Customer Decision Making

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CustomerDecision Making

CustomerDecision Making

Themost important application of psychology in business management is inunderstanding consumers’ behaviors. This includes identifyingfactors that influence a consumer to make a decision and howmarketing strategies can be used to alter the decision making processin favor of the business organization product. The consumer decisionmaking process is considered to be a cognitive process in which apotential customer selects a product or service from multiplealternatives. Consumer behavior models, economic models as well aspsychological have been used by researchers to study various aspectsof consumer’s decision making processes (Vasquez, 2014). There arespecific questions that researchers in consumer behavior and decisionmaking processes have sought to answer. For example, studies haveestablished that consumers are more attracted by percentage discountoffered by the sellers, without considering other factors. A discountof 25 percent on a garget costing 100 dollars will amount to a 25dollars discount. Customers are more likely to travel for 40 minutesor spend two hours in order to buy the garget at a 25 percentdiscount without considering the value of time lost compared to theamount saved. Although both time and the discount have some value tothe consumer, many consumers are influenced by discounts (Simonson etal, 2013). However, it is important to note that the action taken byconsumers is largely influenced by the information held by theconsumer. There are many channels through which consumers can obtaininformation about the available alternatives. The information mayinclude the quality, prices or experiences with the particularproduct. The consumer compares the different choices available, andmakes an informed choice. This paper discuses the role of onlinereviews and comparison selection concept in the consumer decisionmaking process.

Roleof online reviews in consumer decision making

Theinfluence of computer and internet technology in marketing cannot beunderestimated. The development of Web 2.0 and related applicationshave had huge impacts on the ability of individuals to share andaccess information and knowledge. According to Gupta and Harris(2010), due to the advent of these technologies, consumers as well assellers are able to share information, opinions and personalexperiences with a particular product, which has an influence on thedecision made by a potential consumer. Thus, in the modern marketplace, consumers tend to search for online reviews about a productbefore making a decision to but the product. Additionally, the onlinereviews provide potential customers with alternatives. Due to thesignificant role of online information on consumer behaviors, thereare thousands of product reviews mainly by other consumers orconsumer groups. Traditionally, the manufacturers or sellers provideda product description to influence the consumer decision. Theinternet technology has expanded this information to include expertreviews, customer reviews as well as personalized advice to clients(Hu et al, 2008).

Thereare different types of online product reviews that have an impact onconsumer decision making processes. According to Mudambi &amp Schuff(2010), online customer reviews refers to “peer generated productevaluation posted on company or third party websites”. Due to theimportant role of customer reviews on product marketing and customerdecisions, many producers and sellers have interactive platforms ontheir websites which allows customers to post product reviews.Majority of customer reviews in retailers’ and producers’websites have a numerical star rating. However, opened ended commentsby customers and experts which allow them more detailed expressionsof their views are more effective in influencing potential customerdecisions. For example, online sellers such as Amazon allow consumersto submit product reviews about product bought from their website.These reviews have had a huge influence on success of some of thelargest online retailers. Due to the huge influence of customerreview on the sales, some producers buy customer reviews from theonline sellers. For example, an electronic manufacturer can buypositive customer reviews of their products from online sellers suchas Amazon and post them in their websites. The interactive platformsprovided by these retailers have acted as a source of extra income.Additionally, sites that provides customer rating services indifferent specialty areas such as automobile, charities, hotels andtravels have emerged (Mudambi &amp Schuff, 2010).

Accordingto a recent study by Cisco Systems, online customer reviews haveevolved into one of the most important tool that influence majorityof shoppers in the modern market place. This is mainly due to theability of potential clients to access digital information about aproduct or a retailer using multiple gargets. For example, in thepast, online reviews were only accessible through a computerconnected to the internet. Today, potential customers can accessonline product information remotely using their smart phones. This isone of the different ways through which the retail industry is beinginfluenced by emerging technologies. The study identified a categoryof shoppers identified as ‘digital mass market’ who have theability to advance their online abilities and their impacts on theirshopping behaviors beyond the reach of many retailers and sellers(ScreenMediadaily, 2015). The increased accessibility of onlineinformation and the free flow of information has been an advantage tothe shoppers, while producers and retailers have struggled to cope upwith the trends. This is because a negative publicity of a retaileror a product on the online platform can have critical impact on theretailer or consumer. The main challenge that faces marketers in themodern technology dependent market place is the speed of informationflow, transparency in communication and the role of third parties inthe market place. For example, there are an increased number ofexperts sharing information about products in the online platform(ScreenMediadaily, 2015). Additionally, the reputation, brand name,loyalties and market share of a product can be ruined within a veryshort time by a negative online review and online discussions thatare likely to follow. The borderless, timeless communication channelsoffered by the internet means that large scale damage can occur veryfast such that the seller is unable to respond adequately on time.

Thereare numerous studies and research approaches that have been used toinvestigate the role of online reviews on customer decision makingprocesses. Some studies have focused on how consumers’ decisionsare influenced by expert or profession review of a product. Generallyproduct that are reviewed and recommended by recognized authoritiesare more attractive to potential customers. For example, a woman inher reproductive age looking for an appropriate birth control optionis more likely to be influenced by an online expert opinion fromdoctor known to him. Additionally, a person seeking to buy a new carwill be influenced by an expert review by a mechanical engineer or amechanic. Studies in the recent past have also focused on howcustomer feedback influence brand loyalty and trust in the product.To enhance positive product reviews, producers and sellers haveintroduced online platforms in which clients can easily give feedbackabout a product. Products that have more positive feedback are morelikely to be attractive to potential customers (Moe &amp Schweidel,2012).

Morerecent studies have focused on the characteristics of online customerreviews and characteristics of potential customers who are morelikely to be influenced by online reviewers. It is expected that moreonline reviews are more likely to be associated with individuals whouse the internet more frequently. This mainly includes youths, youngadults and professionals. Similarly, the same groups are more likelyto search for online reviews and thus be influenced by informationshared by other customers or experts. As a result, producers andsellers who mainly target these groups of client are more concernedabout online customers and expert reviews about their product (Hu etal, 2008). For example, more women are likely to prefer a birthcontrol method that has been more positive customer reviews. On theother, fewer women are likely to select a birth control method thathas negative customer reviews. A doctor’s opinion that a particularmethod is problematic is enough to discourage women from using aparticular method. However, these reviews will have insignificanteffects on clients who are unable to access online information. Morerelevant studies in the recent past have focused on how onlinereviews affect marketing strategies and sales. According to Chen etal (2008), the quality of product reviews by past customers has adirect impact on sales growth and general positive influence onsales. Other studies have focused on how online reviews helpconsumers in decision making processes and their impacts on productbiasness and brand loyalty.

Tounderstand the significance on online product reviews on customerdecision making process, it is important to understand the differentbetween shoppers and buyers. Majority of online reviews viewers areshoppers, who seek for information about a particular product. Theshoppers can be buyers or potential buyers. Online reviews canconvert shoppers into a buyer of a specific product. This is becausemajority of shoppers in the modern market place are depending ondigital content in making decisions. This is based on the assumptionthat the digital information will guide the shopper to seller whooffers the most competitive prices and producer who offers the bestquality and value for money. Thus, while online reviews have aninfluence on consumer decisions, a correlation between the onlinedescription and the physical aspects of the products and services arecritical in ensuring that the shoppers become buyers (Moe &ampSchweidel, 2012).

Studieshave reviewed that positive customer reviews improves the customerperception about a product, seller or manufacturer. This is becausecustomers tend to trust other consumers more that marketers. Forexample, websites that have more customer reviews attract moreshoppers and shoppers are more likely to spend more time on thesewebsites. This is because it creates a feeling of community amongonline buyers and shoppers. As online reviews becomes a criticalaspect of marketing strategies in the modern marketplace, the focushas been how these reviews impacts on buying decisions amongconsumers. The influence of online reviews on online shoppers is anincentive for retailers and producers to provide digital informationand customer interaction platforms that are valuable to potentialconsumers (Mudambi &amp Schuff, 2010).

Comparisonselection concept in consumer decisions

Acustomer makes a decision to spend his or her money on a particularproduct depending on the information available to him or her.Majority of this information is available online. In almost allcases, consumers are faced with more than one option. Based on theinformation they have about a product, they compare the two or moreproducts before making the final decision to buy the product. This isthe foundation of the comparison selection concept in marketingpsychology. The concept is based on choices and judgment principlesin the decision making process. Among the most important aspects ofcomparison selection concept includes variety seeking when a consumeris making simultaneous choices, compromise effects and scopeinsensitivity. For example, when a client is required to choicebetween snacks that will be consumed in consecutive days or weekssimultaneously, the previous choice is likely to influence the choicein subsequent choices. This means that past experiences as well asshifts in preferences work concurrently to influence a customerdecision making process. This is what is referred to as varietyseeking. Compromise effects refers a situation where an option of thechances of a client choosing a particular option over another changeswhen a third option is introduced. To illustrate scope insensitivityin the decision making processes, Simonson et al (2013) used the caseof how much an individual would be willing to spend in order to savea given number of birds. The responses indicate that the individualsare less likely to be sensitive about the number of birds that needto be saved. According to Simonson et al (2013), the comparisonselection in consumer decision making processes is based on severalpsychological processes. The drivers follow a similar process likeother psychological processes such as memory and categorization.Addition, the comparison selection can be voluntary or involuntary.This can be understood based on the judgment decision making tasksand processes. In all decision making processes, involving consumers,has two or more comparison. Psychology of comparison selection isbased on the principles that guide the selection of comparison in thechoice dilemma (Simonson et al, 2013).

Asmentioned earlier, the comparison selection is dependent on theinformation available to the potential consumer about the availableoption. This means that the customer makes comparison based on theperceived information the products. This includes quality, prices,reliability, taste and preferences and its ability to satisfy thedesired needs. Online reviews can have a positive and negativeimpact on comparison selection of a product. For example, an onlinereview in which a customer expresses dissatisfaction with aparticular product will alter the psychological processes throughwhich a client considers a particular product or services. Apositive customer or expert review has positive impacts on comparisonselection of a product. However, it is important to note thatinformation is costly. As a result, consumers are more likely to makedecision and purchase a product with inadequate information about theproduct such as quality, seller information as well as thealternatives available in the market. This is because it costs thecustomer time and money to search for information about a produce.Online surveys provide an easy and reliable access to the informationrequired by a potential customer to make an informed choice (Zhu &ampZhang, 2010).

Reviewand conclusion

Thedifferences between brick and mortar business organization and onlineorganization have expanded significantly as the shopping behaviorsand preferences evolve due to the influence of technology. Storefrontsales and inquiries have reduced significantly, forcing retailers toadapt to the changing patterns in the technology dominated market.There is no doubt that the introduction of internet as marketing andshopping tool has had a direct impact on consumer behaviors and thedecision making processes (Moe &amp Schweidel, 2012). Researchersand scholars have made numerous attempts to understand the shiftingcustomer experiences, decision making processes and experiences.There are numerous studies that have focused on how consumer shop ormake a decision on when to buy or not to buy. However, more researchneeds to focus on the rationale and processes that are associatedwith these behaviors. An analysis of the consumer decision makingprocess is an intersection between marketing and psychology.

Theadvent of digital technology as a marketing tool had a huge impactson sales and marketing. However, its role has a shopping and buyingtool has transformed the market place. Consumers have a more accessto information about a product as well as available alternatives. Dueto the influence of technology, the producers and retailers do nothave a monopoly of information about the product. Through onlinereviews, consumers are able to share their product experiences withother clients. This has evolved into one of the most important sourceof information for shoppers. This information forms the basis ofcomparison selection. Based on the online reviews, which includesconsumer and expert reviews, the client is able to make an informedcomparisons and select the most appropriate choice.

References

Chen,P., Dhanasobhon, S., &amp Smith, M. (2008). AllReviews Are Not Created Equal: The Disaggregate Impact of Reviews onSales on Amazon.com,working paper, Carnegie Mellon University.

Gupta,P., &amp Harris, J. (2010). “How e-WOM recommendations influenceproduct consideration and quality of choice: A motivation to processinformation perspective”. Journalof Business Research,63, 1041-1049.

Hu,N., Liu, L., &amp Zhang, J. (2008). “Do Online Reviews AffectProduct Sales? The Role of Reviewer Characteristics and TemporalEffects,” InformationTechnology Management9(3), 201-214.

Moe,W. &amp Schweidel, D. (2012). “Online product opinions: Incidence,evaluation, and evolution”. MarketingSci.31(3):372–386.

Mudambi,S. M. &amp Schuff, D. (2010). “What Makes a Helpful Review? AStudy of Customer Reviews on Amazon.com”. MISQuarterly,34, 185-200.

ScreenMediadaily(2015). OnlineRatings and Reviews Influence Consumer Shopping Behavior.http://screenmediadaily.com/online-ratings-and-reviews-influence-consumer-shopping-behavior/

Simonson,I. et al (2013). “Comparison selection: An approach to the study ofconsumer judgment and choice”. Journalof Consumer Psychology.23(1), 137–149.

Vasquez,C. (2014). Thediscourse of online consumer reviews.New York: Bloomsbury.

Zhu,F. &amp Zhang, X.Q. (2010). “Impact of Online Consumer Reviews onSales: The Moderating Role of Product and Consumer Characteristics”.Journalof Marketing,74(2), 133-148.

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