Un­der­stand­ing Consumer Be­hav­iour


Insurance - - CONTENTS - Text As­soc. Prof. Dr Mo­hamad Fa­zli Sabri, Shariah RFP (MFPC), CFP (FPAM) | Head, De­part­ment of Re­source Man­age­ment & Consumer Stud­ies Fac­ulty of Hu­man Ecol­ogy | Univer­siti Pu­tra Malaysia


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.


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.


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.


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Un­der­stand­ing consumer be­hav­iour is to know and un­der­stand in­di­vid­u­als’ needs and wants.

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