Review of related Literature and studies
Related theories of the dependent and independent variables of this study are included in this chapter. The theories and models are then use to develop the conceptual framework of the research, focusing the factors influences consumers buying behavior.
Related Literatures
Consumer behavior
According to Foxall (2007, pp. 3), consumer behavior is an important part of academic marketing as there is no fix rules but application area that depends on the disciplines like economics and psychology that provided with the attitudes, methodologies, theories and techniques.
The final decision process of the household consumers usually involved evaluation, buying, consumption, and they way and price that they would get to get rid of the products in the future.
With the buying of automobile, there are a lot of factors involve in the decision making such as price and additional costs, need which are the basic factors. However, there are also several factors that customer usually take in to consideration before they actually make the purchase, choosing the dealership, car models, methods of payment, designs, options, and so on.
According to this case of purchasing an automobile, the generic model of consumer decision making is can be apply to as it consists of:
- Need recognition
- Information search
- Evaluation of alternatives
- Purchase decision
- Post-purchase behavior.
In the case of imported automobile, it is usually beyond the need as the simple, cheap, made in the country can fits the need, whereas this imported automobile is a luxury product and so it’s more of the wants, desire and fashion or trend. People buy an automobile because they need it, but then they choose the brand, model, etc. However, to studying the correctness of the above model does not really interest the researchers but it’s the factors that influence on the generic model that would work.
Influences on Decision-making
External factors
Group such as culture, family, friends, the referrer
Environmental factors such as time, temperature, etc.
Internal factors
Lifestyle, personality, decision making process, motivation, etc.
Word of mouth
According to East et al. (2008), identification of the people who give advice is the third concern of market researchers as to target this group of people as there is evidence that word of mouth can be a very effective strategy in which a lot of companies offer incentives to encourage the referrals (Buttle, 1998; Danaher and Rust, 1996, cited in East et al., 2008). However, it is not clearly identify if the people received the message would reconsider, knowing that the referrers are incentivized.
Demographic factors
Kotler (1997) mentioned that demographic factors influenced customer’s buying decision are the internal factors including gender, age, income, education level and family size.
Kotler (2000) commented that the market is divided based on factors like age, gender, income, occupation, education, family size, and religion, race, generation, nationality and social class. These factors are the basic factors to differentiate customer groups as the customer wants, preferences and usage are usually involve demographic factors.
Age
Age is one of the demographic variables that often use to divide the market segment as it helps marketers to understand and keep themselves up to date of the changing life cycle of each generation (Dibb et al., 2006).
According to Flynn (1995), age is a very important demographic factors that influences on the decision making process on the purchase because natural factor, easy to measure and use it a lot of social science theories. Kotler (2000) mentioned that the different needs and wants are different in different age groups. People of different age have different needs and wants and buy different goods and services over their life time.
Gender
Education level
Skinner (1994) has mentioned that educated customers tend to find more information on the product they are purchasing and demand better quality products and so education becomes one of the factors that influences the decision making process.
Solomon (2006) stated that the level of education might be related to the income level and occupation as the certain education level will be accepted by a certain social class in which education is also one of the factors that’s being use to identify the social class in some area.
According to Dunne and Lusch (1999), the accomplishment in the education field is the most reliable index for the income potential, attitudes and the way of spending of a person. For example, graduate students have different buying behavior comparing to the undergraduate students even though they might stand in the same age group. They are more conscious of the quality, price and services.
Occupation
In accordance with Kotler and Armstrong (2001), the purchase made for goods and services are affected by a person’s occupation. Identifying the occupational groups according to the interest in their products is an important thing for the marketers to do as a company will be able to focus on the target customers or even specialize on a certain products that will fit with the customers’ needs.
Hawkins, Best and Coney (2001) mentioned the differences in consuming the products and services among the different occupational classes, whether it would be normal grocery like soap or food or even the electronic products like mobile phone or computer. It’s not just the differences in the consumption, but also the media preferences and shopping patterns.
Income
According to Statt (1997), income is one of the variables that is used to identify the status of a person. It is considered to be one of the most important socio-economic status variable as the quantification can be easily done and compel the entry to some markets. Peter and Oslon (1996) have indicate that the different in the income level of people has influences on the value, behaviors and lifestyles.
In agreement with Solomon (1999), the buying power and market potential is also define by income of a person, as people obtain goods and services that they need to show their choices, in which more money will be required to do so.
Culture
According to Solomon (2006), culture is a society’s character that includes theoretical ideas like values and ethics and physical matters and services like automobile, clothes, food, sports, etc, that are delivered or respect by a society. In the other word, it’s a set of belief, norms, values and traditions that share among the members.
Culture is being learned and has a long effect on the behavior of an individual. As an example of cultural influences, consider how the salesperson in a car showroom in England should approach the different couples of customers that visit as in some cultures the husband will be the one making the decision, while in the other it’s the wife.
Social Class
This can be simply defined by set of factors like income, family background and occupation.
“Social class is a much a state of being as it is of having: As Phile saw, class is also a matter of what one does with one’s money and how one defines his rold in society”. (Solomon 2006)
However, it is mentioned in Solomon (2006) as one wealthy woman observed when she was asked to define social class:
“I would suppose social class means where you went to school and how far. Your intelligence. Where you live… Where you send your children to school. The hobbies you have. Skiing, for example, is higher than the snowmobile… It can’t be [just] money, because nobody ever knows that about you for sure.”
Lifestyle
“Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumer’ major AIO dimension activities (work, hobbies, shopping, sports, social events), interest (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products).” (Kotler and Armstrong, 2001, PP. 181)
According to Kotler and Armstrong (2001), lifestyle is not just all about social class or personality, but it involves the entire life of a person. People from the same family, social class, or income level can have totally different lifestyles.
Types of buying decision behavior
According to Kotler and Armstrong (2001), the process of buying differs from each product or service, a bottle of shampoo, a tennis racket, an expensive mobile phone or computer and a new car. The harder the decision, it’s usually the more expensive the product is and therefore require mostly more people and time to consider before making the decision.
| High Involvement | Low Involvement | |
| Significant differences | Complex buying | Variety seeking |
| Between brands | Behavior | Buying behavior |
| Few differences | Dissonance-reducing | Habitual buying |
| Between brands | Buying behavior | Behavior |
Figure: the four type of buying behavior. Source Kotler and Armstrong (2001)
Purchase decision process
According to East (et. Al., 2008), the purchase decision process is the basic approach to consumer behavior’s problems. However, Ehrenberg (1988, cited in East et al., 2008) has identified that there’s less eagerness for such models as they are hard to test because the satisfactory measures for the components cannot be easily find.
East (et al., 2008) said it has been accepted that most repeat purchase are done as a habit. “Often, this range of decision-making from rational to automatic is related to the degree of involvement.” When the outcomes of the decision are of high-value or the thing is new to them, people are more likely to get involved and often think more. The three models of consumer decision which are used to explain the decision-making in details are:
- Cognitive – taking purchase in such a way that it is the outcome of rational decision-making processes.
- Reinforcement – taking purchase as the learning and modifying behavior as a reaction to the opportunities, rewards and costs present in the consumer’s environment.
- Habit – taking purchase as the learned behavior which being brought out by specific inducement in the consumer’s environment.
The buyer decision process
Need recognition a information search aevaluation of alternatives apurchase decision a post purchase behavior
Figure 5.6 buying decision process chapter 5 pp 193, kotler and Armstrong (2001)
Previous Research
According to the automotive study done by Baltimore, Md. in 2005, the reason that consumer decided to purchase a new car is just because they want. The Vertis Customer Focus(R) 2005 has given the factors that influences adults to buy new cars; 8% claiming that their current automobile has problems, 11% need one for work, 4% has a new driving member in the family, 3% want new one as they can afford a better car and 5% are motivated to get a new car because of the lower prices, lower interest/financing or price incentives (Business wire, May 2, 2005).
With the economic crisis all over the world, Thailand automotive market has also been affected in the first half of the year 2009. However, according to the Thai Farmer Bank Research Center, Thai economy seems to be getting back on track together with the other countries. (Smartfund, 2009)
The Bank of Thailand has reduced the interest rate on the loans in which helps to drive the country’s economic during the year. At the same time, the reducing in the sales of the cars has affected finance company and therefore these finance companies then starting to be more lenient with the buyers by offering lower interest to courage more sales which can then be identify that interest rate is one of the most important factors that influences the buying behavior of the customer towards the automobile. (Smartfund, 2009)
However, the positive factors is being obstruct by the negative factor like fuel price that’s been increasing and which unfortunately effect the decision of the customers in buying the new vehicles, whether or not to buy or reconsider about the model and size of the vehicles they going to buy. (Smartfund, 2009)
The survey results from cars.com in 2005 also reveals that 20% of women consider fuel efficiency as one of the most important factors in the car-buying process. (PRNewswire, November 15, 2005)
Communication research also discloses that the online car sales in U.S. is increasing. Economist Intelligence Unit (cited in NUA, 2000b) mentioned that it is unlikely to use the internet as a channel to sell cars when Mintel (2000b) mentioned that only 5% of adults would buy cars on the internet (Molesworth and Suortti, 2001).
However, people finding internet to be useful for learning about the product in the early stage to learn about the offer and advantage that they would get, but in the later stage, people would want to get back to the traditional way of purchasing and get a test drive during the evaluation stage (Molesworth and Suortti, 2001).
Resale values of the vehicles also become one of the factors that influence people to buy a new vehicle. Bill Drew, president of Drew Auto Center in La Mesa mentioned that he has made 25 sales on the first day that he started offering the trade-in cars. G. “‘Cash for Clunkers’ revs up car buying.” San Diego Business Journal. CBJ, L.P. 2009. HighBeam Research. 13 Nov. 2009 http://www.highbeam.com.
According to Edwards (2008), strategic vision’s president of automobile, customers are now looking for the quality of the products they are purchasing, which has the long term value with the best price, even with the luxury vehicles. She mentioned that it is important for the manufacturers to focus on improving the product quality when the economic situation is favorable.