What key factor influence purchasing decision?

Answer 1

Key factors affecting consumer
decisions
Every day, consumers and households make decisions
about the goods and services they purchase. Figure
1.2n (page 17) summarises some factors that infl uence
these consumption decisions.
Finance
Consumers require access to funds in order to purchase
goods and services. These funds may come from their
own savings or from a bank or fi nancial institution in
the form of credit. Some retailers also offer fi nance
in the form of store credit cards and hire purchase
agreements. Hire purchase is similar to purchasing
goods on a credit card. With hire purchase, however,
the funds are lent to the customer by the store rather
than a bank or fi nancial institution. Customers can take
the goods home and make regular payments to the
retailer over a period of time. This is a common way of
purchasing durable goods, such as cars, white goods
and jewellery.
Consumer choice 17
Finance
Can I obtain finance to help
me make this purchase?
Factors
affecting
consumer
decisions
Price
What is my budget?
Can I afford this good or service?
Marketing
How is marketing used to
lure me as a potential customer?
Age and gender
How do my age and gender
influence my consumption habits?
Environmental concerns
What impact does the consumption of
this product have on the environment?
Service and convenience
What in-store service is available?
How easy is it to shop in this way?
Warranties and after-sales service
Does this product have a warranty?
What after-sales service is available?
Figure 1.2n Factors affecting consumer decisions.
The amount of money that you earn (your income) is
another important factor that infl uences purchasing
behaviour. Your disposable income (or net income) is
the amount of money that you have to spend on goods
and services. It is calculated by subtracting the tax you
are required to pay from your gross income (or total
income).
Disposable income = gross income - tax
A number of factors infl uence your level of gross
income, including the type of industry you work in, your
qualifi cations and your level of experience in the job.
Price
The amount of money you are willing to spend and the
product's price are two of the most important factors
affecting your decisions as a consumer. Being a wise
consumer means answering the following questions
before you purchase a good or service:
• Am I spending more than I can afford?
• Have I checked the prices of the same product in
other stores?
The Australian Government's consumer website
suggests that you obtain a minimum of three quotes
before buying an expensive good or a service. When
comparison shopping, it is often useful to mention that
you have obtained quotes from a number of suppliers.
This usually encourages businesses to quote you a
lower price.
It is also vital that you know how much you can spend
by preparing a detailed budget. It is easy to forget about
your spending limit when you are excited about buying
a new mobile phone, computer game or surfboard. A
budget helps you to avoid spending your money on
less important items and not leaving enough money for
the things you really want.
Some other tips for comparing prices are summarised
below:
• Don't assume that the price is lower just because
the item is on sale or that the advertised price is
always the lowest price.
• Don't be rushed into making a purchase by sales
assistants telling you 'The prices are only good
today'.
• Be aware of hidden costs, including extra charges
for delivery fees, installation charges, service costs
and postage and handling fees. Add these charges
to the total cost of the product.
• When comparing the prices of products in a supermarket
use the unit pricing method to compare the
cost per gram or kilogram (see the box 'Unit pricing
example' below). Bigger packages are not always
better value for money than smaller ones.
Unit pricing example
Two packages of breakfast cereal are provided for sale
in your local supermarket. The product in both boxes is
identical. However, the prices and weights differ:
• box A weighs 1 kilogram and the price is $8.33
• box B weights 750 grams and the price is $6.00.
You can work out which box is better value by calculating
the cost per gram using the formula below.
Cost per unit = price ÷ weight
Using the formula above, the cost per gram of the boxes is:
• box A-833 ÷ 1000 = 0.833c per gram
• box B-600 ÷ 750 = 0.800c per gram.
Box B is better value as it has a lower cost per unit.
18 Commerce.dot.com
Marketing
Retailers and manufacturers use the fi ve 'Ps' of
marketing (price, position, product, promotion and
place) to alter the buying behaviour of consumers.
Breakfast cereal manufacturers, for example, package
their product in large boxes to maximise the advertising
power of each box on the supermarket shelf.
Marketing strategies such as this have a considerable
negative, as well as positive, impact on consumers.
Growing numbers of consumers and community
groups are unhappy with the wasteful use of resources
in some product packaging and the extra costs that
are passed on to customers. These groups would like
to see manufacturers reduce the amount of packaging
used for their products and minimise the impact of their
production methods on the environment.
Age and gender
Most consumers realise that their wants change as
they get older. There are, however, a range of other
demographic factors that infl uence consumption
decisions, such as gender (boys and girls often
purchase different types of products), ethnic background
and income. An example of the importance
of Demographics is the recent trend by manufacturers
to cash in on the market known as 'the tweens'-girls
aged 10 to 13. Tweens tend to be very aware of brand
names and often purchase make-up, motivated by a
desire to look older than they are. Recent attempts to
market products to this age group have included the
Sabrina the Teenage Witch products and the Nikki
Webster line of cosmetics and records. It is estimated
that the tween market could potentially be worth more
than $175 million a year to retailers.
Environmental concerns
In recent years, consumers have become increasingly
aware of environmental issues and have taken these
into account when choosing which goods and services
to purchase. They have started to look beyond 'value
for money' and consider the environmental impact of
their purchases.
In response to these concerns, manufacturers and
retailers have started promoting and selling a range
of 'environmentally friendly' products, such as paper
products made from recycled paper. These products
are becoming increasingly popular among consumers.
Service and convenience
In recent years, service and convenience have
become increasingly important to customers as their
lives have become busier and the value of their free
time has increased. As a result of these pressures
and the diffi culties of transport in many of Australia's
large cities, customers are increasingly making use of
new, convenient shopping alternatives, such as online
shopping and internet banking.
The demand for increased convenience is accompanied
by a desire by many consumers for a more
personalised shopping experience. Businesses have
responded to this demand by offering a range of
mobile domestic services, including car washing, pet
grooming, ironing and gardening services. Many of
these businesses operate seven days a week and will
travel to a customer's home or workplace at a time that
is convenient for the customer.
Info.com.tech
Consumer information online
The Australian Government's consumer website
provides useful information
for consumers.
Activity
Access the Australian Government's consumer website.
What advice does this site give about the importance of
fi nance, price, packaging, service and convenience when
making consumer decisions?
Warranties and after-sales service
A warranty is an agreement that outlines the conditions
under which a consumer is entitled to have a good
either repaired or replaced. Warranty conditions differ
from one product manufacturer to another, so it is
important to know what is covered by each policy
and what is not. Shop around until you secure a good
deal.
Customers can often purchase an extended warranty
from the manufacturer or retailer. Paying for an extended
warranty can save a lot of money on ongoing
repairs, which makes the product cheaper in the long
run. Extended warranties are popular for expensive
electrical goods, such as computers and white goods
(for example, clothes dryers and fridges). It is important
to be aware of your rights and responsibilities as a
consumer so you know whether you can have the
product repaired or replaced if it is faulty.
Other forms of after-sales service include customer
help lines and product-support websites. Make sure
you are aware of the support available for a product
before you purchase it.