Consumer behavior
Consumer behavior refers to the decision-linked activities and processes during the process of purchasing and consuming goods and services. Consumer behavior is influenced by a wide range of factors, and for one to understand it, knowledge of these factors is necessary. Consumer behavior may also be influenced by societal factors that are changing over time. A firm that seeks to succeed in business may be interested in analyzing and knowing how the final target consumer reacts to a strategy or trend so as to reap benefit from the existing scenario by either continuing, withdrawing and replacing, modifying it, or changing it. Such analysis and knowledge may not be itself adequate, but companies may also need to be able to predict how their strategies would influence customer behavior even before the application of the strategy. Companies may be required to provide a marketing mix to fit their consumers in terms of the place consumers buy, the good or service on offer, and the timing of the offer.
The Buying Process
Buying, although simple in appearance, may involve a number of processes before the actual buying activity. In addition, the buying decision involved may be complex, although all consumer decisions do not necessarily lead to buying. A consumer buying process may be conceptualized as taking six stages, although some may not go through all the stages. The degree of complexity determines the number of stages a consumer decision will go. The following are the stages that the consumer decision may take;
- Recognition of the need or problem: the first stage involves the identification of a need, a need that is based on the difference between the current and the desired state. This identified difference can be presumed or truly perceived to be satisfied by acquiring it through buying.
- Search for information: this may take an external or internal search. The earlier may involve memory, for example, of a past event, and the latter involves people like friends and relatives or marketers. The consumer may obtain information to render him consider alternatives for buying.
- Evaluating of the alternatives: once a customer attains information on alternatives, he may then consider each one of them by carefully gauging them with his needs in characteristics and features desired. In addition, a method and criteria of evaluation may require being identified.
- Purchase decision: This may require determination of what alternatives to go by, the store, purchase method, and the package
- Purchasing: this may differ from the aforementioned step in the availability of product and time-lapse between this and the previous step
- Evaluation after buying: the customer may analyze the product or service and become satisfied or not. Dissatisfied consumers may never repeat the act of buying from the seller or may take cautionary measures against the seller. Thus the seller may be interested in ensuring that their products and services are up to standard or may provide countermeasure after-sale services such as fixing the product or refunding money and warranties.
This process is influenced by three factors, namely, personal, psychological, and social. The earlier refers to the influence of characteristics of personal nature and interests such as age, sex, race, among others. Psychological factors refer to the motives, perception, attitudes, personality, ability and knowledge, and lifestyle. The determination of these psychological influences to the customer behavior can help companies strategize on achieving customers by modifying their products to fit the needs. This requires a keen study of the way of life of a people and consistent patterns to be able to build consumer-driven products that will fit into people’s way and pattern of life. For example, a product may gain acceptance amongst people where a consistent lifestyle is inclined towards individualism and personal independence if the product promotes these.
Customer behavior and the Culture
Different people have an inclination towards particular behaviors, food preferences, may speak different languages and use or identity with different commodities; their choices differ.
The culture of an individual affects the way he or she chooses the products for consumption. The cultural dimension in the airline business may be indicated by the preferences of people to use certain lines that associate or identify with their culture or values. Because international travel companies involved may be serving a divergent of cultures, acculturation may be important, but at the same time, ethnic identification may help them retain customers in native countries (Laroche et al., 1997). Companies will need to adopt means to attract these customers by offering the preferred goods that favor certain trends because attitude, perception, and change originated from culture may influence purchase decisions.
Importance of studying consumer behavior
Understanding the consumer buying decision process may help a company to determine at what level customers may likely engage their products and services and how to influence the best to purchase their commodity. In fact, studying the process may help a company develop its strategy after identifying the levels where the customer decision making is really substantial hence the formulation of ways to influence the consumption of this customer for their product.
Knowing the type of consumer behavior the targeted group is likely to follow may help a company to strategize on advertisement, timely product entry, among other issues. Different types of consumer behavior may emanate from the purchase of the same product, for example, by different customers, at times and depending on the surrounding circumstances. The following are the various types of consumer buying behavior which are determined by the level the customer is engaged in the buying decision;
- Impulse buying: The customers do not make a plan for purchase.
- Programmed or routine response behavior: The goods and services involved in this process are of low price, frequently and almost automatically bought, such as milk and soft drinks. The level of involvement and decision required is low.
- Limited Decision-Making: The category of the product, in this case, maybe known, but in order to know a particular unknown brand in this category, customers may only acquire limited information as the time for inquiry from friends and other sources may be limited. The company may wish to study the channels which may be quicker to convey enough or the most important information needed to make a decision that favors them.
- Extensive Decision-Making: This category involves a high risk which is either psychological, performance or economic type since there is a high level of involvement. The product involved may be of high price, and the decision required may be involving and causing the customer to seek more information on the product. Companies can benefit by studying the level of risks involved and minimize it, for example, by offering after-sale services after purchasing a vehicle.
Airline industry
Development and the Introduction of online booking in the airline industry
Development of the airline for many parts across the world was characteristic of the liberalization of the market to allow private ventures into the market other than government-sponsored traffic lines that originally used to operate. An example of this is the case in Europe. The market became more opened in Europe with the creation of a Single Market in air transport in 1992, which would be the basis of a market with no discrimination (Han Tourism Congress, 2007).
The development in the airline industry has been facilitated mainly by three factors; namely, competition, regulation, and requirements to comply with, and the demands by the consumer. Raising demand in tourism activities has also contributed to the growth of airlines since it is a constituent of transport and plays an important role in tourism. The industry has, however, suffered increasingly due to the emergence and growth of the internet, which facilitates activities that would have otherwise depended on traveling. As the world becomes more integrated, customers have been drawn closer to their supplier, which has presented benefits like improved efficiency, saving of transaction time, reduction of the likelihood of physical failure like accidents, and the saving of costs. On the one hand, such evolutions have contributed to the improvement of tourism through supplier-customer contact, but on the other hand, they may have negatively affected the travel industry by reducing the number of travels made to facilitate transactions. This is only a partial view of things. On a wider scope, evolution on the internet has presented an opportunity to the travel industry first of all by facilitating operations through electronic ticketing, self “check-in” systems, and e-procurement, among other benefits (Han Tourism Congress, 2007).
The Online Reservations
The internet as a facility in travel and tourism has exploited more than one area: travel flights bookings, hotels booking, and vacation packages, for example. These activities may boost one another, especially where they need to be done together, for example, booking a place in a hotel and a seat on the plane. There have emerged websites like the lowestfare.com that can help travelers have the lowest fares to flights, vacation offers, and packages while others facilitate the customers to search lowest offers on the internet. This has partially eliminated the need for customers to book such services through the travel agents using the GDS systems. In addition, customers can now access e-tickets that guarantee their seats on the plane they will travel with by providing a confirmation number through the internet. This has, for example, helped companies to save an average of around $6-7 for every ticket due to the elimination need for printing the ticket and mailing it to the customer (Datta & Chakravarty n.d.). In addition, customers can check-in flights through the internet from home and avoid the Check-In lines at the airport. This is by printing the boarding pass through the internet by the customer.
A process of disintermediation aids to eliminate the travel agents by allowing the customers to draw near to the supplier is already in progress following the usage of Global Distribution Systems over the internet, among other areas like travel TV channels (PRO€INVEST, 2004) to directly connect the customer with themselves. Among the advantages that are being realized by the usage of the internet to reach the travel customer without the use of the travel agent includes saving up the money paid to the agent, quicker and more direct means. Hand in hand with this development is the equaled growth in the hotel industries, which have implemented systems that allow them to have direct contact with their customers. In addition, these systems would realize increased efficiency in distribution and transactions, low uncertainties, and encourage sharing of market information.
Travel is among the topmost developing industries in the world today. Yet, the evolution of the same internet has presented more options to the traveler to choose from. Companies offering internet travel services survive the market through adapting to the evolving demands in the market and the reliance on the research studies that embrace the internet as the future of the travel industry. It has also been reported that intermediaries-who are companies independent from the travel agents and airlines and operating as a link-have evolved.
Growth and expansion have been favored by the growing and expanding technology industry which has facilitated, among other services, online booking through the internet. The eMarketer predicted in the year 2007 that growth in United States online sales, including unmanaged business travels where the airline was included, would go up to about $126.9 million by the year 2009. Online travel sales realized Euro 49.4 billion in the year 2007 in the European Market and were projected to reach Euro 67 billion this year (2009) (Marcussen, 2008). In Europe, it has been reported that the internet has gathered twice as much importance in providing information than the travel agent, and offering dynamic packaging to a client who is booking online is still an important channel of distribution according to (IPK International 2007).
According to PhocusWright, supplier webs hold 56% of the online travel sales, which indicates a high representation as a tool in this industry. In 2007, the greatest share went to Air travel (57%). Satisfaction in online bookings was however found to have a decreasing figure of 49% in 2007 as compared to 53% in the year 2006. Customers (24%) felt that booking offline was more convenient in the year 2007 as compared to 2006’s 20%. The role of travel agents initially of taking reservations was seen as being reverted to providing customers with advice and consultancy services, and in the future, they would become agents to travelers rather than to suppliers. With the rising e-commerce, companies can now optimize their services to remain as much competitive by providing the customer with more satisfying services and commodities (Loborec, n.d.).
While the internet empowers the agents to a market beyond localities, the growth is expected to grow. This would be accompanied by the usage of the internet as a standard tool to plan and travels manage in addition to further usage as research tools, connecting and advertising. Value addition to the current services would also be expected by travelers in areas like electronic folio access (Chiu, 2006; qtd. in Patricia, n.d.).
Corporate strategy in the airline industry
With the advancement in interest in the airline industry, expansion has been facilitated with joining together of bodies like Eurocontrol seeking to avail a system that is more secure, prone to current and future challenges in aviation, and achieve strategic and tactical flow management in controller training, and development of appropriate lead technologies. Together with the demands to adhere to set guidelines, competition in the aviation industry which has seen lowering of travel charges in some countries, the corporations have been presented with new challenges to act to these situations. In addition, situations like those existing in Europe where about 60% of costs are fixed in the short run may present few options to the corporate managers to optimize the profits. The fixed costs occur in terms of charges at the airport and ground handling, fuel, and maintenance, while the managers are left to only optimize on areas like cutting administrative costs, sales, and marketing, distribution, and crew costs. In reference to the lowering of travel charges as a result of increasing competition, for example, the entry of low-cost Ryanair in the European market made some companies introduce versions of their own that are cheaper (Han Tourism Congress, 2007). British Midlands responded by introducing the bmibaby. This strategy is referred to as spin-off. Another strategy that has been demonstrated in markets like Europe is the take-over of smaller corporations by larger ones or investing them. This has come to be referred to as cross-holdings. Companies may choose between having to put in place a leisure carrier operating model by using its assets and facilities to maximize return on its capital expenditure or may put in place a low-cost model to focus more on the “non-core business functions” (Han Tourism Congress, 2007). Companies in the European market who use these low-cost models do avoid high expenditures in terms of maintaining larger infrastructures and payment fees to different airports than their counterparts operating a larger network carrier model (Han Tourism Congress, 2007).
Faced with these fixed options, the tool to optimizing variable costs options has been the internet. This has helped the airlines cut costs and increase revenues through process and model restructuring. Ticket online is only a very small portion of the opportunity presented by the internet that helps companies to optimize their processes. Other strategies include Gate assignment and planning systems to optimize assets, vendor management to optimize purchasing, CRM Solutions to help the corporations streamline their products, and aircraft and crew scheduling IT systems to optimize fleet and increase the productivity of the crew (Han Tourism Congress, 2007).
Global alliances such as the signing in the systems like the Global Distribution Systems (GDS) and others in the industry have presented the corporations with advantages associated with activities like joint sales offices, combined flyer programs, joint maintenance, and wider market scope among the collaborating members. For example, GDS can provide customers with tickets around the world and facilitate inventory cost management.
Customer Behavior in Air travel
Consumer’s ability and willingness to make purchases in the e-commerce sector using the available internet tools have been explained by literature that has been brought forward in terms of if and why they occur. These include enjoyment brought by the website, which has been covered by Saeed, Hwang, & Yi (2003), the effectiveness of the process for searching and making online purchases which have been covered by Hodkinson & Kiel (2003) and Li & Zhang (2002), the quality of the information provided and technical performance (Saeed, Hwang, & Yi, 2003), and the ease-of-use and usability in the system (Nah, & Davies, 2002). However, this literature has been termed as inadequate to explain other customer behavior relating to the success of e-commerce, for example, why customers would encounter beautifully designed websites but fail to purchase altogether (Dijk, Minocha, & Laing, 2006).
The other factors which may influence whether a customer will purchase over the internet but have been blamed as inadequate too in explaining the customer behavior in the usage of the internet in e-commerce include customer’s quality perception (Saeed, Hwang, & Yi, 2003), risks related to usage (Forsythe, Shi, 2003), the satisfaction and the involvement of the customer (Hodkinson, 2003) and the customer’s previous experience with e-commerce systems which may influence him to develop a sense of trust or distrust towards them (Misiolek, Zakaria, Zhang, 2002), according to Dijk, Minocha, & Laing, (2006). The authors refer to the aforementioned literature as only giving characteristics of the websites and as “antecedents to a consumer’s choice” in using e-commerce while failing to address the issues influencing the customers’ behavior to or not to purchase over the internet. Although the literature was criticized for its inadequacy, it addresses main concerns that may influence the process of purchasing over the internet by a customer and which fit this study. Since customers will probably not exhibit a trend of being influenced by only a number of factors during decision-making in making internet purchasing, such studies form a core part of the analysis of the e-market: the tools being used in the process must be as good as the process itself. For example, a customer’s decision to make online purchases may be influenced by issues of security and privacy more than by the issue of the availability of mere options.
In an attempt to solve the issues related to the above literature presented in previous studies in the field of e-commerce, the authors carried out a study where they analyzed 143 reports of participants (travelers) who were involved in their study. The reports were interpretational stories written by the researchers giving the accounts of the participants on the basis of the reported preparations and subsequent validation of these stories through a third interview (Eldridge & Newman, 1996; Dijk, Minocha, & Laing, 2006). According to the researchers’ analysis, participants displayed a likely trend showing that customers tended to use the internet more during its early stages in the consumption process, but some shifted to the usage of the phone as the decision, and the purchasing stages in the consumption process approached. The researchers found that the drivers in the making of choice between offline and online channels by a customer were; the obstacles presented by the system and the choice. Therefore, customers exhibit a multi-channel behavior towards consumption of the travel options. Other options to the internet included mail, phone, and high street (shop and travel agents) (Dijk, Minocha, & Laing, 2006). This study may have shed light on the opportunities that can be presented to the stakeholders in an e-commerce business that is related to travel and booking operations. Companies could make sure that they were the preferred choice by the customers by eliminating the current barriers and making their systems as attractive as possible.
International students are of economic importance to the United States since they represent a proportion in the expenditure group, and they represent an annual influx of $5 billion dollars for the United States universities and colleges as tuition rates. The number of international students has been increasing in numbers in the United States University over the last decade, according to the Institute of International Education (1996), leading to an increase in expenditure in the United States, which benefits from this.
Consumption behavior also is influencing by the class of the customer involved. Efforts to attract and retain international students into the Australian and British institutions of learning through the application of innovative marketing techniques have been registered in these countries. These aggressive techniques, such as guaranteed loan offers and monetary incentive offers to those who are successful, have influenced consumer buying habits and purchase preferences. Other issues that have influenced the aforementioned include travel, which has been examined by Hsu & Sung (1997), and educational matters examined by Heiskell (1998), political, social, and cultural issues (Dato-on and Conway, 2000).
According to Holiday Online Planning (2007), Europe realized a rise in the number of those searching information about their holiday online (78%) and an increase in holiday bookings online. The consumer behavior has reportedly turned to be sophisticated, a trend that was set to increase further with the usage of Web 2.0 and social software. Thus companies should act to satisfy these needs and behaviors. It is clear that research and interest into the field of customer in travels has been advancing with stakeholders. The areas of focus into the matter include consumers’ likes and dislikes on the current offers, influences of the price and brand to the customer buying decisions, customer’s interests in using the web and phone, and the recognized and purchased customers’ favorite brands (Understanding key trends in online travel consumer behavior, 2007).
In addition, the comfort required by the customer may make his preference change. Other matter relates to privacy before, during and after travel and information privacy, security, level of leisure and entertainment and attractive and innovative travel environment and equipment. Individual decision in international travel may be influenced by these among other factors when they may require traveling alone. However, the impact of family on this decision may arise in instances where making a group decision is necessary to put the interest of various people together. This includes instances where the family may require traveling together. In addition, offering of information related to travel to an individual by a family member may change his perceptions for example, based on the information presented.
Conclusion
Consumer behavior refers to the decision-linked activities and processes during the process of purchasing and consuming goods and services. The buying process which takes place in steps is influenced by culture, economic, personal and political factors. Companies in the airline industry need to study the two aforementioned because they influence their business and to know the necessary strategies they may need to adopt. The evolution in technology today offers airline stakeholders with online opportunity to manage their businesses.
Consumer behavior is indicative of inclining towards a preference to more sophisticated and better offers the market is offering, which meets their needs satisfactorily. In addition, factors that play to influence the customer preference to purchasing these services online may include the influence of barriers of systems, customer choice, security, interactive features of the websites, and personal factors like privacy. Travel companies in the industry where more growth is expected, need to sooth the customer by providing services that exploit these factors.
References
Chiu, Paul. Managing Partner, Accenture, 2006, quoted in Online Travel in the US: Pursuing Customer Loyalty. eMarketer. 2006.
Consumer Behavior. Class notes.
Datta Debarshi Subham Chakravarty. European Airline Industry-Strategies for the New Millennium. Web.
Dijk Geke, Minocha Shailey, & Laing Angus. Multi-channel consumer behavior: Online and Offline travel preparations. 2006. Montreal, Canada. Web.
Eldridge, M., and W., Newman. Agenda Benders: Modeling the disruptions caused by technology failures in the workplace. Proc. CHI 1996.
Forsythe M., & Shi B. Consumer patronage and risk perceptions in Internet shopping. Journal of Business Research. 2003. 56(11): p. 867-875.
Han Tourism Congress. Trends in the Airline Industry. 2007. Web.
Heiskell, Andrew. America’s Wobbly Pre-eminence. Journal of Commerce and Commercial. (1998). 415(29147): 6A(1).
Hodkinson C., and Kiel G. Understanding Web Information Search Behavior: An Exploratory Model. Journal of End User Computing. 2003. 15(4): p. 27-48.
Hsu, Cathy C., and Shihlin Sung. Travel Behaviors of International Students at a Midwestern University. Journal of Travel Research. (1997). 36(1): 59-66.
Institute of International Education. (1996). Open Doors. Institute of International Education.
IPK International. A World Travel Trends Report. Message from the PisaForum. November 2007
Laroche, Michel, Chankon Kim, Michael Hui and Marc A. Tomiuk. Test of a Nonlinear Relationship between Linguistic Acculturation and Ethnic Identification. Journal of Cross-Cultural Psychology. (1998) Vol.29 (3): pp. 418-434.
Li N., and Zhang P. Consumer Online shopping attitudes and behavior: An assessment of research. In Proc. Eighth Americas Conferences on Information Systems. 2002.
Loborec Vesna. E-Business Opportunities amongst Slovenian vs. Croatian Travel Agencies: A Five Year Comparison. High School for Hospitality and Tourism in Ljubljana, Slovenia. Web.
Marcussen Carl. Trends in European Internet Distribution – of Travel and Tourism Services. Centre for Regional and Tourism Research. Denmark. 2008.
Misiolek I., Zakaria N., and Zhang P. Trust in organizational acceptance of information technology: A conceptual model and preliminary evidence. Proc. Decision Sciences Institute 33rd Annual Meeting 2002.
Nah F.-H., and Davies S. HCI research issues in e-commerce. Journal of Electronic Commerce research. (2002). 3(3): p. 98-113.
PRO€INVEST. Profile of the tourism sector in the EU and opportunities in relation to the Caribbean Region. Deloitte Touche Tohmatsu. Emerging Markets (UK) Ltd. 2004.
Saeed A., Hwang Y., and Yi Y. Toward an Integrative Framework for Online Consumer Behavior Research: A Meta-Analysis Approach. Journal of End User Computing, 2003. 15(4): p. 1-26.
Silvia Patricia. The Interne, Threat or Tool for Travel Agencies? Web.
Understanding key trends in online travel consumer behavior. 2007. Web.