception Theory/eHow.com

(BAV Technologies: 2008 info) http://www.yrbav.com

(MKT 645 ILG page 121) Copyright 2009 by California InterContinental University

(‘SyKronix,”n.d.) http://www.sykronix.com/tsoc/courses/cb/cb_sit.htm

Deng, T ( 2009). www.ccsenet.org/journal/index.php/ijms/article/view/1645/1556

“Online Etymology Dictionary,” http://www.etymonline.com/index.php?search=lifestyle Retrieved 2010.

"McDonald's Opens First McCafe in U.S." http://www.entrepreneur.com/franchises/franchisezone/thisjustin/article40494.html.

Retrieved2010.

(Cherry, 2010). http://psychology.about.com/od/theoriesofpersonality/a/psychogenic.htm