This chapter presents a literature review of basic theories of consumer behaviour and consumer adoption. In this chapter, different views and perspectives of each theory will be critically discussed.

The theories which related to this research include: (1) consumer buying behaviour, (2) some factors influencing customer buying behaviour, (3) customers’ needs and wants. (4) Consumer decision making process, (5) different types of consumer buying situation, (6) consumer adoption process, (7) diffusion of innovations, (8) the hierarchy of effects model.

There is no doubt that the customers play an important role in the buying process. According to their needs and wants, they will go through the whole buying process and make the final decision to buy the products. At the same time, some factors such as culture, social, personal and psychological factors will influence their buying behaviour. To clearly understand their buying behaviour and adoption process will give the researcher basic ideas about the research.

2.2 Customer Buying Behaviour

Consumer behavior consists of people’s activities when they are consuming, obtaining and disposing products or services. Marketers could develop marketing or sales strategies according to reasons that why consumers buy a specific product or certain brands to influence consumers about their buying preferences and buying power. There are three primary activities (Figure 2.1) are included: (Blackwell, Miniard & Engel, 2006, p4)

? Obtaining: includes activities of getting information of products, evaluating substitute products or brands and purchasing.

? Consuming refers to “3 W + 1 H”, which means where, when, under what circumstances and how customers use products.

? Disposing means how consumers eliminate products or packaging.

Consumer behavior contains many aspects, according to Solomon (2007) consumer behavior include when a consumer or groups of consumers make decisions, purchase, use or get rid of products, services, suggestions or experiences to meet consumers’ needs and wants. (Solomon et al, 2007, p5)

The dynamic interaction of affect and cognition, behaviour, and environmental events which human being conduct will exchange aspects of their lives. According to this definition, consumer behavior is dynamic and including various different aspects. (Blythe, 2008, p7)

Customer behavior focused on how a customer or groups of customers decide to spend their resources such as time, money, effect on products or services, which cover what, where, why, when consumers buy a specific product or service, how often they buy and use. (Schiffman & Kanuk, 2000, p5)

According to Hawkins, Best & Coney, we could use the conceptual model below to get a broad idea of the consumer behavior structure and process. This model reflects on how we think of the general nature of consumer behavior (Figure 2.2), but it does not indicate how we could predict special behavior. Consumers’ self-concepts and corresponding lifestyles are influenced internally and externally. Their self-concepts and lifestyles generate needs and desires. And these needs and desires usually require products or services consumptions to content. Under this circumstance, consumers need to make consumption decisions. The decision making process and previous consuming experience by turns affect consumers’ self-concepts and lifestyles. (Hawkins, Best & Coney, 2004, pp26-27)

Figure 2.2 (Sources: http://jcmc.indiana.edu/vol9/issue2/giaglis.html)

Hoyer & Macinnis said there were many factors affecting acquisition, usage, and disposition decisions. These factors can be categorized into four broad areas: (Hoyer & Macinnis, 2009, p10) (Figure 2.3)

? Psychological core

? Process of making decisions,

? Consumer’s culture

? Consumer behavior outcomes.

Figure 2.3 (Source: Hoyer & Macinnis, 2009, p11)

Four areas are related with each other. When consumers want to buy a product or service, they must get involved in the first area called psychological core. They need to have motivations, abilities and opportunities to search and obtain information. They need to analyse these information, develop preferences and eventually put them into memories. External factors also influence consumers’ motivation, methods of processing information and consumption decisions. And these factors including age, gender, social class, families, friends, economic situations and religions all play a role in influencing consumers’ values, self-concepts and desirable lifestyles, thereby, affect why and how consumers make consumption decisions. (Hoyer & Macinnis, 2009, p10) Then, the consumers will go through each stage of the decision making process and make the final decision.

2.3 Factors Influencing Customer Purchasing Behaviour

Customers’ decision-making perspective reflects their problem-solving behavior. Consumer behaviour is quite complex and it has many things to learn especially there are some important factors affecting it. (Zikmund & d¿½¿½Amico, 2002, p149)

Several factors come into play in consumer buying behaviour. The successful marketers should take the beliefs and culture of the consumers, as well as their family issues and even the psychological factors into account. (Penn, 2010)

Figure 2.4 (Sources: Wilson & Gilligan, 1993, p104)

There are several factors (Figure 2.4) such as mix of culture, social, personal and psychological issues also affect customer purchasing behavior, and these factors are not easily controlled. (Wilson & Gilligan, 1993, pp104-107) The details of each factors shows below:

? Culture Factor: is the most predominant factor of the four influencing forces. So when we try to analyse customer’s behavior, we should take culture factors as starting point. Culture factors include main stream culture, subculture and social class.

? Social Factor: Except for culture factors, social factors also greatly influence customer behavior. Social factors usually include reference groups, family, social status and roles in the society.

? Personal Factor: Customer’ personal characteristics, including age, occupation, economic situations, lifestyle, social-circle and personality make up the third major influences category.

? Psychological factor: The last factor that affects customer behavior is related to psychological issues including motivation, perception, learning, beliefs and attitudes. Compared to other issues, motivation is the most important as well as complex one in terms of analysing.

2.3.1 Culture Factor

Culture is an essential notion for understanding and analyzing consumer behavior, because people use culture as a window to view marketing trends, messages, tendencies and products. Culture includes shared basics such as language, geographic location, race, or history background. These basics provide the standard and regulation for people to perceive, believe, comprehend, estimate, act and communicate. According to psychological theories, culture can be studied in many ways, for example: across countries, across ethnic groups within a country, and even individuals. (Haugtvedt, Herr & Kardes, 2008, p1103)

For the purposes of studying consumer behavior, culture can be defined as: “The values, attitudes, beliefs, ideas, artifacts and other meaningful symbols represented in the pattern of life adopted by people that help them interpret, evaluate and communicate as members of a society.” (Rice, 1997, pp69-70)

Rice also mentioned that culture has some characteristics. In a very real sense culture is exhibited by the customs and rituals of a society: Firstly, culture serves the needs of the people who make up the society. Secondly, society members learn the culture during the socialization processes and the culture define people¿½¿½s behaviors. Members conform the value system and society rules to obtain acceptance within the society. Thirdly, culture may be considered as a cumulative process, as it is passed from one generation to the next. But it is not accurate to say the culture is always remaining constant. Lastly, culture is affected by several elements (Figure 2.5) such as values, religion, politics, and laws and so on. (Rice, 1997, p70)

Figure 2.5¿½¿½Source: Rice, 1997, p70¿½¿½

The culture factor also includes subculture and social class.

Subculture is a group within a culture that is different from the mainstream culture. People belong to a subculture usually present some beliefs, values or ethical standards that differ from people belong to a general mainstream culture. Members of a subculture typically share common ethnic, racial, religious or even geographical location. They are more likely to pass on their values, attitudes or codes from one generation to the next. (Hollensen, 2010, p120)

Social Classes refer to economic or culture arrangements of groups in society. People who belong to a social class share common values, interests and behaviors. Social classes are not purely determined by single issue such as income or occupation, but are measured by a combination of factors such as income, education background, social status and other factors. In some social systems, people who belong to different social classes usually play certain roles and they rarely change their social positions. (Kotler & Armstrong, 2007, p132)

2.3.2 Social Factors

The social factor contains reference groups, family, role and status.

Reference groups are people or organizations whose opinions and suggestions are treasured and took seriously. People usually look reference groups for ideas or guidance. Consumers typically consolidate their purchase behavior with values and principles of their reference groups. The extent of people is influenced by reference groups differ accordingly. Usually children are easily to be influenced by reference groups. Their friends, TV advertisements can all affect their purchase decisions. (Boone & Kurtz, 2008, p154)

Family members can influence consumer behavior greatly. So marketers should find some ways to influence wife, husband and children. Family also helps marketers understand who target audiences of the advertisement are. For example: if a wife is influenced by the purchasing decision of a certain product, marketers should try to treat women as target audiences of their advertisement. (Shah, n.d.)

A person¿½¿½s position within a group is defined by the role or status this person plays or has. Role contains activities that a person is expected to perform. Consumers select products or brands based on their roles and status society. So marketers should pay attention on people¿½¿½s status and roles and provide different products or brands based on them. (Majumdar, 2010, p23)

2.3.3 Personal Factors

Some personal factors also will affect consumer buying behavior.

Firstly, the age and life cycle stage of consumers. Consumer behavior will change according to their ages. Consumers may have different interests or needs at different age period. Marketers should design effective marketing strategies to attract different age groups. Life cycle stage refers to life experiences consumers have. Different people experience life differently, and the experiences they go through vary according to change of age. (Hsu & Powers, 2002, p55)

Secondly, occupation also plays a role in shaping consumers behavior. People who have different occupations can behave differently in many ways. For example: a university lecturer and a model have different purchase choice with regard to dress-style. Therefore, marketers should design different products or services to fulfill the needs of different occupational groups. (Mukesh Trehan & Ranju Trehan, 2010, p198)

In addition, a lifestyle is a way people lives their lives. A lifestyle determines how people spend their time, money, and energy. People’s values, preferences and tastes can be reflected by their lifestyles. Consumers express their lifestyles through some activities such as sports, music, political views, opinions and religions. Consumers usually choose products or services based on their lifestyles. (Solomon, Marshall & Stuart, 2009, p148)

2.3.3 Psychological Factors

Psychology helps marketers understand consumer behavior. Many psychological concepts and research results are useful for explaining why and how consumers behave in a particular way,such as motivation, perception, learning, values, beliefs, attitudes and lifestyles. (Kerin, Hartley & Rudelius, 2009, p103)

In order to understand customer behavior, the primary step is to study individual’s motivation. The mixture of wants, needs and drives. Marketers could understand the underlying reasons about why customers have such behavior and how they make consumption decisions by recognizing customers’ attitudes, beliefs, motives and other pressures.(Mooij, 2004, p135)

Perception is the act of faculty of apprehending by the means of the senses or of the mind. Perception can be obtained by seeing, hearing, tasting, feeling or smelling, and during the perception process, sensations can be interpreted. When consumers face with new sensations or information, they try to look for patterns, relate these patterns with new sensations or information and explain them by using past experience or knowledge. Perception is the interpretation of reality; people interpret reality from different perspectives. (Zikmund & d¿½¿½Amico, 2002, p152)

From psychological perspective, attitude is emotional response that represents an individual¿½¿½s degree of like or dislike for an item. Consumers form attitude for a product or a brand according to their beliefs about the product or brand. For example, consumers may have belief that products of certain brands are durable. This kind of attitude may lead consumers to purchase certain products or brands. (Kundi, Khan & Mahir, 2008)

Learning refers to acquire existing knowledge, skills or values. But consumers may not need to go through the learning process themselves to make purchasing decisions. They may learn from observing the consequences of others or other people¿½¿½s experiences. (Perner, n.d.)

2.4 Customers’ Needs and Wants

When the focus is on identifying and satisfying the wants and needs of consumers, the intention of the firm is not seen as merely providing goods and services. Instead, want and need satisfaction is viewed as the purpose and providing products and services is the means to achieve that end. (Loudon, 1993, p10)

2.4.1 Needs

A need is an unsatisfactory condition of the customer that leads him or her to an action that will make the condition better. (Sheth & Mittal, 2004, p17) The need usually talk about the basic requirements of human such as the food, the air, water which make people survival; the spiritual support such as friendship, complete families; and self-satisfaction such as success, status.

Maslow gives needs the most comprehensive summary and conclusion which is the hierarchy of human needs. In his initial opinion, there are five levels of basic kinds of need which can motivate us a lot. They are physiological needs, safety needs, love and belonging needs, self-esteem needs, and self-actualisation needs. (Figure 2.6)

Figure 2.6

(Sources: http://docsiva.wordpress.com/2009/01/03/web20-and-the-nature-of-man/)

Each needs include different concepts, the details shows below (Table 2.1):

physiological oxygen, water, nutrients, homeostasis, excretion, sleep, sex

safety physical security, security of resources, livelihood, family and possessions

love & belonging relationships, family and friendship and sexual intimacy

self-esteem self-identity and respect, confidence and respect from others

self-actualisation self-fulfilment through achievement

Table 2.1 (Sources: Hartley Dean, 2010, pp.19-20)

At the end of his life, Maslow added two more needs into this hierarchy. They are cognitive which are the needs of acquiring knowledge and understanding and aesthetic which is the need for creativity and appreciation of beauty and structure. (Hartley Dean, 2010, pp.19-20)

Maslow¿½¿½s theory is wildly used for explaining consumers¿½¿½ behaviors, however, according to Rice, there are also both of the strengths and weaknesses. (Rice, 1997, p122)

? Maslow¿½¿½s theory is able to effectively describe and explain consumers¿½¿½ behaviors but it cannot predict them.

? Maslow¿½¿½s theory lack empirical supporting evidence. Behaviour is not always determined by physiological and safety needs factors.

? Maslow¿½¿½s theory is not including money. In fact, money is a very important issue, which greatly influences consumers¿½¿½ behaviour.

? Maslow¿½¿½s theory does not indicate influence of self-actualization and esteem. We could not neglect people¿½¿½s family, gender, culture and class, as those factors contribute to shape a person¿½¿½s innate need.

2.4.2 Wants

A want is something you would like to have. It is not absolutely necessary, but it would be a good thing to have. An example of a want is music. Music can make you feel good, but you do not need music to survive. A need is something you have to have, if you do not have them, you can not do something. A good example of a need is food and water. You need both of them to survive. The difference between a want and a need is a need is driven by physical and psychological fundermentals. And a want is beyond the minimal comfort and more focuses on internal satisfactions. (Sheth & Mittal, 2004, p17)

Consumers¿½¿½ wants are based on their reflection on preferred life vision. Their ideas of what good life style is and how they are able to get their desirable life shape their wants. If consumers know their reflection on preferred life vision very clearly, their wants usually are very obvious and specific. However, if consumers only have general or ambiguous goals, marketers would have more opportunities to persuade consumers to buy their products. Wants are always recognized according to a disposition to some action. (O’Shaughnessy, 1987, p13) The concept of a want includes several implications: (O’Shaughnessy, 1987, pp14-15)

? Consumers do not always know their wants unless they are motivated by some stimulus such as advertisement, recommendations of a friend and so on.

? Sometimes consumers buy a product for the future, so remind consumers to make a plan for the future may generate sales.

? Consumers sometimes may miss out the real wants but take something they do not need as their wants. For example: those consumers who buy cigarettes may think cigarettes are what they really need, but in fact, cigarettes harm their health. Some consumers need job skills to be out of unemployment, however, they may think job skills are not what they need.

? Consumers may have some secret wants that are not expressed. Sellers should not neglect consumers¿½¿½ current non-realizable wants but give them some guarantee, as those secret wants may turn into sales some day.

? Consumers may not aware of what they really want. If they eventually are conscious of what they really want, they could be dissatisfied with the product after it is bought. So sellers should educate consumers and inform them about what they really need.

2.5 Decision making process:

Marketing scholars have developed a stage model to illustrate consumer purchasing-decision process. When consumers make a purchase decision, they usually go through five stages: recognize problems, search useful information, evaluate options and alternatives, and make consumption decision and how to react after purchasing. The purchasing process starts long before the actual purchase and has impact more than expected afterward. (Kotler & Keller, 2009, p207)

Figure 2.7

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

Sheth & Mittal (2004, p277) pointed customers make decisions in marketplace as buyers, payers and users. The decisions contains every aspect of product or service consumption, which is including whether customers want to buy a product or service, what kind of products or services they want to buy, when they make purchase, who offer products or services for them to buy, and how they pay for products or services.

When customers are about to purchase products or services, they will be also involved in decision making process. This decision making process begins with customers’ realization of their needs or wants to buy something and ends with usage, appraisal and benefits of the product or service they bought. (Wright, 2006, p27)

Wilkie (1994, p475) mentioned that the entire consumer decision process includes four stages, which are problem identification, information collection, alternatives evaluation, purchase and post-purchase processes. And three stages: problem identification, information collection and alternatives evaluation can be grouped together as pre-purchase processes. During the pre-purchase process, consumers will make decisions on what kind of products or services to buy and when they are going to buy. Wilkie also described the importance of the role of marketers in his book.

2.5.1 Need Recognition & Problem Awareness

The decision process starts when a customer identifies a problem that is required to be solved or a need that is required to be satisfied. The problem can be any states such as physical problem, discomfort, disposition, or desires. Customers try to get back to the right track or normal physical and psychological state by buying something. (Sheth & Mittal, 2004, pp278-279)

Identify need means consumers realize some problems happened in their lives and they need to purchase a product or service to solve the problems or get back to normal state. Internal stimulus such as values, attitudes, lifestyles, self-concepts and so on can cause needs. In addition, the need might be hidden deeply. Consumers might be not aware of their needs. And the needs sometimes are related to consumers’ anxiety of social status or self-esteem crisis. (Wright, 2006, p27)

This stage starts when consumers begin thinking about purchasing something. And it is very important to both consumers and marketers. For consumers, they need to recognize their problems and have needs and wants to stimulate purchase desires. For marketers, they can influence consumer¿½¿½s problem identification via many ways such as advertising, presenting products or services as solutions and so on. (Wilkie, 1994, pp485-486)

2.5.2 Information Search

Customers start looking for information about alternatives after they recognize their needs. Customers usually do not search for information about all brands but certain brands instead. (Sheth & Mittal, 2004, p282) (Figure 2.8)

Figure 2.8 (Source: Sheth & Mittal, 2004, p283)

Consumers are able to search useful information about various alternatives by talking to sales people, asking friends, reading consumer magazines, viewing consumer or product website on internet, comparing different kinds of products or services. (Wright, 2006, p27)

During this stage, consumers gather useful information about various alternatives through many ways such as talking to sales staff, reading consumer magazines or going to Internet to compare and evaluate options. According to Wilkie, there are two essential types of information collection; first type is incidental learning, which means information collected is not for current decision making but long term memory. Consumers gain information for making the future purchase decisions. (Wilkie, 1994, p488)

2.5.3 Evaluation of Alternatives

After customers gather all useful information, they need to decide which alternatives they prefer. Sheth & Mittal mentioned two general categories of choice models: compensatory and non-compensatory.

? Compensatory model: the customer considers all functions and benefits of a product or service and compares strengths and weaknesses of various alternatives to make a preferred choice.

? Non-compensatory model: according to Sheth & Mittal, non-compensatory model includes four sub-models: conjunctive, disjunctive, lexicographic, and elimination by aspects. (Sheth & Mittal, 2004, pp293-294)

When consumers finish information collection by asking questions, read related resources (magazine, website) and real hands-on, all their doubts and rejections have been overcome and according to price, value, design, features and functions and attractiveness, they will select the best alternative to purchase. (Wright, 2006, p28)

2.5.4 Purchase

Customers would make purchase when they finish product or service alternatives evaluation. This step looks straightforward, but sometimes, customers behavior would alter. They may delay purchase because of tight timing, need of more information or lack of buying ability at that time. (Sheth & Mittal, 2004, pp298-300)

Customers make up their minds and they are about to purchase products or services. However, some issues might cause customers to delay consumption or turn around to other alternatives such as bad-attitude sales personnel, delays and lack of stock. (Wright, 2006, p28)

When consumers make up their minds and also make move toward products or services purchase, purchase processes would occur. Wilkie suggested the marketers to learn more about consumers’ in-store decision to deal with the failure. Also the marketers should provide good services and experiences to consumers to attract them. (Wilkie, 1994, pp521-522)

2.5.5 Post-Purchase Evaluation

Purchase doesn’t mean the end of customer’s decision process. Customers will use current purchasing experience and usage of the product or service for decision making in future. The post-purchase process includes four steps: decision confirmation (customers identify their purchase decisions), experience evaluation (customers appraise the buying experience), satisfaction or disatisfaction (whether customers are satisfied with the products or services) and future response (wether customers get rid of the products or services or they will continuously choose to buy the same products or brands). When a customer makes a choice, he needs intensively to test and confirm if his decision is correct and wise. The outcome of the decision is depending upon his satisfaction or dissatisfaction, and the outcome will directly affect the customer’s future behavior and response. He may choose to buy the same brand or products repeatedly, complain to the sellers or never buy the product any more. (Sheth & Mittal, 2004, pp301-305)

Customers usually have some evaluations after they purchase products or services. They may feel the product or service does not live up to their expectations and meet their needs, or they may think other alternatives are more suitable and preferable. Once customers have this negative post-purchase evaluation, they might complain to sellers, demand refund or never buy the same product or brand in future. (Wright, 2006, pp28-29)

This stage includes activities happens after a purchase is made. Post-purchase stage is extremely important for marketers, as it greatly affects consumers’ future purchase decisions. Whether consumers continue to purchase the same product or brand is strongly depend on this stage. Wilkie gave some suggestions for marketers to apply in post-purchase stage. (Wilkie, 1994, p481)

? Positioning of new product can be guided by how consumers use the product

? Marketers do not give consumers exaggerate promises, which make consumers feel the product does not live up their expectations.

? Marketers shall provide good post-purchase services and stay in contact with consumers.

? Marketers shall manage marketing system well. Lack of stock or false product information can lead consumers to dispose the product or make complaints to management.

2.6 Types of Consumer Buying Situation

According to Dowling, consumers¿½¿½ experiences, product knowledge, purchase decision making involvement and risk taking behaviors can be summarized by a prudent way, which is their perception of the type of buying situation that they face. John Howard classified buying situations into the following three categories:

? Extensive problem solving: In this buying situation, consumers have little useful product category knowledge or brands information. The uncertainty in this situation usually produces a high level of perceived risk.

? Limited problem solving: the consumers think they have resourceful and enough product category knowledge, but brand knowledge still out of date.

? Routing response behavior: consumers have good both of product category and brand knowledge.

Also perceived risk and the buying situation are very important because they affect product features evaluation such as brand name, quality and price significantly and purchasing decision making. (Dowling, 2004, pp.108-109)

In addition, Dr.Brassington and Dr. Pettitt suggested consumers are likely to experience routine problem solving buying situation on a regular basis. Most grocery shopping belongs to this category. Consumers typically purchase certain brands or products without resourceful information or going through decision-making process.

Limited problem solving takes place less regularly and involves more purposeful decision making efforts than routine problem solving does. Usually the products are more expensive and durable. So the risks of making wrong decisions are much higher. So in this situation, consumers need to spend more time in searching useful information as well as evaluating these information, but the problem is consumers unlikely to absorb too much time and effort.

At last, the extended problem solving needs more investment of money, time and effort from consumers, and as a result, a much higher risk. Usually purchase of major capital such as houses or cars belongs to this category. Consumers typically need a long time to make a purchase decision, and these kinds of purchases take place very infrequently. Consumers may take a loan to make purchase. Therefore, consumers require as much resourceful information as possible. They need to think consciously and take purchasing decision very seriously.

They also discussed the significance of buying situations. To identify different buying situations of consumers will help marketers to develop more effective and appropriate marketing strategies. (Brassington & Pettitt, 2007, pp.76-77)

2.7 Adoption Process

The adoption process includes all activities related to new product launch or innovation accepted. There are many similarities between the customers in the adoption process. (Bingham, Gomes & Knowles, 2005, p228)

According to Lancaster & Reynolds, customer adoption process model have relationship with new purchasing situations. The marketers must make customers aware of as well help customers understand new products or services.(Lancaster & Reynolds, 2001, p37)

Also the adoption process was defined as the mental process through which an individual passes from first hearing about an innovation to final adoption. Kotler & Armstrong mentioned there are five stages during customer adoption process: (Kotler & Armstrong, 2010, pp181-182)

? Awareness: consumers become aware of the new product or service, but they do not have enough information about the new stuff.