Literature Review on consumer buying behaviour

Introduction

Literature review provides a theoretical framework of this research. It critically analyses the research topic and is the key process of any process any research project as it allows the research to be placed in the context. The data was collected from various sources such as textbooks, journals, magazines and websites. This chapter is divided into four main sections as given below:

• Consumer buying behaviour
• Sales Promotion
• Impulse purchase
• Relation between sales promotion and impulse purchase

Consumer buying behaviour:

The decision making process

Consumer behaviour is a field of study that focuses on consumer activities. This has been a topic of vast interest for the marketers all over the world. The marketing managers always study these consumer behavioural changes and make continuous changes in products and services. According to Blackwell et al. (2006), consumer behaviour is defined as the activities that people undertake when obtaining, consuming and disposing of products and services that they expect will satisfy their personal needs. Blackwell et al. (2006) mentions that a customer follows a sequence before buying a product or service. They are as follows:

1. Need Recognition:

Looking at the needs, there could be various things that influence the need to buy a product or service. Environmental influences such as situation, culture, family etc might be a few of them. There are also individual differences such as knowledge, attitude and lifestyles.

Information Search:

Once the customer thinks that they need to buy something, then the search for information begins. There are two types of search, internal or external. Internal search is retrieving the knowledge from the memory. External search is influenced by the environmental factors.

Evaluation of alternatives:

The next consumer decision process is the search for the purchase evaluation alternatives. A consumer might look for various other options. This could be product replacements, which will depend on external factors such as price, quality, variety etc.

Purchase of the product:

Once all the options are evaluated, the consumer decides to buy a product. Purchase is the next step. A customer might have choice for purchase influenced by the in store choices, sales persons etc. One thing that could happen differently from a pre-planned purchase is the impulse purchase. One might choose to buy something else because of the sales promotion that is going on at that particular store. The customer could also find another product that is better value for money than the one he indented to buy. The consumption of the product happens at the point when the consumers use the products.

Post consumption evaluation:

The next stage is the post consumption evaluation when a customer is satisfied or dissatisfied with the product. Customers are satisfied if the expectations are matched by the performance and opposite if otherwise. If it is a satisfied customer, there are chances that the product might be bought again. This leads to the consumer loyalty of the customer. The last stage of the consumer buying process is the divestment where consumer has options to dispose or remarket the product after the usage.

Blackwell et al. (2006, pp.70-84.)

Need Recognition

Information Search

Evaluation of alternatives

Purchase of the product

Post consumption evaluation

Adopted from Blackwell et al (2006)

Factors that affect consumer behaviour:

There are several factors that affect consumer behaviour. The market is an ever-changing place and it’s significant to understand what factors influence the consumer behaviour. According to Kotler and Armstrong, (2007), the consumer behaviour is influenced by the four main factors namely: Cultural factors, Social factors, personal factors and physiological factors.

Cultural factors:

Cultural factors integrate rules and traditions of the members of the society, shared religion. A particular group of people usually have a unique culture (Luna & Gupta, 2001) Consumer culture decides the relationship between consumers and different activities or products and also decides the success or failure of specific products and services. (Solomon, 2002) The culture exists in every organization or society and it affects the purchase behaviour differently in different countries. Group of people are identified by social classes. Typically, people in the same class exhibit similar buying behaviour. (Kotler & Armstrong, 2007, pp161,164).

Social Factors:

The main social factors that influence consumer buying are groups, family, roles and status. (Kotler & Amstrong, 2007, pp164).

Groups:

Groups are group of people that work together to achieve their individual goals. (Schiffman and Kanuk, 1994). By knowing the reference group, a person’s buying behaviour, attitude, product decisions and brand choices can be easily understood.

Family:

Family members can strongly influence buying behaviour. A family’s values and beliefs can determine the preferences. Children may also strongly influence the family (Kotler and Armstrong, 2007)

Roles and Status:

In each group that were discussed above, each person has its own role status and this status reflects the general position in the society. (Kotler & Armstrong, 2007.) A role embraces, expected activities of a person in a particular situation according to that person’s situation. The role and status of a person affects the buying behaviour.

Personal Factors:

The personal factors that influence the consumer behaviour are age and life cycle stage, occupation, economic situation, lifestyle and self-concept.

Age and Life cycle stage:

Age is a very important factor in terms of purchasing. The needs for the people in different age groups are different. Even if the individuals are of the same age, the consumption will differ due to their level and occupation the behaviour of buying is formed in the different stages of a consumer’s life cycle (Kotler & Amstrong, 2007).

Occupation:

Consumers with different occupation buy different goods and it has a good influence in the buying behaviour. E.g., a businessperson buys business suits where as a plumber buys casual clothes.

Economic situation:

The economic situation of consumers will decide what product or service they can buy. The economic situation consists of their income, saving and interest rates.

Lifestyle:

This represents the kind of living that people lead. People with same culture or social class may have different life styles. The life style can reflect a consumer’s pattern in the purchasing world.

Personality and self concept:

Personality can reflect a person’s unique characteristics that determine and influence what responses and behaviours a person has in a particular situation. Self-concept is closely related with personality, which is a kind of person with traits, relationships, habits, possessions and ways of purchasing behaviour. Both personality and self-concept affects consumer buying behaviour, which is different for every person.

(Kotler & Amstrong, 2007, pp 171, 172.)

Psychological factors:

Individuals have different psychological reasons to purchase goods. There are four main psychological factors that affect the consumer buying behaviour. They are motivation, perception, learning and beliefs & attitudes. (Stavkoa et al, 2008)

Motivation:

Different consumers have different motivation to satisfy their needs. Some may be instant or some may be delayed. An individual’s buying decisions are influenced by conscious motives, which is a need to make the person satisfied.

Perception:

This is the process of understanding the reality including selection, processing and interpretation of information from the environment to make them meaningful and purposeful.

Learning:

When people improve their experience, they change their buying behaviour. These are shown through interaction of drives, responses, stimuli and reinforcement.

Beliefs and attitudes:

Belief represents an individual’s attitude, opinion and knowledge. Attitudes depict the opinions, expectations and orientation towards products and services are difficult to change.

Discussion:

The act of impulse purchasing behaviour comes under the psychological factors. Silvera et al (2005), examines the relationship between impulse buying psychological constructs such as subjective well being, positive and negative effect, social influence and self esteem. Verplanken and Herabadi(2001) also found the relation between impulse buying tendency and personality-related variables.

There are three research perspectives on consumer behaviour.

Decision making perspective: A consumer first perceives that a problem exists and go through a series of steps in a rational solving process as explained in the first section.

Experimental Perspective: In this case, the consumer do not purchase strictly according to strictly rational decision-making process.

Behavioural influence perspective: This occurs when environmental forces propel consumers to make purchases without necessarily developing strong beliefs of the product.

This research is based on the behavioural influence perspective. The consumers do not think before they purchase something, but act impulsively based on the environmental forces. These environmental forces are stimulated by the things that the consumers’ see/fee/touch when they enter the store. Sales promotion is one of the types of environmental force that makes the consumer to buy things instantly.

Sales Promotion in retail environment:

Sales promotions have become increasingly important element of commercial marketing space (Paettie, 2002). It has matured since 1970’s when the advertising agencies started giving attention to this subject. During 1990’s more attention was paid for the effectiveness of sales promotion and adopted more integrated approach to promotional activities. The main objective of the sales promotion is to increase the short-term sales volume, maintaining customer loyalty, emphasizing novelty and to complement other promotion tools. One of the main reasons for using sales promotion is because of the competition.

There are various definitions for sales promotions, which are explained below. According to institution of sales promotion (2004), “Sales promotion is defined as a planned and implemented marketing activity that both enhances the product or service appeal and changes customer behaviour positively in return for an additional benefit for purchase or participation.” (Tony, 2006, pp 7). Chris (1993) defines the sales promotion as the practice of offering temporary addition value to a brand in order to reach specific market objectives. Sales promotion consists of short-term incentives to encourage purchase or sale of a product or service (Kotler & Armstrong, 2007).

The intention of sales promotion is to attract new consumer, reward loyal customers and increase the repurchase rates of occasional users. The new consumers are into three kinds; users of another brand, users in other categories, frequent brand switchers. The sales promotion often attracts brand switchers who are people who primarily look for low price, good value for money products. Sales promotions might or might not turn them to loyal users. Sales promotions are primarily used by high brands to create a short-term rise in sales, but would gain little market share.

(David Jobber and Geoff Lancaster(2003), ‘Selling and Sales management’ pp 258-262)

Deborah et al (2001) based on Ehernberg et al (1994) and Shapiro(1990) mentions that sales promotions have been used to achieve timed sales increases. They also mention that the use of sales promotions has increased dramatically. One of the reasons for increase in sales promotion is the easiness of measuring and documenting the campaigns and promotions, which is beneficial for retailers.

Advantages of Sales promotions:

Jobber and Lancaster (2003) mentioned that sales promotion has vital techniques that are used as a part of organisations’ marketing effort and the important objectives of sales promotion. There are many advantages of sales promotion in a retailer’s point of view as mentioned below.

Encouragement of repeat purchases

Building a long term customer loyalty

Encouragement of consumers to visit a particular sales outlet

Building up of retail stock levels

Types of Sales promotions:

There are several types of sales promotion as listed below. (Schultz et al, 1998 pp 25)

Coupon: Certificate allowing consumer to get reduced price at purchase

Bonus pack: More product for the regular price

In-pack, On-pack, Near pack: Gift given to customers at purchase

Speciality container: Container that can be reused or that adds value to the product

Continuity Program: Reward system for multiple purchases

Refund: Customer get money back after purchase

Sweepstakes: Consumer has a random chance to win a price, so no purchase is required

Contest: Consumers compete to win a prize- purchase may be required

Through the mail premium: Gift given to the consumer after purchase

Sampling: Product is given to consumers for free

Price off: Product package informs consumer that marked price is lower than the regular price

Trade deal: Retailer gets discount on price of product or incentive for promoting product to the consumers

Cause related promotion: Donation to charitable organisation made by company for each unit of product sold.

Effects of sales promotion:

Positive effects of sales promotion:

Kenning and Evanschitzky(2007) mentioned that price knowledge is a physiological construct that is relevant to retailer success since it influences both a consumer’s buying decision and the sales margin. Deborah et al (2001) based on Ehrenberg (1994) mentions that sale promotions appeal to the retailers because they: 1. Accelerate purchase 2. Raise shelf space revenue 3. Provide sales staff with basis for facilitating interaction with customers 4. generate increased tangible sales as inventory moves quickly out of store. Further, retailers rely on promotional programs to generate store traffic and to increase store loyalty (Todden and Block, 1994) as well as giving the retailer a reason to develop local advertising and special ‘in store’ merchandising that features the promoted brand or product. With the support of manufacturers, retailers have the option of increasing the profit margins as well.

From a consumer’s point of view, the sales promotion gives them an opportunity to take advantage of the promotional activities in the store. This could be money related or product related. By price related, they could save money by purchasing goods with price discounts and these discounts are very attractive as they give the consumers immediate savings. The quantity related is when consumers buy products from multibuys or extra fill packs. They get more quantity of items with the same price. According to Vincent et al (2001), the impact of price promotion need not be limited to its immediate effect. It also causes post promotion. Additional sales come in the expense of future purchases. Consumer purchase reinforcement can stimulate subsequent category demand included by the promotion of one brand.

Negative effects of sales promotion:

There are various negative effects on retailers because of sales promotion. Raju (1992) based on Winer(1986) and Lattin(1989) conclude that frequent discounts may lower the reference price of the promoted brand, which in turn may negate the effect of promotions. Hence, the potential for sales increases may be lower if deep discounts are offered less frequently. Nijs et al (2001) confirmed that the frequent use of price promotions has a strong affect on the short-term consumer sensitivity to the item. Gupta (1988) concluded that the total sales increase due to promotion might lead to brand switching. This means, the existing brands will not be able sell as they used to be because people choose cheaper brands when there is a sales promotion. Borges et al (2005) suggests that retailers need to pay attention to avoid promoting categories that are frequently bought together in the same promotional action or be faced with a strong redundancy effect. Jones (1990) informs of the ‘double jeopardy’ of sales promotion which means sales promotion increases the short term, but the long term result could be destruction of the brand.

Pricing Strategies in retail shops:

Pricing is the second of the four ‘P’s described in the marketing mix. Price can reflect how much consumers pay for their product or service. The pricing strategies vary on different retailers. There are various other considerations while setting the retail prices.(Levy, Weitz, 2007, pp 402) They are price sensitivity, competition, cost of operations and legal constraints.

There are many options for a retailer in terms of pricing. (Berman & Evans, 2010, pp 464). One of them is discount orientation. This uses lower prices as the major competitive advantage. Full time discount stores like two Euro shop comes in this category. The second one is at the market orientation. In this case, the retailer has average prices. These retail shops will be feasible for the common people. E.g. Tesco. The third type is upscale orientation: In this, the retailer has a prestige image, which is the major competitive advantage for the retailer. This will have a limited number of customers E.g.: Marks and Spencer

Most of the retailers fall in one of these categories. One important key to successful retailing is offering a good value in consumers mind. One of the factors that affect the retail pricing strategy is the consumer. (Berman & Evans, 2010, pp 464). Price and consumer purchases and perceptions are interrelated. If there is a small change in price, it affects the retail business, as consumers are sensitive to prices. The other factors that affect the pricing are government regulations, manufacturers, wholesalers and other suppliers.

According to Sullivan and Adcock (2002), “The two specific approaches that are used in pricing are Everyday low pricing (ELDP) and High/Low pricing (HLP). ELDP is a strategy that sets a stable price at a point between competitor’s price and promotional price. HLP is a mixed approach that that sets prices the at levels both above and below ELDP” Borges et al., (2005) states that “Sales promotion is a key tool used by hi-lo retailers to attract consumers to their stores, while the EDLP strategy proposes the lowest prices every day without promotions.” However, this study is based in Tesco Ireland, which uses High/Low pricing strategy. Some retailers just concentrate on the pricing strategies by specifically looking on the short-term benefits.

Price promotion:

Srinivasan et al (2004) based on Blattberg et al (1995) defined price promotion as temporary price reductions offered to the consumer. Price promotion is one of the types of sales promotion methods used.

Cummins (1998) classified the sales promotions into two types. Price promotion was one type, which depends on the economic dimension of product or service. Value promotion was the second type that was based on the functional or physiological dimensions of the product or service. Examples of price promotion would be Money of Coupons, Pence off flashes, buy one get one free, extra fill packs. Examples of value promotions would be free draws, main-in premiums, container promotions, competitions. The price promotion is the one that is used in this study.

According to Smith & Sinha(2000), there are three types of price promotions that are available in the market.

1. Price promotion

2. Extra product promotion

3. Mixed promotion

An example of the price promotion would be 50% off, was € 2 now € 1. An example of extra product promotion would be ‘Buy 1 get 1 Free’ and the mixed promotion would be ‘Buy two and get 50% off’. Smith & Sinha (2000) concluded that the price promotion was the most popular one, as the consumer perceives more value for money when compared to the other two. This is mainly because, the consumer get instant discount when they go for the price promotion.

Cummings (1998) describes about six main types of discounts that are available ‘off’ the normal price. These discounts are immediately available at the time of purchase. They are

Seasonal discounts: They are designed to boost sales in off-peak seasons, move outdated lines or heavy stocks bring forward purchases or improve cash flow.

Multi-buys: These are particular form of quantity discount offered by retailers, which is usually funded by the manufacturers for multiple purchases of the same item. E.g.: Buy one get one free

Banded packs: In this type, two or more of the same product are banded together or placed in an additional outer wrap so that the consumer buys them together. E.g. 12 cans of Coca Cola for reduced price

Reduced Shelf price: In this type, a standard product is on sale with a shelf sticker or poster showing a reduced price. This is the most common type of promotion. Example: Was €1.99 now €0.99, save € 1′

Reduced price offers: These will be mostly flashed on the pack, offering a saving. E.g. 25c off the marked price.

Extra fill packs: The quantity of the product goes up while the price remains the same in this type of promotion E.g.: 25% extra free.

Smith and Sinha, (2000) mentions that strategically, some supermarkets; for example, rely heavily on price promotions to appeal to more price sensitive markets and tactically adjust the extent of the promotion to match daily or weekly promotions of competitors. The retailers also have a good knowledge about the consumer’s perceptions about the price. An underlying assumption made by retailers is that some deals are more effective than the others in communicating deal value and in enhancing a particular offer’s attractiveness. Price promotion allows the buyer to obtain maximum monetary savings since the buyer only needs to pay a discounted price. The retailers use price as one of the key factors to create this perception in the customers mind. These are the main strategies used by the retailers to improve sales promotion concerning pricing. Manufacturer price-offs are the ones that a consumer gain without any extra effort. The extra efforts here imply the use of a coupon or send a refund certificate. Schultz et al, (1998) mentions that the main advantage of using price off is that they provide a differentiating factor to consumers at the point of purchase. Consumers who are price sensitive may notice the flagged package on the store shelf and decide to buy the promoted brand rather than a competing brand because of the discount. According to the Scott et al (2001) and Qelch et al (1985), the most effective tool of accelerating the purchases appears to be advertised price cuts. Price cut is rated over other types of sales promotion. Kenning & Evanschitzky(2007) and Thomas & Morwitz(2004) mentions that it is a common knowledge that price affects a consumers buying decision.

4.3 Impulse Purchase

Impulse purchase is a form of unplanned and sudden purchases. (David et.al (2008) based on Rook (1987)). A customer makes an instant decision without thinking about the consequences of buying. It is something that stimulates the customer to buy things suddenly. It is described as more arousing, less deliberate and irresistible buying behaviour compared to the planned purchasing behaviour. There are many definitions on impulse buying, the most common one’s are explained below.

Rook (1987) suggests impulse buying occurs when a consumer experiences a sudden and often persistent urge to buy something immediately. The impulse to buy is hedonically complex and may stimulate emotional conflict. Impulse buying is also prone to occur with diminished regard for its consequences. He also explains that it is a fast experience, which can be literally ‘grabbing’ a product instead of ‘choosing’ one. It is a forceful, urgent, spontaneous, extraordinary and exciting need when compared to the normal purchase. Beatty and Ferrell (1998) defines impulse buying as a sudden and immediate purchase with no pre-shopping intentions either to buy a specific product category or to fulfil a specific buying task. The behaviour occurs after an urge to buy and it tends to be spontaneous and without a lot of reflection. It does not include the purchase of a simple reminder item, which is an item that is simply out of stock at home. Virvilaite et al (2009), based on Omar and Kent (2001) describe impulsive purchasing as measurable construct, that means buyer’s tendency to think and buy on his own particular way: beside, spontaneously, thoughtlessly and immediately. Piron (1991), defined impulse purchase as unplanned purchase, result of an instantaneous decision of consumer’s response to stimulus. After purchase, a consumer experiences emotional and/or cognitive reactions. Madhavram and Laverie (2004) have a different view towards impulse buying. They mention that impulse buying is a result of purchaser’s immediate reaction to external stimuli that is often hedonically charged. An impulse buying episode signifies a change in purchaser’s intention to purchase that particular product before and after the exposure to the stimuli.

No matter how defined, impulse buying refers to a distinctive type of unplanned purchase, and the fact that impulse purchase is unplanned is central to all definitions of impulse buying. An example of impulse purchase would be a consumer who buys chocolates might see a chocolate at the checkout while waiting in a line in a grocery store and want it based on the price (half price). In this case, the purchase would be considered as an impulse purchase because it is outside of the normal purchase behaviour and it satisfies an immediate desire of getting his favourite chocolate for half price.

Characteristics of an impulse purchase:

Bayley and Nancarrow (1998), based on Rook (1987) describes impulse buying exhibiting the following characteristics:

The feeling of an overwhelming force from the product

An intense feeling of having to buy the product immediately

Ignoring the negative consequences from the purchase

Feeling of excitement, even Euphoria

The conflict between control and indulgence

3.2 Factors affecting impulse purchase:

There are many factors influence the impulse purchase. Most of these are personal factors and it varies from person to person, the shopping environment and situation. Virvilaite et al., (2009) based on Parboteeah (2005) generalised the factors that influence an impulse purchase:

Characteristics of a consumer

Peculiarities of purchase environment

Situation factors

Characteristics of goods

Adopted from Peculiarities of impulse purchasing in the market of consumer goods (Virvilaite et al 2009)

The consumer characteristics include age, sex, culture, mood, tendency to materialism, enjoy of buying, tendency to buy impulsively.

a. Age:

The age is an important factor in terms of impulse purchase. Young people tend to spend more money for impulse purchase. Studies shows that people under 35 years of age are more prone to impulse purchase. This has been confirmed by Bellinger et al. (1978) and Wood (1998) cited by Kacen and Lee(2002). Lawton et al(1992), McContha et al(1994) cited by Kacen and Lee(2002) suggested that as consumers age, they learn to control their impulsive buying tendencies.

Sex:

The consumer’s sex has influence on impulse purchasing. Women tend to be more impulsive than men are. Dittmar et al.(1995) cited by Kacen and Lee(2002) argued that women value their possessions for emotional and relational-oriented reasons while men value their possessions for functional and instrumental reasons.

Culture:

There is a strong relation between culture and impulsive purchasing. There are people from individualistic culture and collective culture. Individualistic culture is where people give their own preferences, needs and rights who give priority to their personal goals motivate people compared to collectivists who are people who give priority to their group. Kacen and Lee (2002) conclude that impulsive purchasing will be stronger among people from individualistic cultures compared to people from collective cultures.

d. Mood:

A person’s mood and emotional state affects the impulse purchase. If the person is in good mood, there are more chances of impulse purchase. This was confirmed by Rook and Garderner(1993), Donovan et al (1994) cited by Kacen and Lee(2002). Betty and Ferrel(1998) found out that consumers positive mood was associated with urge to buy impulsively.

e. Tendency to materialism:

The tendency to materialism means that the person use purchase of goods as a reduce strategy of perception of inadequacy level of real me and perfect me and tend to be more impulsive.

f. Enjoy buying:

This means that a person who enjoys buying treats it as a form of relaxation.

Tendency to buy impulsively: The consumers characterised by high impulsive purchase are less thinking and are easily attracted emotionally by seen goods, as they desire immediate satisfaction.

Peculiarities of the purchasing environment:

Store Layout: A good design and atmosphere of the store stimulates impulse buying.

Staff: Staff of the store may help the customers, which could increase the chance of an impulse buying.

Store type and atmosphere: A good atmosphere stimulates the impulse buying. Customers also tends to buy more things impulsively in a super market or a big retail store the goods are clearly arranged. Mattila and Wirtz(2006) discussed about environmental and social factors that lead to impulse purchasing. They said highly stimulating and pleasant store environments leads to enhanced impulse buying.

Situation factors:

Time: This is the time that a consumer spends for buying something. Shortage of time reduces impulsive buying.

Examination of goods: People who examine goods more tend to buy more compared to people who examine less.

Means: Consumers means facilitate impulse buying because it increases the person’s opportunities to buy.

Influence groups: This could a person or group of people who accompanies the person the shopping environment. This could either stimulate or limit the impulse purchase.

Characteristics of the goods: Various characteristics include price and symbolic meaning of goods. The difference in them could make one item sell more or less

Category of goods: Considering the hedonistic and functional goods, customers tend to buy more hedonistic goods more impulsively than functional goods.

Price of goods: Price of goods very important as the consumers buys or rejects an item in terms of price. There are more tendencies to buy things when the customer sees a price cut.