Customer Spending Behaviour Essay

Question:

Discuss about the Customer Spending Behaviour.

Answer:

Introduction:

Engel, Kollat and Blackwell have developed EKB model in the year of 1968. EKB is a comprehensive model that focuses on the evaluation of decision-making and purchasing behaviour of the customers (Tidwell 2015). The model has highlighted five distinctive parts including decision process, information processing, external influences, decision process variables and input regarding the decision-making process of the consumers. Now, input regarding customer spending pattern focuses on the impact of different stimuli like advertisement, store display, peer group influence etc. Now, Penang has extreme competition in the cafe industry. Therefore, it is expected that cafe organizations will have to utilize stimuli’s for influencing buying behaviour of the potential customer. Thus, the theory helped cafes to identify prime stimuli that can influence people more on the cafe services. On the other hand, due to the presence of many elements cafes will have to focus on developing complex strategies that can create difficulties on fulfilling the desired objectives.

Therefore, it can be said that according to this particular theory, the external influences and information processing influence the customer spending behaviour. For example, if a customer wants to purchase a television, at first, the customer will collect the information regarding the quality, longevity, prices and the look of the television and analyze that information, which is known as information processing and after that the customer will ask friends and other people about the product (O’Brien 2015). Then if the customer gets the positive feedback from both aspects, then only the customer will be agreed to spend for the product.

Advantage of using this model is that the theory helps to understand the impact of external influences and information on the buying decision of the customers (Wu and Zheng 2016). However, the major disadvantage of this model is that the model does not consider customer’s personal choice while describing consumer spending behaviour.

Howard Sheth buying model:

Howard and Sheth have developed the model in the year of 1969 for analyzing the customer spending behaviour in an appropriate manner. Howard Seth buying model has been developed on the assumption that consumers behave rationally at the time of purchasing any products. The model has highlighted four variables including input variables, hypothetical construct, output variables, and external variables that can have major impact on the spending pattern of the potential customers (Xinhui and Han 2016). Now, input variables like physical, visual and verbal characteristics often influence people to become biased towards a particular coffee shop. On the other hand, hypothetical construct and external variable also can create impact on spending pattern of the potential customers. The model has provided understanding regarding the rational behaviour pattern of the customers, which is likely to create positive impact on the customer-spending pattern (Makkonen, Olkkonen and Halinen 2012). Conversely, the model has not provided any idea regarding irrational behavioural pattern of the customers.

The advantage of this particular model is that the model helps to analyze the buying or spending behaviour of the customers, when they do not have complete information. At the same time, this model also helps to understand three different types of consumer behaviour – limited problem solving behaviour, extensive problem solving behaviour and routinized response behaviour (Prasad and Jha 2014). However, there are some disadvantages of this model like, the absence of clear difference between the exogenous variables and the other variables. Moreover, the model is very tough to understand (Reddy 2015).

Theory of reasoned action:

Martin Fishbein and Icek Ajzen have developed the theory of reasoned action in the year of 1975 to analyze the behavioural pattern of the customers in an appropriate way. The theory has highlighted the fact that positive attitudes towards a particular product often induce customers to develop positive belief towards the product (Mishra, Akman and Mishra 2014). As per the theory, effective brand development can actually help cafe shops to enhance the faith and belief level of the customers, which will eventually influence them more in the cafe services. Thus, the theory has highlighted in-depth understanding regarding the relationship between attitudes and beliefs that can induce people to spend more on the luxurious cafe services frequently. However, it has not considered other factors that can have impact on the spending pattern of the customers (Peslak, Ceccucci and Sendall 2012).

The advantages of this particular model are – this model helps to understand the changing behaviour of the consumers. At the same time, the Theory of Reasoned Action helps to identify the relationship between the buying behaviour of the consumer with their attitude. However, the limitation of the theory is that the use of the theory is limited to understanding the behaviour of those consumers, who have volitional control (LaCaille 2013). At the same time, this model cannot differentiate the social norms and attitudes of the people.

Theory of planned behaviour:

Icek Ajzen has proposed theory of planned behaviour in the year of 1985 to evaluate various factors that can have impact on the behavioural pattern of the customers. This theory focuses on the evaluation of the normative beliefs, control beliefs and behavioural beliefs of the people and its possible impact on the spending pattern. As per the theory, mentioned beliefs can actually increase the intention level of the customers for spending more for availing a particular products or services (Conner and Sparks 2015). Thus, the theory actually provide an idea about the prime factors that can have impact on influencing people to spend more on the luxurious activities like cafe services. Thus, cafe in Penang will have to focus on the effective utilization of behavioural beliefs, normative beliefs and control beliefs for achieving sustainable growth in the market. It has been assessed that behavioural, normative and control beliefs help customer to develop purchasing intention towards a particular product. Furthermore, planned theory can also allow cafe to understand the kind of future demand it will have face for sustaining its position in the market. However, the theory has not provided in-depth analysis regarding the relationship between normative and behavioural beliefs that can also have major impact on the behavioural pattern of the customers.

The major advantage of this theory is that the theory gives a complete view of the consumers’ behaviour. This theory also helps to predict the consumer behaviour at any time. Therefore, with the help of this particular theory, the marketers of any company can easily understand or predict the behaviour of the prospective customers (Ajzen 2015). On the basis of that understanding or prediction, the marketers can take proper decision or strategies to convince the prospective customers.

However, this theory believes that the habits of the consumers are rational, which has been criticised by many people. It has been identified that consumers’ habits are not rational. Moreover, the theory is based on the self-report measures, which can be biased. Moreover, in today’s context, this theory needs more demonstration (Kautonen, Gelderen and Fink 2015).

Economical model:

Sigmund Freud has developed economical model in the year of 1985 to highlight the prime factors that can restrict individuals from spending on particular goods or services. This theory focuses on the evaluation of different logical and structural framework to identify the kind of impact it has on the spending pattern of the people. For instance, it has tried to evaluate the impact of different economic policies in the business level of the organization. It highlights the fact that if taxes increase on the import of coffee, it will directly increase the price level in an appropriate way (Cavalcanti, Oliveira-Castro and Foxall 2013). Now, increase in the price level can certainly create major impact on the spending decisions of the people. Therefore, cafe of Penang will have to reduce the adverse impact of the external factors for influencing people to visit cafe shops in Penang on a regular basis. Thus, the theory can help cafes to understand the effect of any economical reformation strategy on the spending pattern of the people (K?szegi and Szeidl 2013). However, evaluation of the theory might restrict cafes from taking any aggressive business decisions.

The major advantages of this particular model are – this model helps to understand the consumer behaviour from the point of view of logical consistent theory, which helps to predict the behaviour of the consumers or prospective consumers. Like the theory of planned behaviour, the marketers can also use this model in order to take proper and realistic strategies for grabbing the attention of the customers (Michaillat and Saez 2014). However, this particular model cannot be used at the time of urgency. Apart from that, the prediction based on this model can be biased (Elms 2013).

Sociological model:

Nicosia has developed sociological model in the year of 1966 for the effective evaluation of the customers buying behaviour. Sociological model highlights the fact that all the individuals are part of society. As per the model, social believes, values and ethics can have major impact on the behavioural pattern of the people, which might create major impact on the spending pattern as well (Solomon, Russell-Bennett and Previte 2012). The theory has tried to evaluate the extent to which social values and ethics can create influence people for spending money in the luxurious activities like cafe services. It has been assessed that effective development of reputation can influence people to spend more on products of a particular company. Therefore, the theory has suggested cafes to focus on the development of reputation for influencing people to spend more on the cafe services. However, the theory has not focused too much on the internal stimuli that can also have impact on the spending pattern of the customers.

The primary advantage of this model is that the model helps in market segmentation. If the marketers use this particular model, then they can logically divide the market in to various segments. This ultimately helps in taking proper marketing strategies based on the social classes of the consumers (Carter 2013). However, the limitation of this model is that the model mainly focuses on the social factors. The other factors like, personality, attitude and choices of the consumers are not considered by this theory (Foxall 2014).

Conceptual framework:

Social status:

Social status focuses on the development of image within a society that depends heavily on the financial position of the people (Wind, Thomas and Sheth 2014). For instance, people from higher financial group always look to avail services from the theme cafes for maintaining their social image on the community. On the other hand, people belongs to relatively low financial group will try to avail services from the cheap cafes (Malik et al. 2013).

Lifestyle:

Lifestyle pattern of the people also plays a major in developing behavioural pattern of the people. For instance, lifestyle of young generation has influenced cafes to develop smoking zones and gaming spot on the cafe. It has been assessed that cafes with smoking and gaming facilities able to influence customers to spend more for long period of time (Solomon, Russell-Bennett and Previte 2012). Therefore, it is expected that lifestyle of the young generation will focus on identifying the best available services in the cafe market so that they can able to spent more in an appropriate manner (Azuwa and Ali 2015).

Psychological:

Psychological factor also play a major role in developing spending pattern of the customers. For instance, if a particular customer has emotional attachment towards a particular cafe shop, the person will visit that particular cafe shop on a regular basis. Furthermore, emotional attachment also has influenced customers to develop strong positive beliefs towards a cafe services (Schiffman et al. 2013). Furthermore, stress and perception can also influence spending pattern of the people in luxurious services like availing facilities of a cafe shop (Lysonski and Durvasula 2013).

Economic situation:

Penang has huge amount of competition in the cafe market, as different cafe shops has been established in recent time (East, Wright and Vanhuele 2013). For that reason, different cafes have targeted different group of the market for achieving sustainable growth in the market. For instance, theme cafes have kept their prices at higher level for targeted people with higher income group in an appropriate manner (Wind, Thomas and Sheth 2014).

Occupation:

Lastly, designation, working profile and job location has also played major role in spending pattern of the people (Magin, Huber and Herrmann 2015). For instance, people with higher designation are expected to spend more on the luxurious activities. Conversely, unemployed people are not expected to spend more on the luxurious activities like cafe services (Pornpitakpan and Han 2013).

References:

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Cavalcanti, P.R., Oliveira-Castro, J.M. and Foxall, G.R., 2013. Individual differences in consumer buying patterns: a behavioral economic analysis. The Psychological Record, 63(2), p.259.

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