INFLUENCING CUSTOMERS’ DECISION MAKING PROCESS BY

UNDERSTANDING HOW CUSTOMERS CHOOSE PRODUCTS

Influencing

Decision Making

Customer

AGENDA

Social

Personal

Cultural

PART I - Background Of The Research

PART II - Methodology, Analysis and Findings

PART III - Academic and Commercial Benefits, Limitations of the Research, Suggestions for Future Research

PART I Background Of The Research

Customers' Decision Making Process

The primary objective of any firm that wants to remain successful is to understand “How”, “Why” and “When” customers choose a particular product or service.

Customers' Decision Making Process

Literature on Buyer Behaviour suggests that customers go through a Five-stage Decision Making Process in any purchase.

This model is important for anyone making Business decisions, be it Product Manufacturers or Retailers. It forces them to consider the whole buying process rather than just the purchase decision.

Source: http://tutor2u.net/business/marketing/buying_decision_process.asp

Stimulus – Response Model of Buyer Behaviour

MARKETING STIMULI

OTHER STIMULI

Product Price Place Promotion

Economic Technologic

al Political Cultural

BUYER’S CHARACTERIST

ICS

BUYER’S DECISION MAKING PROCESS

Cultural Personal Social Psychological

Problem Recognition

Information search

Evaluation of Alternatives

Purchase Decision

Post-Purchase Behaviour

BUYER’S DECISION

Product Choice Brand Choice Dealer Choice Purchase timing Purchase

Amount

Source: K6221 – Business Intelligence Notes

Stimulus – Response Model of Buyer Behaviour

MARKETING STIMULI

OTHER STIMULI

Product Price Place Promotion

Economic Technologic

al Political Cultural

BUYER’S CHARACTERIST

ICS

BUYER’S DECISION MAKING PROCESS

Cultural Personal Social Psychological

Problem Recognition

Information search

Evaluation of Alternatives

Purchase Decision

Post-Purchase Behaviour

BUYER’S DECISION

Product Choice Brand Choice Dealer Choice Purchase timing Purchase

Amount

Source: K6221 – Business Intelligence Notes

Scope of Research

Stimulus – Response Model of Buyer Behaviour

MARKETING STIMULI

OTHER STIMULI

Product Price Place Promotion

Economic Technologic

al Political Cultural

BUYER’S DECISION

Product Choice Brand Choice Dealer Choice Purchase timing Purchase

Amount

Focus of this research is to understand what exactly goes through buyer’s mind at this point…

Customer Intelligenc

e

Scope Of Research

Buying Behaviour in Supermarkets

Note: By supermarkets we mean the stores consisting mainly of groceries and limited products on non food items such as toiletries, cosmetics, etc.

What Is The Need For This Research?

Small grocery shop of the Past

Retail Outlets of the Present In the last two decades the modern retail industry has boomed

across the globe.

Supermarket

Outlets Market Share

NTUC FairPrice

240 Over 50%

Cold Storage 43 Over 30%

Sheng Siong 25 Around 15%

Singapore

India

Supermarket Outlets

Food Bazaar/ Big Bazaar

700+

Reliance Fresh 680+

Spencer’s 420+

Business Monitor International (BMI) forecast that sales through Mass Grocery Retail outlets to reach to USD 27.67 billion by 2015

Business Monitor International (BMI) forecast that sales through Mass Grocery Retail outlets to reach US$3.6 billion in 2012 and grow almost 28 percent to US$4.6 billion by 2016

What Is The Need For This Research?

SCENARIOCHALLENGE

Changing Lifestyles and

TastesWhat do customers expect

from supermarkets?

Demographic Changes Who are the customers?

Increase in the number of supermarkets

Gaining/Retaining Customer Loyalty

Access to multiple media channels

Which channels and information sources do they

rely on?

Demographic Changes

If retailers can get to know what customers go through in each of the five stages of the decision making process, the sources of information and customers’ characteristics, they can influence customers to buy their products

Objectives of the Research

To understand buyer behaviour

To identify information sources that customers rely on

To assess the factors that influence customers

To propose how customers decision making can be influenced

PART II Methodology, Analysis and Findings

METHODOLOGY

An online survey was conducted to understand the various thoughts that go into the customers’ decision making process.

The questions of the survey were framed such that we will get to know the customer’s characteristics, customer’s decision making process and marketing stimuli that influence the customer’s decision of buying their choice of product/brand.

In addition to the online survey, we observed the way people buy products in supermarkets

The survey responses are analysed and suggestions are provided on how to influence customers’ decision making

HYPOTHESIS

Age is a significant factor in influencing Purchasing Decision.

Nationality is a significant factor in influencing Purchasing Decision.

Gender is a significant factor in influencing Purchasing Decision.

SAMPLE A total of 254 people took the survey and the

respondents consisted of individuals from India, Singapore, China and a few other countries.

Singaporean, 53

Indian, 157

PRC, 31

Others, 13

Nationality

Singaporean

Indian

PRC

Others

Findings Based On Nationality

Which Nationals are more Brand Conscious?

Singap

orean

Indian

PRCOth

ers

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

75%

79%

77%

69%

25%

21%

23

31%

Nationality - Brand Consciousness

Yes

No

Response Percent

Nati

onalit

yN - 254

79% of the respondents from India say that they are Brand Conscious

A recent poll has found consumers in Asia to be more brand-conscious than their counterparts in Europe and the US

Source: http://www.cosmeticsbusiness.com/news/article_page/Asian_consumers_more_brandconscious_than_westerners/61951

75% of the respondents from Singapore say that they are Brand Conscious

77% of the respondents from China say that they are Brand Conscious

Which is the Go-To Channel for new product information?

Response Percent

Nati

onalit

y

Sing

apor

ean

Indi

an

PRC

Other

s

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

26

123

16

7

15

24

9

4

20

42

12

1

19

34

11

4

26

91

14

10

Nationality vs Channels

General Media (TV, Radio, Magazines)

Promotional Events (Ex-ample: Road Shows)

Social Media (Example: Facebook, Twitter )

Discussion Forums/ Reviews and Ratings

Word of mouth

Respondents from India say that they are mostly influenced by General Media, followed by Word of Mouth

And to the joy of advertisers and marketers, social media is twice as likely to influence Chinese buying decisions

Source: http://www.fastcompany.com/magazine/152/the-socialist-networks.html

N - 254

39% of the respondents from China say that they are influenced by Social Media

Respondents from Singapore say that they are equally influenced by General Media and Word of Mouth

The number of Singaporeans (38%) who use Social Media to know about Products/Brands is increasing of late

Which Information Source is the most trusted for evaluating alternatives?

Response Percent

Sing

apor

ean

Indi

anChi

nese

Other

s

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

38

104

21

10

36

120

18

12

7

18

5

1

25

72

18

3

Nationality vs Information Sources

Reviews/ Ratings

Family and Friends

Sales Personnel

AdvertisementsNati

onalit

y

71% of the respondents from Singapore say that they trust Reviews/Ratings

With use of social media and interaction with fellow online consumers increasing, Singaporeans’ trust in consumer opinions posted online is high. Online product reviews and discussion forums are one of the most trusted sources of recommendations in purchase decision making

Source: Nielsen Report - http://www.sg.nielsen.com/site/NewsReleaseJuly112011.shtml

N - 254

76% of the respondents from India say that they trust Family/Friends 58% of the respondents from China say that they trust Advertisements

Value for Money

What do customers expect when buying products from supermarkets?

What do customers expect when buying products from supermarkets?

Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl

Value for Money

Price

What do customers expect when buying products from supermarkets?

Global consumers vote “good value for money” #1 influencer of grocery store choice

Nielsen found that price, promotions and perceptions are most influential in helping consumers define value.

Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl

According to Nielsen’s latest annual Shopper Trends report, 62% of Singaporean shoppers claim they know the prices of most grocery items and notice when price changes, making them the second most price-sensitive shoppers in Southeast Asia after Malaysia

Brand Reputation

What do customers expect when buying products from supermarkets?

Quality

Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl

Today’s shopper appears to be what retailing pundits aptly refer to as

“The schizophrenic shopper”

On one hand, shoppers demand good value for their grocery dollar

On the other, they also expect retailers to stock a wide selection of

high quality brands

This ‘dual demand’ indicates that the same consumers want the

‘cheapest of the cheap’ in some categories and the ‘best of the best’

in others

Buyer Involvement and Purchase Decision

Factors that Impact High/Low

Involvement Purchase Decisions

Perception of Product Quality

Positive Belief about the brand

Lower Price Sales Promotions Product Features Brand Reputation

High Involvement

• Purchases that require extensive evaluation

Low Involvement

• Purchases that have a simple evaluation process

Few Differences Between Brands

Singapore

India

China

0% 20% 40% 60% 80%

68%

49%

74%

Nationality – Sales Promotions

Agree

Singapore

India

China

0%20%

40%60%

80%100%

77%

56%

78%

Nationality – Sales Promotions

Agree

High Involvement

Low Involvement

Customers prefer shopping in stores that run a lot of promotions irrespective of whether it is a High Involvement Purchase or Low Involvement Purchase

Over eighty-five percent of Malaysian and Singaporean shoppers said they shopped in stores which offered promotions and price discounts

Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl

Singapore

India

China

0% 20% 40% 60%

41%

40%

29%

Nationality – Brand Reputation

Agree

Singapore

India

China

0%10%

20%30%

40%50%

45%

38%

35%

Nationality – Brand Reputation

Agree

Significant Differences Between Brands

High Involvement

Low Involvement

Customers prefer to buy products based on the reputation of the brand irrespective of whether it is a High Involvement Purchase or Low Involvement Purchase

Nielsen’s Shopper Trends survey revealed that consumers are only inclined to buy promotional items when they already like and trust a brand – price promotions and discounts are simply not enough to attract shoppers to a specific retailer in a highly competitive and concentrated retailer environment

Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl

NATIONALITY- SUMMARY We found that irrespective of the nationality, respondents are predominantly

Brand Conscious Respondents from all the three countries still trust Traditional Media the

most

Among the three nationals, Chinese are more influenced by Social Media Reviews/Ratings and Family/Friends are the most trusted Information sources among all nationals.

In general, respondents from all three countries are most likely to listen to word-of-mouth and friends who tell them where to get the best value

A recent study by Nielsen in Singapore says-“Social media enables consumers to obtain opinions and information from sources that were previously not possible. As a result, consumers are flocking to popular social networks to help them make purchase decisions and the platform has become one of the most influential forms of information available.”

So the impact of social media in purchase decisions might increase among Singaporeans in the near future.

Value for Money, Brand Reputation and Price influence customers in selection of the store

So Supermarkets can employ the triple play strategy of Price, Promotions and Perceptions to attract consumers over other retailers.

Findings Based On Age

Which age group is more Brand Conscious?

≤ 25

26-40

≥ 41

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

78.2%

79.6%

63.6%

21.8%

20.4%

36.4%

Age - Brand Consciousness

Yes

No

Respondents in the age group 20-40 are more brand consciousThe 26-40 age group are the most likely of the set to carry

dependents and would therefore benefit from “back to school” type advertising. They are also very brand conscious and are more likely to have a preferred set of brands that they are loyal to.

Source: http://www.bigonit.co.uk/services/wordpress/?cat=13

Ag

e

Response Percent

N - 254

Which is the Go-To Channel for new product information?

≤ 25

26-40

≥ 41

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

85

68

19

18

28

6

40

33

2

31

33

4

64

64

13

Age - Channels

General Media (TV, Radio, Magazines)

Promotional Events (Example: Road Shows)

Social Media (Example: Facebook, Twitter )

Discussion Forums/ Reviews and Ratings

Word of mouth

Ag

e

Response Percent

N - 254

General Media Advertising and Word of Mouth are the most influential of the channels among all age groups. Though social media has made a great impact in our day-to-day lives it is still far from influencing our purchasing decision86% of people stated that TV advertising still has the most impact on their buying decisions. Word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions.

Source: http://www.twistimage.com/blog/archives/what-type-of-advertising-has-the-most-influence/

Which Information Source is the most trusted for evaluating alternatives?

≤ 25

26-40

≥ 41

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

82

79

12

89

79

18

13

16

2

54

52

12

Age vs Information Sources

Reviews/ Ratings

Family and Friends

Sales Personnel

Advertisements

Ag

e

Response Percent

N - 254

Reviews/Ratings and Family/Friends are the most trusted information source among all age groups.

It’s also reported 61% of consumers rely on online ratings and reviews before making a purchase.

Source: http://allthings.womma.org/2010/03/03/ratingsreviews/

Findings Based On Gender

Male

Female

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

93

79

36

16

42

33

38

30

83

58

Gender - Channels

General Media (TV, Radio, Magazines)

Promotional Events (Example: Road Shows)

Social Media (Example: Facebook, Twitter )

Discussion Forums/ Reviews and Ratings

Word of mouth

Which is the Go-To Channel for new product information?

Response Percent

N - 254

Gend

er

73% of Women respondents are influenced by General Media Women (31%) are early adopters of technology than men

(28%) and are active in social media but their purchases have not been strongly influenced by social mediaMajority of the female respondents (75.7%) were of the opinion that they were influenced by TV commercials to purchase different types of products like food, clothing, cosmetics, stationeries and so on.Source: Impact of Television Advertisements on buying pattern of

Women ( European Journal of Business and Management ) Vol 3, No.3

Male

Female

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

99

74

105

81

21

10

67

51

Gender - Information Sources

Reviews/ Ratings

Family and Friends

Sales Personnel

Advertisements

Which Information Source is the most trusted for evaluating

alternatives?

Response Percent

N - 254

Gend

er

Reviews/Ratings and Family/Friends are the most trusted Information sources among men and women.

56% of women seek product trends, product reviews and recommendations online as part of their shopping process

Source: A report from Total Beauty Media Grouphttp://www.totalbeautymedia.com/tbm/insights/whitepapers/shopping-cart

AGE AND GENDER- SUMMARY

Around 80% of the respondents in the age group 26-40 are Brand Conscious.

Word of Mouth Advertising and General Media are the most influential channels among both genders and all age groups.

Social media is still not the “Go-To” channel when it

comes to Decision Making even among the 20-25 age group which is believed to dominate the social media sphere Reviews/Ratings and Family/Friends are the most trusted Information sources among both genders and all age groups

The findings show that age, gender and nationality are all significant factors in influencing the purchase decision

Suggestions

SCENARIOCHALLENGE

SOLUTION

Changing Lifestyles and Tastes

What do customers expect from

supermarkets?

Good Value for Money is now the most important factor in determining where customers buy their groceries

Customers choose a supermarket that offers a better selection of High Quality Brand and Products

SCENARIOCHALLENGE

SOLUTION

Access to multiple media channels

Which channels and information sources

do they rely on?

Traditional media still remains the most influential channel.

Reviews/Ratings and Family/Friends are the most trusted information sources

A store’s/Brand’s reputation is an influential factor in what constitutes Good Value in consumers’ minds. The power of perception is increasingly becoming very Important

SCENARIO

CHALLENGE

SOLUTION

Increase in the number of

supermarkets

Gaining/Retaining Customer Loyalty

Loyalty Cards: We have started to see the launch

of many types of loyalty cards Can’t say whether these cards will

truly provide differentiation for retailers or whether these cards will just be a different means for shoppers to obtain promotional offers.

Regardless, these cards will say a lot about shoppers. As the usage of such cards increase in popularity, the wealth of customer data and insights gained will increasingly be central to the shopper engagement strategies

Price Promotion

Perception

Supermarkets should understand that what customers expect is ‘Value for Money’

‘Good value’ is matter of the mind The power of perception is very important – especially among

shoppers Supermarkets can develop a strategy for taking the specific

steps necessary to create positive perceptions about their Store Reputation and Brands Reputation

Create Positive Perceptions

PART III Academic and Commercial Benefits

Limitations of the ResearchSuggestions for Future Research

Academic Benefits

Social

Personal

Cultural

This study provides students in psychology,

marketing, and communications with

information to: Develop theoretical model of decisions made

by customers

Study how customers respond to

product/service related information and

experiences

Study how different channels can be used to

influence different age groups and improve

their attitude towards a brand/product

Understand how people from different

cultural backgrounds make purchase

decisions

Commercial Benefits

Social

Personal

Cultural

This study will help retailers understand:

Buyer Behaviour Buyers’ Information Sources Buyers’ Characteristics Buyers’ Decision Making

Process

The insights gained from this study can be used for:

Collecting Customer Intelligence Identifying who makes purchasing decisions Identifying what customers expect when

buying products from supermarkets Retaining Customer Loyalty Identifying the channels that could be used

for marketing and providing information to customers

Finding new customers

Social

Personal

Cultural

The findings cannot be generalized because:

The majority of respondents are in the

age group 20-40

Methodology used for this research – Online Survey

This limitation can be overcome by conducting similar studies in other countries by inviting participants from more diverse age groups and also having questions that focus on other retail businesses

This limitation can be overcome by using other methodologies like face-to-face interviews, observational methods and diary studies

Suggestions For Future Research

Social

Personal

Cultural

The current research focused on identifying the buyer behaviour based on nationality. Future researches on buyer behaviour can be carried out to identify if there are differences in buying behaviour between people of same ethnicity living in home country and a foreign country

Understanding the impact of Social and Psychological characters of consumers in the Decision Making process

Future research work could focus on:

The ways Technology is likely to fundamentally alter how and where shoppers spend their money and interact with retailers Finding ways to retain customer loyalty

Understanding how important it is for stores to carry a lot of Private Label products that are cheaper

Social

Personal

Cultural

Statistics show that about 40% of consumer spending is on impulse buying.

Recommendations For Future Research

A study can be conducted to understand the factors that influence Impulse Buying.