Download CHAPTER TWO LITERATURE REVIEW This research applies the

CHAPTER TWO
LITERATURE REVIEW
This research applies the theory model created by Phillip Kotler because it is
directly related to the objectives of this study and it also includes the related concepts
and relevant studies in order to allow the reader to gain a clearer perspective of the
research topic. This chapter explains the theoretical framework regarding consumer
behavior and opinion. It also contains related information as follows:
1. The concept of buyer characteristics influencing customer behavior
2. Concept of marketing mix
3. Relevant Research
1.
THE CONCEPT OF BUYER CHARACTEREISTICS INFLUENCING
CUSTOMER BEHAVIOR
Kotler (2003) described that each buyer is different from one another because
of their diversified background. Although, the decisions to purchase the goods
depends on many factors, they consist of the same basics which are cultural, social,
personal and psychological characteristics according to figure1.
Figure 1. The concept of buyer characteristics influencing customer behavior.
Cultural
Social
Personal
Psychological
1. Culture
1. Reference Group 1. Age and life cycle stage
1. Motivation
2. Subculture
2. Family
2. Economic circumstance
2. Perception
3. Social Class
3. Role and Status
3. Lifestyle
3. Learning
4. Personality and self concept 4. Belief & Attitude
From Marketing Management (3rd ed., p.135), by P. Kotler, 2003, Singapore: Prentice
Hall.
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1. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer
behavior. The role played by the buyer’ culture, subculture and social class are
particularly important.
1.1 Culture: Culture is the most fundamental determinant of a person’s
needs and behavior. The growing child acquires a set of values, perceptions,
performances and behaviors though his or her family and other key institutions.
1.2 Subculture: Each culture consists of smaller subcultures that provide
more specific identification and socialization for its members. Subculture includes
nationalities, religions, racial groups and geographical regions.
1.3 Social class: Social classes are a relatively homogeneous and enduring
division in society which are hierarchically ordered and whose members share similar
values, interests and behavior. Social classes do not reflect income alone but also
other indications such as occupation, education and area of residence. Social classes
differ in their dress, speech patterns, recreational references and many other
characteristics. Social classes show distinct product and brand preferences in many
areas, including clothing, home furnishings, leisure activities and automobiles.
2. Social Factors
In addition to cultural factors, a consumer’s behavior is influenced by
each social factor such as reference group, family, role and status.
2.1 Reference Groups: A person’s reference group consist of all the group
behavior. Groups having a direct influence on a person are called “Membership
Groups.” Some membership groups are primary groups such as family, friends with
whom the person interacts fairly continuously and informally. People also belong to
secondary groups such as religious, professional groups and trade unions. Marketers
try to identify their target customer’s reference groups. However, the level of
reference group influence varies among product and brands.
2.2 Family: The family is the most important customer buying
organization in society and it has been researched extensively. Family members
constitute the most influential primary reference group. We can distinguish between
two families in the buyer’s life. The family of orientation consists of one’s parents
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and siblings. From parents a person acquires an orientation toward religion, politics
and economics and sense of personal ambition, self worth and love. The parents’
influence on the buyer’s behavior can be significant. The family of procreation
namely one’s spouse and children. A more direct influence on everyday buying
behavior, marketers are interested in the roles and relative influence of the husband,
wife and children in the purchase of a large variety of products and service. Marketers
need to determine which member normally has the greater influence in choosing
various products. Often it is a matter of who has more power or expertise.
2.3 Roles and status: A person participates in many groups through out
life: family, club and organization. The person’s position in each group can be defined
in terms of roles and status. A role consists of the activities that a person is expected
to perform. Each role carries a status. People choose products that communicate their
roles and status in society: therefore, the awareness of the status symbol potential of a
product and brand is very important.
3. Personal Factors
3.1 Age and Stage in Life Cycle: People buy different goods and services
over their lifetime. Consumption is also shaped by the family life cycle, life cycle
group as their target market.
3.2 Occupation: A person’s occupation also influences his or her
consumption pattern. Sellers try to identify the occupational group that has above
average interest in their products and services; a company can specialize in products
for certain occupational groups.
3.3 Economic Circumstances: Product choice is greatly affected by one’s
economic circumstances. People’s circumstances consists of their spendable income
(its level, stability and time pattern) savings and assets, debts, borrowing power and
attitude toward spending versus saving. Income sensitive goods should pay constant
attention to trends in personal income, savings and interest rates, if economic
indicators point to a recession.
3.4 Lifestyle: People coming from the same subculture, social class and
occupation may lead quite different lifestyles. A person’s lifestyle is the person’s
pattern of living in the world as expressed in the person’s activities, interests and
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opinions. Lifestyle portrays the “whole person” interaction with his or her
environment. Therefore, marketers search for relationships between their products and
lifestyle groups.
3.5 Personality and Self Concept: Each person has a distinct
personality that influences his or her buying behavior. Personality can be a useful
variable in analyzing consumer behavior, provided that personality types can classify
accurately and a strong correlation’ exists between certain personality types and
product or brand choice.
4. Psychological Factors
A person’s buying choice is influenced by four major psychological
factors: Motivation, perception, learning and beliefs and attitude.
4.1 Motivation: A person has many needs at any given time. Some
needs are biogenic, they arise from psychological states of tension such as hunger,
thirst and discomfort. Other needs are psychogenic; they arise from psychological
states of tension such as the need for recognition, esteem or belonging. Most
psychogenic needs are not intense enough to motivate the person to act on them
immediately. Psychologists have developed theories of human motivation.
4.2 Perception: Perception is the process by which an individual
selects, organizes and interprets information inputs to create a meaningful picture of
the world. Perception depends not only on the physical stimuli but also on the
stimuli’s relation to the surrounding field and on conditions within the individual.
4.3 Learning: Learning involves changes in an individual’s behavior
arising from experience. Learning theory teaches marketers that they can build up
demand for a product by associating it with strong drives which are internal stimuli,
using motivational cues, and providing positive reinforcement. A new company can
enter the market by appealing to the same drives that competitors use and providing
similar cue configurations because buyers are most likely to transfer loyalty to similar
brands than to dissimilar brands.
4.4 Beliefs and Attitudes: Belief is a descriptive thought that a person
holds about something. In particular, a global trend is the fact that buyers often hold
distinct beliefs about brands or products based on their country of origin. Attitude is a
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person’s enduring favorable or unfavorable evaluation, emotional feelings and action
tendencies toward almost everything such as religion, politics, clothes and so on.
Attitudes put them into a frame of mind of liking or disliking an object and moving
toward or away from it.
2.
THE CONCEPT OF MARKETING MIX
Product, price, place and promotion are widely known as “Marketing Mix”
one of the major concepts in modern marketing. Setting the right strategy for each “P”
and blending them together would lead a business to reach its goals. Marketing mix is
the set of controllable, tactical marketing tools that the firm blends to produce the
response it wants in the target market. The marketing mix consists of everything the
firm can do to influence the demand for its product. The many possibilities can be
collected into 4 groups of variables known as the “Four Ps”: product, price, place and
promotion. (Kotler, 2003, p. 10)
The essence of marketing is a transaction of exchange in order to satisfy
human needs or wants. Marketing is an entire system of business activities designed
to plan, price, promote and distribute the want-satisfying goods and services to the
existing and potential customers. The marketing concept is a new philosophy in
business, the satisfaction of customers’ wants is the economic justification for the
firm’s existence. As a result, the company’s activities attempt to discover the
customer’s wants and satisfy them to ensure its long-run profit, instead of just selling
what they produce. (Stanton, 1981)
The marketing concept according to Smykay and Breibart (1971, p. 8) is that a
business must regard its customers’ needs, desires, likes, dislikes, habits and attitudes
at every stage of its business operation in order to be successful in the market.
Because the more a business knows its customers, the better it can satisfy the
customers’ needs than its competitors. Consequently, its sales and profits will
increase.
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Figure 2. The four Ps of the marketing mix.
Product
Product Variety
Quality
Design
Features
Brand Name
Packaging
Sizes
Services
Warranties
Returns
Price
List Price
Discounts
Allowances
Payment Period
Credit Terms
Promotion
Advertising
Personal Selling
Sales Promotion
Public Relations
Place
Channels
Coverage
Assortments
Locations
Inventory
Transportation
Logistics
Target Customers
Intended Positioning
Note. From Marketing Management (3rd ed., P.49), by P. Kotler, 2003, Singapore:
Prentice Hall.
1. Product: Product is the total bundle of satisfaction that is offered to the target
market in an exchange transaction-whether it be goods, services, or a combination of
them. The key success factor of a product is to satisfy the customer. A product can be
tangible or intangible. Also, it includes not only the physical product or core service
but also complementary components such as packaging or a warranty. Each consumer
may view the importance of each component of a product in a different way.
Complementary components may be perceived by a customer to be more or less
important that the core product.
2. Price: Price is the cost of a product that a customer has to pay for the benefits
of having or using the product. Thus, price could be the best measure of customer’s
willingness to receive in exchange for transferring ownership or use of a product or
service. In other words, price reflects the value of a product in the customers’
perception. Since price is the only element in the marketing mix that can be viewed as
a source of income. What is more, price is a very sensitive factor affecting customer-
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buying decisions; hence, it is important to set the most reasonable price to maximize
business profit. There are many factors that should be considered when setting prices
such as marketing objectives, marketing mix strategy, costs of the product,
organizational considerations, the market and demand, rivals’ costs, prices, offers, etc.
3. Place: Place is where activities are conducted by business to make the product
available to the target market. The place of sale generates an impact on the perception
of product. So, setting an effective channel of distribution is critical. To decide which
channels of distribution to choose depends upon a variety of factors. Instances are
production specifics, need for control and margin desired.
4. Promotion: Promotion is persuasive communication between a business and
its target customer to communicate the benefits of the product and to build demand
for the product as well. The ultimate goal of promotion is to affect buyer behavior.
Promotion includes all the advertising and selling efforts of the marketing plan.
Blattberg and Neslin (1990, p. 78) stated that the appropriate promotion mix, a
blend of personal and non-personal promotion methods aimed a target market, would
lead the company to achieve its objectives. There are five general elements of
promotion mix, advertising, personal selling, sales promotion, public relations, and
direct marketing.
4.1 Advertising: Advertising is the non-personal presentation of ideas, goods,
or services that is identified with a business sponsor and is projected through the mass
media including television, radio, magazines, newspapers and billboards. Two
important things to keep in mind are your intended mission and the quantitative
measurement of exposure required to accomplish it. Reach and frequency are key
quantitative measurements of media goals. Reach is the percentage of the target
customers who see and hear an advertisement. Frequency is the number of times they
saw or heard it. Marketers refer to the number of times a person is exposed to a
message as the total impressions made on that audience. As a primary goal, the major
objectives of an advertisement are to sell the product by informing, persuading and
reminding customers of the existence or superiority of a product or service.
4.2 Personal selling: Personal selling is a sales presentation delivered in a
personal a one-to-one environment. It includes the activities of both the inside
salespersons of retail, wholesale and service establishments and the outside sales
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representatives who call on business establishments and final customers. Personal
selling is an interactive way to communicate with the target customers and get their
feedback about the product.
4.3 Sales promotion: Sales promotion is designed to draw out the desired
behavior from consumers, the sales force and other channel participants. Sales
promotion may be defined as short-term incentives that are set to encourage purchase
or sales of a product since it serves as an inducement to buy a certain product while
typically offering value to prospective customers. Generally, sales promotion includes
specialties, premiums, publicity, contests, tradeshow exhibits, point-of-purchase
displays, sampling, free merchandise, coupons, samples, cash refund offer, price pack,
patronage reward, discount, allowance and so on.
4.4 Public relations: Public relations are “building good relations with the
company’s various publics by obtaining favorable publicity, building up a good
“corporate image,” and handling or heading off unfavorable rumors, stories and
events. There are a number of public relation department’s functions: for example,
press relation, product publicity, building affairs, lobbying and investor relation
development.
4.5 Direct marketing: Direct marketing is an interactive system of marketing
that uses one or more marketing channels to affect a measurable response and/or
transaction at any location. It is the planned recording, analysis and tracking of
customer behavior to develop relational marketing strategies. Effective direct
marketing should be customer focused, cost-effective, convenient and competitive.
3.
RELEVANT RESEARCH
The study of Worrawan Sangthong (วรวรรณ แสงทอง, ๒๕๔๕) on the “Effects of
Marketing Communication Strategies on Automobile Owner’s Decision Making to
Purchase Pickup Trucks in Bangkok Metropolis” studied a population based on the
car registration numbers of three types of cars in Bangkok: Sedans (not more than 7
passengers), Microbuses and Passenger Vans (More than 7 Passengers), and Vans and
Pick Ups. These types were categorized in accordance with the car registration
regulation of the Department of Land Transport. The study indicated that the
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demographic variables of automobile users such as gender, age, education level,
occupation and income level affected the marketing communication behavior of the
automobile users. These communications included sales promotion information and
the numbers of sales promotion communications. Furthermore, the study found that
marketing communication behavior was related to the buying decision of the
automobile users.
The survey regarding trends in buying and using private cars among Bangkok
users conducted by Weena Tangkamolkasem (วีณา ตั้งกมลเกษม, ๒๕๔๕) examined the
most important factors in car users’ buying decisions. Car appearance and brand name
were selected in the first rank, followed by fuel efficiency in the second rank, and
reasonable price and durability of the engine in the third rank. The survey also sought
opinions of the car users towards five promotion offers; a) 0% interest, b) long
installment periods, c) free extras e.g. a CD player, d) free insurance, and e) free car
servicing. The favorite offer that more than 50% favored was the 0% interest on
installments. For the long period installment, nearly one third of them felt indifferent
towards this promotion. In addition, most respondents were not sure whether the
offering of free extras such as CD players affected their buying decisions. Bangkok
users also thought that offering car insurance and fee car servicing would significantly
affect their buying decision.
The case study of Thipnapa Kittiudon (ทิพนภา กิตติอุดม, ๒๕๔๕) in the “Factors
influencing a decision to purchase a mobile phone: A case study of Glow Group
Employees”, demonstrated that Glow Group employees with higher incomes would
purchase mobile phones in a higher proportion than those who had lower incomes.
The results of the study identified that income as a significant variable that affected
the mobile phone buying decision of the respondents.
The study of Kanjana Somjit (กาญจนา สมจิตร, ๒๕๔๗): a study of dealer
satisfaction on the marketing mix of Airco Ltd. The objective was to assess the
customers’ satisfaction by comparing levels of customer expectations and perceptions
of the marketing mix in terms of products, price, place, promotion, people, physical
evidence and process of Airco. The majority of the population were the dealers, who
ran the business in the type of project seller and were able to generate its monthly
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sales revenue which was less than 2 million Baht and were served by Airco for more
than 8 years. Most of them were satisfied with the overall marketing mix of Airco,
except for the price factor such as, year-end bonus and price competition. In addition,
the dealers with different characteristics also had different satisfaction levels. It was
recommended to improve the 7 marketing strategies of the dealers such as type of
business, monthly sales revenue and length of service by enhancing the value of the
services in order to weaken the price competition.
To summarize, in order to study the consumer behavior, we must understand
how consumers initiate their action in purchasing. The concept of consumer behavior
and the marketing mix factor should be studied. The customers were different in terms
of individual characteristics and all marketing factors had an influence on customers’
decision making to purchase a product. Therefore, it is worthwhile to study the
behavior of consumers and marketing mix factors which influence the consumers’
purchasing decision, in particular, car-tyre purchasing decison. In the next chapter, the
methodology of the study will be presented.