Unit 37-LO1 Demonstrate the ability to map a path to purchase in a given category, including the decision-making process-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

A decision to purchase something is anything but an easy one. Factors such as brand loyalty, price, and quality all play into the final decision-making process when it comes to making a purchase. It can take weeks for someone to finally make up their mind on what they want or need, depending on how much research they do beforehand.

There are many different types of consumers out there and understanding who your audience is will help you tailor your content in a way that resonates with them the most.

For example, Millennials are typically not loyal customers which means that brands have to work harder at convincing this demographic why they should buy from them instead of somewhere else; otherwise a Millennial might opt for another brand because it’s cheaper or more trendy than the one they were originally considering.

Also Read: Evaluate appropriate forms of research to understand influences on the decision-making process (B2C and B2B)

Introduction to consumer decision-making:

Model of consumer decision-making. The five-stage process

The levels of consumer decision-making (and what they call the five stages) are as follows:

1. Recognition
2. Information search
3. Evaluate alternatives
4. Purchase/purchase intention and post-purchase evaluations
5. Repeat purchase, or end of the product life cycle (end purchase).

One can see that recognition is in a sense the beginning of all stages, considering consumer decisions are always motivated by needs that were previously externally stimulated by an impulse propositioned and recognized by a given individual where subsequently he or she becomes aware of various alternatives to satisfy it (recognition stage). This gives rise to information search, which leads to the evaluation of various criteria determining selection from products for purchase. Based on comparison with these criteria, a purchase decision will eventually be made (decision stage). Once purchased, the product is experiencing use and getting associated with experiences in usage which are being evaluated through actual use (experience stage).

The value of mapping a path to purchase: the consumer decision journey from pre-purchase, purchase, receive, and post-purchase

A large amount of research has been done to quantify the importance and effects of certain phases.

For example, during the pre-purchase phase, consumers are driven by both emotional considerations and rational considerations. Emotions seem silly in a business context but they are measurable with survey data.

An effective purchase path can have an astronomical ROI when looked at in aggregate for campaigns and as a whole across various channels. Many retailers will also look at their purchase paths on an individual level to understand consumer journeys as well as to improve overall revenue engagement with customers. The complexity lies not just in mapping out what the significant opportunities exist but also in how best to nurture those opportunities between each phase of the decision journey from pre-purchase to purchase and post-purchase.

Levels of consumer decision-making – extensive problem-solving, limited problem-solving, and routine response behavior

Consumer decision-making can force itself into one of three categories: extensive problem-solving, limited problem-solving, and routine response behavior.

• Extensive problem-solving: The consumer is willing to spend the time and effort on finding new, better alternatives or circumstances. They are looking for the “best solution.”
• Limited problem-solving: The customer is more of a “runner” and will find an acceptable option, but then stick with that without really thinking about if there might be something even better.
• Routine response behavior: Consumers don’t have the time or motivation to go beyond their typical routine choices. They sometimes consult friends or family before making decisions, but only selectively. Suddenly deciding on something different can leave them feeling completely lost with no sense of authority at all (and who knows if they even like it).

Four views of consumer decision-making: economic, passive, emotional, and cognitive

Problem-solving decision making – A person requests information and evaluates alternatives before coming up with a choice and purchasing the selected option.

• Economic – consumers choose what is in their best interest.
• Passive – consumers are influenced by outside forces without understanding why they make a decision.
• Emotional – Consumers buy products based on feelings and associations with the product.
• Cognitive- Consumers need a reason for making a purchase, even if that reason is artificial or arbitrary; it enables them to use logic and analysis to justify their decision-making process.

Factors that influence decision-making:

The influence of heuristics on decision-making

The line of research that deals with these are called “heuristics and biases.”

Heuristics are cognitive shortcuts we use to navigate life efficiently. These shortcuts can be helpful when deciding on an uncertain situation; however, they also come with some tradeoffs. There has been a good deal of social and medical psychology research in recent years determining how people make decisions, so this topic is heavily studied. Biases in our decisions on heuristic methods will often lead to irrational outcomes and inefficient or insufficient solutions – fascinating stuff for guys like me who love understanding how humans think and why we think that way!

The influence of elements of the marketing mix on decision-making

The Marketing Mix is the set of tools that marketers use to create, communicate and deliver value to their customers. The four elements in this mix are product, price, promotion, and place. Our daily interactions with these four elements influence our decision-making processes when buying products or services.

Individuals who have a strong sense of self-efficacy from possessing knowledge about how to build their own custom computer or install the latest version of OS X on their laptop are likely to find themselves more confident in making an informed purchase decision for Apple’s products because they know what they want and need about their desired outcome. On the other hand, someone that is not as tech-savvy may be less confident in themselves for addressing problems with their Dell, or will not have the same familiarity with Mac-OS X to even know how to begin installing a new operating system on their machine.

In addition, our sense of self-efficacy is also affected by external factors such as price and time constraints when making purchase decisions (Cross 2000). If an individual knows that they are on a limited budget for buying computer components, then they may be more likely to buy from a store that has better sales promotions and discounts available than if they were given extra spending money. This reasoning leads us back to our four elements of the marketing mix where external factors like price, place, and promotion can influence our purchasing decision.

The influence of new technologies (e.g. e-tailing, online transactions and purchasing, eBay, and the rise of C2C purchasing)

The rise of online transactions has given way to a new form of commerce. The influence of these technologies on the way we buy and sell is undeniable. In this article, I will explore how e-tailing has influenced the purchase process for consumers as well as sellers.

The different types of impacts that have arisen from this technological development are explored in more detail below:

1) Accessibility – with an increase in internet access, there is now increased opportunity for shopping;

2) Cost – consumers can shop without worrying about shipping costs or returns policies;

3) Trust – buyers feel less reluctant to make purchases through eBay due to increased trustworthiness;

4) Social Media – customers use social media sites such as Facebook or Twitter to make recommendations or comment on products they are interested in buying;

5) Speed – due to the internet, customers can purchase an item from their home and have it delivered within 24 hours.

New opportunities for sellers have also arisen with this technological development such as

1) Reach more buyers worldwide;

2) Sell unique items that cannot be found in local stores;

3) Exposure to a large market of consumers leads to increased sales.

Model for organizational decision-making

The four different decision-making models—rationality, bounded rationality, intuition, and creativity—are different based on the experience or motivation of the decision-maker. Choosing the right method will make you more effective at work and improve your ability to perform all P-O-L-C functions.

• The rational model assumes that people are basically rational.
• The bounded rationality model accounts for common errors in decision-making due to limited information and the complexity of the problem, but it does not diminish our ability to make effective decisions.
• Intuition is another way of realizing what is essentially a gut feeling about your choices or actions without necessarily being able to put your finger on why you are making a particular choice.
• Creative models inspire new ways of thinking about solving familiar problems; recognize multiple perspectives, values, and goals; seek solutions that maximize value to all concerned, and minimize negative consequences.

Different buying stages

In the most generalized definition, there are three stages of buying.

• First is “informational research,” which consumers go through when they’re trying to learn more about the product they might want to purchase.
• Second is the evaluation or consideration phase, where consumers compare competing products and try to figure out which one will best suit their needs.
• The third is the purchase/acquisition phase, during which final purchasing decisions are made and executed–either online or offline at a physical store.

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