Understanding Consumer Behaviour
THE RAPID DEVELOPMENT IN MALAYSIA HAS SEEN TREMENDOUS CHANGES IN THE ECONOMIC, TECHNOLOGICAL, SOCIAL, AND POLITICAL LANDSCAPE OF THE COUNTRY AND HAS SHAPED A NEW ERA OF MODERN LIFESTYLE IN MALAYSIAN SOCIETY. ACCORDING TO THE WORD BANK (2015), MALAYSIA IS
Malaysia is also an uppermiddle income economy and the target is for Malaysia to achieve the status of a high-income nation in 2020 (Economic Development Unit, 2010) and thus the government has planned for a robust and comprehensive 11th Malaysia Plan 2016-2020.
In addition, the improved economy has led to improved public facilities in transportation, education, hospitality, telecommunication and community centres (Naidu, 2008). The improved public infrastructure and economy offers increased opportunities for the business sector and employment. However, the overwhelming increase in the brands of products and services offered in the marketplace has led to unethical decision-making by consumers (Carrington, Neville, & Whitwell, 2010). Moreover, marketers also assume that rational consumers make irrational decisions in the marketplace (Pancer, 2009). The growth of the financial sector and the company finance sector has led to easy access to credit for consumers. This in turn has led to more financial products and services for consumers in the marketplace.
Therefore, the overwhelming amount of financial products and services in the marketplace has resulted in more confusion for consumers when making wise decisions for their financial planning. There is, hence, a need for financial service providers, agents, advisors and planners to have more knowledge and understanding about their customers or potential consumers. This will help them in providing products and services that fit client or customer appetite.
WHAT IS CONSUMER BEHAVIOUR?
Consumer behaviour is the interrelation of activities of individuals and according to Solomon (2009), consumer behaviour is the study of the process that is involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires. However, as reported by Bray (2008), consumer behaviour as defined by Schiffman and Kanuk (2007) is the behaviour that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs. Understanding consumer needs and wants is crucial as the ‘needs’ are the biological basic needs that individuals require to sustain a living and ‘wants’ are how society has taught people to satisfy their needs (Solomon, 2009). Consumers’ decision making is driven by cognitive and behavioural process that involves the internal evaluation of information that influences consumer behaviour (Carrington et al., 2010). It is vital for businesses and marketers to understand consumers as consumers’ decision-making is influenced by culture, norms, values, beliefs, attitudes, knowledge, skills and experience in society and the marketplace.
STAGES OF THE CONSUMER BUYING PROCESS
There are four stages in the consumer buying process according to Jeddi, Atefi, Jalali, Poureisa, & Haghi (2013). The first is identification of the problem (awareness of need). At the first stage of the decision-making process, people feel the difference between the current and the desired situation, and consequently try to resolve the difference. The second is data collection, i.e. to solve the
problem, individuals gather and collect all the necessary information. This information can be internal (experiences) and external (family, exhibits, media, financial planner or advisor). The third is the assessment of the options after gathering the information, when the consumer is ready to make a decision. At this point, individuals should be able to evaluate different options and choose products that meet their demands. The last is the purchase stage. This stage is the result of all marketing activities. At this stage, consumers, according to the information already obtained, select a product they feel satisfies a need and buy it.
Understanding consumer behaviour is to know and understand individuals’ needs and wants. Thus, it is a challenging task to predict consumer behaviour as different individuals have different needs and wants. The financial services industry which deals with consumers must understand consumer behaviour and consumer activities in the marketplace. The vast and bewildering array of products and services offered in the marketplace has an effect on how consumers make the decision to obtain financial products and services. As such, financial advisors or planners require extended knowledge and understanding of financial products and services, and understanding the behaviour of their clients or customers.
Additionally, the stages in the consumer decision-making process when consumers make the decision to select, purchase, use or reject financial products and services will influence the best approach for financial advisors or planners to take to cater for consumers’ needs and wants. So the marketer must be familiar with the basic concepts of consumer behaviour and the model of behaviour to be able to understand part of consumer behaviour, not all of it. As the major concern of consumers is to satisfy their desire to achieve their need, knowing the consumer decision making process will shape better strategies for providers of financial planning services in interacting with customers or potential consumers.
It is also hoped that knowing and understanding consumer behaviour will develop better ethics and professionalism among business people, marketers, and financial advisors or planners. Because of the complexity of the financial products and services in the marketplace, consumers need to rely on financial advisors or planners to get the best advice, suggestions and recommendations in their interest. Hence, developing in-depth understanding of consumer behaviour, especially the decision-making process helps not just business people, marketers, financial advisors or planners but also consumers, and achieves a win-win situation in the marketplace.
Carrington, M. J., Neville, B. a., & Whitwell, G. J. (2010). Why ethical consumers don’t walk their talk: Towards a framework for understanding the gap between the ethical purchase intentions and actual buying behaviour of ethically minded consumers. Journal of Business Ethics, 97(1), 139–158. doi:10.1007/ s10551-010-0501-6
Economic Development Unit. (2010). Tenth Malaysia Plan 2011-2015. Department of the Prime Minister.
Jeddi, S., Atefi, Z., Jalali, M., Poureisa, A., & Haghi, H. (2013). Consumer behavior and Consumer buying decision process. International Journal of Business and Behavoral Science, 3(5), 20–23.
Naidu, G. (2008). Infrastructure Development in Malaysia. Kumar, N. (ed), International Infrastructure Development in East Asia-Towards Balanced Regional Development and Integration, (March), 204–227. Retrieved from http://www.eria.org/publications/research_project_reports/images/pdf/PDFNo.2/No.2-part2-7.Malaysia.pdf
Pancer, E. (2009). What is Consumer Well-Being? An Historical Analysis. In CHARM.
Solomon, M. R. (2009). Consumer Behavior Buying, Having, and Being. Pearson Prentice Hall.
Word Bank. (2015). Malaysia Overview retrieved from http://www.worldbank.org/en/country/malaysia/overview
Understanding consumer behaviour is to know and understand individuals’ needs and wants.