CHAPTER 2

LITERATURE & RELATED REVIEW

Documentation and researches that related to the study of factors affecting the consumer acceptance of

air purifier in Beijing for further study of customer psychology, that used for reference in this study are as

follow:

2.1 Theories of consumer

2.1.1 Utility

2.1.2 Preference

2.1.3 Awareness

2.1.4 Budget constraint

2.1.5 Choice

2.2 Theories of understanding consumer attitudes

2.2.1 Functionalist theory

2.2.2 Learning theory

2.2.3 Cognitive Dissonance Theory

2.2.4 Self-perception Theory

2.3 Theory of consumer acceptance

2.3.1 TAM model (Technology acceptance model)

2.3.2 IDT theory (Innovation diffusion Theory)

2.4 Marketing

2.4.1 Marketing environment

2.4.2 PESTLE format

2.4.3 Maslow’s general theory of human motivation

2.5 Consumer decision making

2.5.1 Seven decision - making strategies

2.5.2 First marketing theory ( Consideration )

2,5.3 Second marketing theory ( Involvement )

2.5.4 The consumer decision making process

2.6 Conclusion

2.1 Theories of consumer

2.1.1 Utility

In economics, utility is a representation of preferences over some set of goods and services.

Preferences have a (continuous) utility representation so long as they are transitive, complete, and continuous.

Utility is usually applied by economists in such constructs as the indifference curve, which plot the combination

of commodities that an individual or a society would accept to maintain a given level of satisfaction. Individual

utility and social utility can be construed as the value of a utility function and a social welfare function

respectively. When coupled with production or commodity constraints, under some assumptions, these

functions can be used to analyze Pareto efficiency, such as illustrated by Edgeworth boxes in contract curves.

Such efficiency is a central concept in welfare economics. In finance, utility is applied to generate an

individual's price for an asset called the indifference price. Utility functions are also related to risk measures,

with the most common example being the entropic risk measure.

- Quantifying utility : It was recognized that utility could not be measured or observed directly, so

instead economists devised a way to infer underlying relative utilities from observed choice. These 'revealed

preferences', as they were named by Paul Samuelson. Utility is taken to be correlative to Desire or Want. It has

been already argued that desires cannot be measured directly, but only indirectly, by the outward phenomena to

which they give rise: and that in those cases with which economics is chiefly concerned the measure is found in

the price which a person is willing to pay for the fulfilment or satisfaction of his desire. (Marshall 1920:78)

[ Alfred Marshall. 1920. Principles of Economics. An introductory Volume. 8th edition. London: Macmillan. ]

- Cardinal and ordinal utility : Economists distinguish between cardinal utility and ordinal utility.

When cardinal utility is used, the magnitude of utility differences is treated as an ethically or behaviorally

significant quantity. On the other hand, ordinal utility captures only ranking and not strength of preferences.

Utility functions of both sorts assign a ranking to members of a choice set. For example, suppose a

cup of orange juice has utility of 120 utils, a cup of tea has a utility of 80 utils, and a cup of water has a utility

of 40 utils. When speaking of cardinal utility, it could be concluded that the cup of orange juice is better than

the cup of tea by exactly the same amount by which the cup of tea is better than the cup of water. One is not

entitled to conclude, however, that the cup of tea is two thirds as good as the cup of juice, because this

conclusion would depend not only on magnitudes of utility differences, but also on the "zero" of utility.

It is tempting when dealing with cardinal utility to aggregate utilities across persons. The argument

against this is that interpersonal comparisons of utility are meaningless because there is no simple way to

interpret how different people value consumption bundles. [citation needed]

When ordinal utilities are used, differences in utils are treated as ethically or behaviorally meaningless: the

utility index encode a full behavioral ordering between members of a choice set, but tells nothing about the

related strength of preferences. In the above example, it would only be possible to say that juice is preferred to

tea to water, but no more.

Neoclassical economics has largely retreated from using cardinal utility functions as the basic

objects of economic analysis, in favor of considering agent preferences over choice sets. However, preference

relations can often be represented by utility functions satisfying several properties.

Ordinal utility functions are unique up to positive monotone transformations, while cardinal utilities are unique

up to positive linear transformations.

Although preferences are the conventional foundation of microeconomics, it is often convenient to

represent preferences with a utility function and analyze human behavior indirectly with utility functions. Let X

be the consumption set, the set of all mutually-exclusive baskets the consumer could conceivably consume. The

consumer's utility function ranks each package in the consumption set. If the consumer strictly

prefers x to y or is indifferent between them, then .

For example, suppose a consumer's consumption set is X = {nothing, 1 apple,1 orange, 1 apple and

1 orange, 2 apples, 2 oranges}, and its utility function is u(nothing) = 0, u(1 apple) = 1, u(1 orange) = 2,

u(1 apple and 1 orange) = 4, u(2 apples) = 2 and u(2 oranges) = 3. Then this consumer prefers 1 orange to 1

apple, but prefers one of each to 2 oranges.

In microeconomic models, there are usually a finite set of L commodities, and a consumer may

consume an arbitrary amount of each commodity. This gives a consumption set of , and each package

is a vector containing the amounts of each commodity. In the previous example, we might say there

are two commodities: apples and oranges. If we say apples is the first commodity, and oranges the second, then

the consumption set and u(0, 0) = 0, u(1, 0) = 1, u(0, 1) = 2, u(1, 1) = 4, u(2, 0) = 2, u(0, 2) = 3 as

before. Note that for u to be a utility function on X, it must be defined for every package in X.

A utility function represents a preference relation on X iff for every ,

implies . If u represents , then this implies is complete and transitive, and

hence rational.

- Expected utility : The expected utility theory deals with the analysis of choices among risky

projects with (possibly multidimensional) outcomes. The expected utility model was first proposed by Nicholas

Bernoulli in 1713 and solved by Daniel Bernoulli in 1738 as the St. Petersburg paradox. Bernoulli argued that

the paradox could be resolved if decisionmakers displayed risk aversion and argued for a logarithmic cardinal

utility function.The first important use of the expected utility theory was that of John von Neumann and Oskar

Morgenstern who used the assumption of expected utility maximization in their formulation of game theory.

- Utility as probability of success : Castagnoli and LiCalzi and Bordley and LiCalzi (2000)

provided another interpretation for Von Neumann and Morgenstern's theory. Specifically for any utility

function, there exists a hypothetical reference lottery with the utility of a lottery being its probability of

performing no worse than the reference lottery. Suppose success is defined as getting an outcome no worse than

the outcome of the reference lottery. Then this mathematical equivalence means that maximizing expected

utility is equivalent to maximizing the probability of success. In many contexts, this makes the concept of utility

easier to justify and to apply. For example, a firm's utility might be the probability of meeting uncertain future

customer expectations. [ Castagnoli, E. and M. LiCalzi. "Expected Utility Theory without Utility." Theory and

Decision, 1996, Bordley, R. and M. LiCalzi. "Decision Analysis with Targets instead of Utilities," Decisions in

Economics and Finance. 2000. Bordley,R. And C.Kirkwood. Multiattribute preference analysis with

Performance Targets. Operations Research. 2004. Bordley, R. And S. Pollock. A decision Analytic approach to

reliability-based design optimization. (2004).]

2.1.2 Preference

Consumer preferences are defined as the subjective (individual) tastes, as measured by utility, of

various bundles of goods. They permit the consumer to rank these bundles of goods according to the levels of

utility they give the consumer. Note that preferences are independent of income and prices. Ability to purchase

goods does not determine a consumer’s likes or dislikes. One can have a preference for Porsches over Fords but

only have the financial means to drive a Ford.

These preferences can be modeled and mapped through the use of indifference curves. In order to

graphically portray consumer preferences, we need to define some terms. First, since we will be working in two

dimensions (2-d graphs), we assume a two good world. These could be any two goods. One common treatment

is to define one good, say food, and let the other good be a composite of all other goods. For expository

simplicity (making things easier for me), let’s define the two goods as Good X and Good Y. The axes of the

graph then measure amounts of Good X on the horizontal, and amounts of Good Y on the vertical. Each point in

this Cartesian space then defines some combination of goods X and Y. We call these combinations commodity

bundles.

The goal of the theory of preferences is for the consumer to be able to rank these commodity bundles

according to the amount of utility obtained from them. In other words, the consumer has different preferences

over the different combinations of goods defined by the set of commodity bundles.

In order to develop a model we need to make some assumptions about the consumer’s preferences .

There are four assumptions. The first is decisiveness. Here, given any two commodity bundles in commodity

space, the consumer must be able to rank them. In Figure 1, suppose we randomly chose two commodity

bundles A and B. This assumption means that the consumer must be able to say that they prefer commodity

bundle A over B, or B over A, or that bundles A and B provide the same level of utility.

Figure 1: Consumer consistent in preference and rankings

The second assumption is consistency. The consumer must be consistent in preference and rankings.

Again referring to Figure 1, suppose we now include bundle C. Let the consumer prefer commodity bundle A

over B, and also commodity bundle B over C. Then by this assumption the consumer must prefer A over C.

The following two assumptions are not required to develop the theory of the consumer, but simplify

matters significantly.

The third assumption is non-satiation. In other words, more is always better than less. More formally,

any commodity bundle with at least as much of one good and more of the other must be preferred. Commodity

bundle A in Figure 1 has two straight lines running through it. This creates four quadrants, to the northeast,

southeast, southwest and northwest of bundle A. All commodity bundles to the northeast of A contain more of

both X and Y then does A. Therefore, by the assumption of non-satiation, any bundle in this quadrant is

preferred to A. The opposite is true for bundles to the southwest of A. They contain less X and Y than does A,

hence must be less preferred.

The quadrants to the southeast and northwest contain more of one good but less of the other; hence we

cannot determine preference rankings with respect to A.

The last of the assumptions is convexity, which is the most difficult to explain. It is based on the

notion that as a consumer consumes more and more of a particular good, the additional utility obtained

decreases. We define marginal utility as the change in utility due to an incremental increase in the consumption

of a given good. Convexity says that marginal utility declines as consumption increases. Note that the total

utility continues to increase if marginal utility is positive (which it must be for non-satiation to hold), but total

utility increases at a decreasing rate if marginal utility is declining.

http://www.usi.edu/business/cashel/331/CONSUMER

2.1.3 Awareness

Consumer awareness ：is the understanding and knowledge that a buyer should have of his rights as a customer.

The awareness is very important for the buyer since it permits him to get the most from what he buys.

Create Consumer Awareness with 6 ways：

1. Decide whom you want to target about your product or public service announcement. Determine which

advertising medium or methods you can use to reach your target audience. Have those various media companies send you a

media kit on their circulation, readership or reach as well as the price of all types of promotions. Develop a website to include

in your advertising.

2. Design a logo that distinctly identifies your product or public service company. Create a memorable character

like Mr. Clean or Smokey the Bear to, respectively, promote your product or public service announcement.

3. Develop a small booklet that contains vital information about your product or information that you want

distributed. Have it printed at a local print shop. Hire people to hand these booklets out at retail outlets or high traffic areas,

inviting consumer to try the product or read more about a particular issue.

4. Schedule a seminar at schools, office complexes or manufacturing plants if you have information that is vital to

students or workers. Discuss the particular topic and explain the steps people can take to resolve any particular issues. An

example would be how to avoid getting the H1N1 virus or a particular disease during a pandemic or bad outbreak.

5. Advertise your product or public service announcement on radio stations that appeal to your target audience.

Run the advertisement frequently in the early stages of your product introduction or public service message to build brand

awareness among consumers.

2.1.4 Budget constraint

A budget constraint represents all the combinations of goods and services that a consumer may purchase

given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint

and a preference map to analyze consumer choices. Both concepts have a ready graphical representation in the

two-good case.

- Individual choice ：Consumer behavior is a maximisation problem. It means making the most of our

limited resources to maximise our utility. As consumers are insatiable, and utility functions grow with quantity,

the only thing that limits our consumption is our own budget.[http://www.policonomics.com/budget-constraint/]

An individual consumer should choose to consume goods at the point where the most preferred available

indifference curve on their preference map is tangent to their budget constraint. That is, the indifference curve

tangent to the budget constraint represents the maximum utility obtained utilizing the entire budget of the

consumer. The tangent point (the xy coordinate) represents the amount of goods x and y the consumer should

purchase to fully utilize their budget to obtain maximum utility.[Lipsey (1975). p 182.] A line connecting all

points of tangency between the indifference curve and the budget constraint is called the expansion

path.[Salvatore, Dominick (1989). Schaum's outline of theory and problems of managerial economics,

McGraw-Hill, ISBN 978-0-07-054513-7]

- Many goods : While low level demonstrations of budget constraints are often limited to two good

situations which provide easy graphical representation, it is possible to demonstrate the relationship between

multiple goods through a budget constraint. [ Lipsey, Richard G. (1975). An introduction to positive economics

(fourth ed.). Weidenfeld & Nicolson. pp. 214–7. ]

2.1.5 Choice

In microeconomics, the theory of consumer choice relates preferences (for the consumption of both

goods and services) to consumption expenditures; ultimately, this relationship between preferences and

consumption expenditures is used to relate preferences to consumer demand curves. The link between personal

preferences, consumption, and the demand curve is one of the most closely studied relations in economics.

Consumer choice theory is a way of analyzing how consumers may achieve equilibrium between preferences

and expenditures by maximizing utility as subject to consumer budget constraints.

- Model setup ： Economists' modern solution to the problem of mapping consumer choices is

indifference curve analysis. For an individual, indifference curves and an assumption of constant prices and a

fixed income in a two-good world will give the following diagram. The consumer can choose any point on or

below the budget constraint line BC. This line is diagonal since it comes from the equation

. In other words, the amount spent on both goods together is less than or equal to

the income of the consumer. The consumer will choose the indifference curve with the highest utility that is

within his budget constraint. Every point on I3 is outside his budget constraint so the best that he can do is the

single point on I2 that is tangent to his budget constraint. He will purchase X* of good X and Y* of good Y.

Figure 2: Economists' modern solution to the problem of mapping consumer choices is indifference

curve analysis

Indifference curve analysis begins with the utility function. The utility function is treated as an index

of utility.[1] All that is necessary is that the utility index change as more preferred bundles are consumed.

Indifference curves are typically numbered with the number increasing as more preferred bundles are consumed.

However, it is not necessary that numbers be used - any indexing system would suffice - colors for example.

The advantage of numbers is that their use makes the math simpler. Numbers used to index indifference curves

have no cardinal significance. For example if three indifference curves are labeled 1, 4, and 16 respectively that

means nothing more than the bundles "on" indifference curve 4 are more preferred than the bundles "on"

indifference curve I. The fact that the index number is a multiple of another is of no significance. For example,

the bundles of good on 4 does not mean that they are four times more satisfying than those on 1. As noted they

merely mean they are more satisfying.

Income effect and price effect deal with how the change in price of a commodity changes the

consumption of the good. The theory of consumer choice examines the trade-offs and decisions people make in

their role as consumers as prices and their income changes.

- Substitution effect ： The substitution effect is the effect observed with changes in relative price of

goods. This effect basically affects the movement along the curve. These curves can be used to predict the

effect of changes to the budget constraint. The graphic below shows the effect of a price increase for good Y. If

the price of Y increases, the budget constraint will pivot from BC2 to BC1. Notice that because the price of X

does not change, the consumer can still buy the same amount of X if he or she chooses to buy only good X. On

the other hand, if the consumer chooses to buy only good Y, he or she will be able to buy less of good Y

because its price has increased.

To maximize the utility with the reduced budget constraint, BC1, the consumer will re-allocate

consumption to reach the highest available indifference curve which BC1 is tangent to. As shown on the

diagram below, that curve is I1, and therefore the amount of good Y bought will shift from Y2 to Y1, and the

amount of good X bought to shift from X2 to X1. The opposite effect will occur if the price of Y decreases

causing the shift from BC2 to BC3, and I2 to I3.

Figure 3: Maximize the utility with the reduced budget constraint

If these curves are plotted for many different prices of good Y, a demand curve for good Y can be

constructed. The diagram below shows the demand curve for good Y as its price varies.

Alternatively, if the price for good Y is fixed and the price for good X is varied, a demand curve for

good X can be constructed.

Figure 4: The demand curve for good Y as its price varies

- Income effect ：Another important item that can change is the money income of the consumer. The

income effect is the phenomenon observed through changes in purchasing power. It reveals the change in

quantity demanded brought by a change in real income (utility). Graphically, as long as the prices remain

constant, changing the income will create a parallel shift of the budget constraint. Increasing the income will

shift the budget constraint right since more of both can be bought, and decreasing income will shift it left.

Figure 5: Depending on the indifference curves, as income increases, the amount purchased of a good can

either increase, decrease or stay the same

Depending on the indifference curves, as income increases, the amount purchased of a good can either

increase, decrease or stay the same. In the diagram below, good Y is a normal good since the amount purchased

increased as the budget constraint shifted from BC1 to the higher income BC2. Good X is an inferior good since

the amount bought decreased as the income increases.

Figure 6: Depending on the indifference

is the change in the demand for good 1 when we change income from to , holding the

price of good 1 fixed at :

2.2 Theories of understanding consumer attitudes

Consumer attitudes are both an obstacle and an advantage to a marketer. Choosing to discount or

ignore consumers’ attitudes of a particular product or service—while developing a marketing

strategy—guarantees limited success of a campaign. In contrast, perceptive marketers leverage their

understanding of attitudes to predict the behavior of consumers. These savvy marketers know exactly how to

distinguish the differences between beliefs, attitudes, and behaviors while leveraging all three in the

development of marketing strategies.

An attitude in marketing terms is defined as a general evaluation of a product or service formed over

time (Solomon, 2008). An attitude satisfies a personal motive—and at the same time, affects the shopping and

buying habits of consumers. Dr. Lars Perner (2010) defines consumer attitude simply as a composite of a

consumer’s beliefs, feelings, and behavioral intentions toward some object within the context of marketing. A

consumer can hold negative or positive beliefs or feelings toward a product or service. A behavioral intention is

defined by the consumer’s belief or feeling with respect to the product or service.

A marketer is challenged to understand the reason a particular attitude might exist.Perhaps the attitude

formed as the result of a positive or negative personal experience. Maybe outside influences of other individuals

persuaded the consumer’s opinion of a product or service. Attitudes are relatively enduring (Oskamp & Schultz,

2005, p. 8). Attitudes are a learned predisposition to proceed in favor of or opposed to a given object. In the

context of marketing, an attitude is the filter to which every product and service is scrutinized.

［ Oskamp, S. & Schultz, W. (2005). Attitudes and opinions. Lawrence Erlbaum Associates, NJ. ］［Perner,

L. (2010). Consumer behavior: the psychology of marketing. Retrieved October 2, 2010, from

http://www.consumerpsychologist.com/］［Petty, R. & Cacioppo, J. (1981). Attitudes and persuasion:

classic and contemporary approaches. Dubuque, IA: William C. Brown.］

2.2.1 Functionalist theory

The functional theory of attitudes—developed by Daniel Katz 1938—offers an explanation as to the functional

motives of attitudes to consumers (Solomon, 2008). Katz theorizes four possible functions of attitudes. Each

function attempts to explain the source and purpose a particular attitude might have to the consumer.

Understanding the purpose of a consumer’s attitude is an imperative step toward changing an attitude. Unlike

Katz’s explanation of attitude—as it relates to social psychology, specifically the ideological or subjective side

of man—consumer attitudes exist to satisfy a function (Katz, 1937).

The utilitarian function is one of the most recognized of Katz’s four defined functions. The utilitarian

function is based on the ethical theory of utilitarianism, whereas an individual will make decisions based

entirely on the producing the greatest amount of happiness as a whole (Sidgwick, 1907). A consumer’s attitude

is clearly based on a utility function when the decision revolves around the amount of pain or pleasure in brings.

The value-expressive function is employed when a consumer is basing their attitude regarding a product

or service on self-concept or central values. The association or reflection that a product or service has on the

consumer is the main concern of an individual embracing the value expressive function (Solomon, 2008). This

particular function is used when a consumer accepts a product or service with the intention of affecting their

social identity.

The ego-defensive function is apparent when a consumer feels that the use of a product or service

might compromise their self-image. Moreover, the ego-defensive attitude is difficult to change. The

ego-defensive attitude—in general psychology—is a way for individuals deny their own disconcerting aspects

(Narayan, 2010). A marketer must tread lightly when considering a message strategy to a consumer with an

attitude based on the ego-defensive function.

The knowledge function is prevalent in individuals who are careful about organizing and providing

structure regarding their attitude or opinion of a product or service (Solomon, 2008). A marketer can change a

consumer’s knowledge function based attitude by using fact-based comparisons and real-world statistics in the

message strategy. Vague and non-relevant marketing campaigns are ineffective against a knowledge attitude

audience.

2.2.2 Learning theory

Learning theory suggests that people learn their attitudes from outside sources, such as a child

learning to hold a view because they see it in their parents or through a subconscious association from classical

conditioning. Learning theory suggests that your attitudes are not likely to change unless you observe a

situation that forces you to rethink your attitudes. As an example, if you purchase a new car and notice that

every time you turn it on, the engine makes a terrible noise, your attitude towards your car would change as you

associate it with that terrible noise.

2.2.3 Cognitive Dissonance Theory

Cognitive dissonance is the theory that states that when people's actions are different from their

attitudes, a natural anxiety will grow within them. Cognitive dissonance suggests that people seek to return to a

happy state in their life, where their attitudes and actions are in harmony. For instance, if you went to work

every day with a mindset that you hated your job, you would be acting in a way that opposes your attitude.

Cognitive dissonance theory suggests that you would be miserable and seek to change either your actions or

your attitude in order to bring the two into alignment.

2.2.4 Self-perception Theory

Self-perception theory suggests that people can learn about their own attitudes by watching their

actions. The idea is that people are always acting in compliance with their attitudes. This theory is very reliant

on self-evaluation. As an example, if you notice yourself looking for reasons to avoid going to work or calling

in for no real reason, you can identify that you have a very negative attitude towards your job.

2.3 Theory of consumer acceptance

2.3.1 TAM model (Technology acceptance model)

TAM (technology acceptance model) is one the famous models in consumer acceptance that was

studied by Davis in 1989. Actually, consumers may adopt high-technology products not only to obtain useful

benefits but also to enjoy the experience of using them (Kulviwat, Bruner II et al. 2007). The goal of TAM is

to offer a parsimonious explanation of the determinants of adoption that would be general enough for

application to usage behavior across a wide range of technology innovations (Davis, Bagozzi et al. 1989). TAM

concentrates on two key perceptions which are ease of use and usefulness. Perceived usefulness is the degree to

which a potential consumer believes the use of a specific instrument or tool will improve his/her

performance,and perceived ease of use is the perception that using a specific technology will not require

additional work and energy.

Figure 7: Technology acceptance model (TAM) (Davis 1989)

2.3.2 IDT theory (Innovation diffusion Theory)

Diffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas and

technology spread through cultures. Everett Rogers, a professor of rural sociology, popularized the theory in his

1962 book Diffusion of Innovations. He said diffusion is the process by which an innovation is communicated

through certain channels over time among the members of a social system. The origins of the diffusion of

innovations theory are varied and span multiple disciplines. Rogers (1962) espoused the theory that there are

four main elements that influence the spread of a new idea: the innovation, communication channels, time, and

a social system. This process relies heavily on human capital. The innovation must be widely adopted in order

to self-sustain. Within the rate of adoption, there is a point at which an innovation reaches critical mass.The

categories of adopters are: innovators, early adopters, early majority, late majority, and laggards (Rogers 1962,

p. 150). Diffusion of Innovations manifests itself in different ways in various cultures and fields and is highly

subject to the type of adopters and innovation-decision process.

Table 1: The key elements in diffusion research are:

Element Definition

Innovation Rogers defines an innovation as "an idea, practice, or object that is perceived as new

by an individual or other unit of adoption". ［Rogers, 1983. p. 11］

Communication channels A communication channel is "the means by which messages get from one individual

to another". ［ ( Rogers, 1983. p. 17) ］

Time "The innovation-decision period is the length of time required to pass through the

innovation-decision process".［(Rogers 1983, p. 21)］"Rate of adoption is the

relative speed with which an innovation is adopted by members of a social system".

［(Rogers, 1983. p. 21, 23)］

Social system "A social system is defined as a set of interrelated units that are engaged in joint

problem solving to accomplish a common goal". ［ (Rogers, 1983. p. 24) ］

- Process : Diffusion of an innovation occurs through a five–step process. This process is a type of

decision-making. It occurs through a series of communication channels over a period of time among the

members of a similar social system. Ryan and Gross first indicated the identification of adoption as a process in

1943 (Rogers 1962, p. 79). Rogers five stages (steps): awareness, interest, evaluation, trial, and adoption are

integral to this theory. An individual might reject an innovation at any time during or after the adoption process.

Scholars such as Abrahamson (1991) examine this process critically by posing questions such as: How do

technically inefficient innovations diffuse and what impedes technically efficient innovations from catching on?

Abrahamson makes suggestions for how organizational scientists can more comprehensively evaluate the

spread of innovations.[Abrahamson, E. (1991). Managerial Fads and Fashions: The Diffusion and Rejection of

Innovation. California Management Review, 16: 586–612.] In later editions of the Diffusion of Innovations

Rogers changes the terminology of the five stages to: knowledge, persuasion, decision, implementation, and

confirmation. However the descriptions of the categories have remained similar throughout the editions.

Table 2: Five stages of the adoption process

Stage Definition

Knowledge In this stage the individual is first exposed to an innovation but lacks information about the

innovation. During this stage of the process the individual has not been inspired to find more

information about the innovation.

Persuasion In this stage the individual is interested in the innovation and actively seeks information/detail

about the innovation.

Decision In this stage the individual takes the concept of the change and weighs the

advantages/disadvantages of using the innovation and decides whether to adopt or reject the

innovation. Due to the individualistic nature of this stage Rogers notes that it is the most difficult

stage to acquire empirical evidence (Rogers 1964, p. 83).

Implementation In this stage the individual employs the innovation to a varying degree depending on the

situation. During this stage the individual determines the usefulness of the innovation and may

search for further information about it.

Confirmation In this stage the individual finalizes his/her decision to continue using the innovation. This stage

is both intrapersonal (may cause cognitive dissonance) and interpersonal, confirmation the group

has made the right decision.

Figure 8: Five stages in the decision innovation process

2.4 Marketing

2.4.1 Marketing environment

The market environment is a marketing term and refers to factors and forces that affect a firm’s

ability to build and maintain successful relationships with customers. Three levels of the environment are:

Micro (internal) environment - small forces within the company that affect its ability to serve its customers.

Meso environment – the industry in which a company operates and the industry’s market(s). Macro (national)

environment - larger societal forces that affect the microenvironment. [Kotler, Armstrong, Philip, Gary.

Principles of Marketing. pearson education]

2.4.2 PESTLE format

There is nothing in this life that does not operate within a particular environment. The

community in which a person lives is an environment. The animals that we see operate within a particular

environment as well. An environment may have a positive or a negative impact on whatever we do. Businesses

all over the world equally operate within certain environments that can affect them positively or negatively.

So, having a proper understanding of business environment is very important. The PESTLE format could be

used in understanding the environment a business operates in. For this reason, we are using it to understand the

marketing environment. The PESTEL framework is broken down into six main types: Political, Economic,

Social, Technological, Environmental and Legal.

Figure 9: Understanding marketing environment using PESTLE format

- Political environment has a very strong influence on marketing and marketing decisions are

seriously affected by developments in our political environments. Here, we look at how the political situation of

a place and happenings will affect marketing of goods and services, prices of goods, transportation and product

delivery. For example, political marketing on the media is likely to influence the business of marketing of

products on the media in terms of increasing cost of advertising. Besides, an area prone to a high level of

political instability will have a negative impact on the 4Ps of marketing such as pricing, product (purchase level)

promotions such as experiential marketing, personal selling, and place (the level of distribution of products).

- Economic environment : draws marketing attention to micro and macro-economic trends

relating to price, level of inflation, purchase power of people, purchase pattern of consumers, unemployment in

the economy, living standards of people, income level, and government policies on the economy that will

positively or negatively affect marketing performance. If a company is into import business, marketing

professionals must have a clear understanding of how variables such as inflation and value of the Naira are

likely to affect the business of marketing.

- Social Trends : Here we look at how social beliefs and social happenings affect marketing

performance; for instance, the need to socialise on the New Media has positively affected the use of social

media platform for marketing of products and has created opportunities for brand owners to market their

products mostly on youth segment of the market.

- Technological Environment : Here, we look at how changes in technology will affect marketing

performance, e.g., new innovation in colour production will have positive impact on product packaging that will

appeal to consumers. The New Media opportunities created in the Internet through technological innovations

have opened up the channel for marketers to reach out to people through different media platforms.

- Legal Environment : Marketing activities and decisions are strongly affected by developments in

the legal environments. Here, we look at how laws made by government and other regulatory bodies can

positively or negatively affect the business of marketing. In Lagos State for instance product owners and

marketers must comply with laws made by Lagos State Signage and Advertisement Agency (LASA) in order to

operate in Lagos environment.

- Environmental Environment : In today’s business, environmental issues are a major concern for

both the government and other stakeholders. Our environment needs protection. Marketing activities could be

seriously affected by environmental issues. For this reason, marketing activities must take into consideration

our environment when taking decisions because in today’s business world, corporate social responsibility (CSR)

in terms of environment can be a platform to market products and win consumers’ loyalty and patronage.

Example MTN has strongly used CSR to win consumers’ patronage among telecom companies in Nigeria.

Figure 10: Marketing Environment Framework

2.4.3 Maslow’s general theory of human motivation

The Maslow’s general theory of human motivation had assumptions of human behavioral (Maslow.

1970), as follow:

1. Human beings are always demand for something and will be endless. Once those needs have been

met, and then there will be other needs replaced and it is never – ended process.

2. The needs that have been already satisfied, there will not be the behavioral motivated any longer.

Only the dissatisfied of needs are the temptation of behavior.

3. There is a hierarchy of human needs by priority or so called the hierarchy of needs. That is to say,

once the needs in lower level have been reached, the needs in higher level of hierarchy will be demanded to

respond immediately.

Maslow (1970) had divided the hierarchy of needs, which can be represented in the figure below.

Figure 11: Maslow’s Five-Stage Hierarchy of Needs Model

1. The physiological needs. - The needs that are usually taken as the starting point for motivation

theory are the so-called physiological drives. Two recent lines of research make it necessary to revise our

customary notions about these needs, first, the development of the concept of homeostasis, and second, the

finding that appetites (preferential choices among foods) are a fairly efficient indication of actual needs or lacks

in the body.

2. The safety needs. - If the physiological needs are relatively well gratified, there then emerges a new

set of needs, which we may categorize roughly as the safety needs. All that has been said of the physiological

needs is equally true, although in lesser degree, of these desires. The organism may equally well be wholly

dominated by them. They may serve as the almost exclusive organizers of behavior, recruiting all the capacities

of the organism in their service, and we may then fairly describe the whole organism as a safety-seeking

mechanism. Again we may say of the receptors, the effectors, of the intellect and the other capacities that they

are primarily safety-seeking tools. Again, as in the hungry man, we find that the dominating goal is a strong

determinant not only of his current world-outlook and philosophy but also of his philosophy of the future.

Practically everything looks less important than safety, (even sometimes the physiological needs which being

satisfied, are now underestimated). A man, in this state, if it is extreme enough and chronic enough, may be

characterized as living almost for safety alone.

3. The love needs. - If both the physiological and the safety needs are fairly well gratified, then there

will emerge the love and affection and belongingness needs, and the whole cycle already described will repeat

itself with this new center. Now the person will feel keenly, as never before, the absence of friends, or a

sweetheart, or a wife, or children. He will hunger for affectionate relations with people in general, namely, for a

place in his group, and he will strive with great intensity to achieve this goal. He will want to attain such a place

more than anything else in the world and may even forget that once, when he was hungry, he sneered at love.

4. The esteem needs. - All people in our society (with a few pathological exceptions) have a need or

desire for a stable, firmly based, (usually) high evaluation of themselves, for self- respect, or self-esteem, and

for the esteem of others. By firmly based self-esteem, we mean that which is soundly based upon real capacity,

achievement and respect from others. These needs may be classified into two subsidiary sets. These are, first,

the desire for strength, for achievement, for adequacy, for confidence in the face of the world, and for

independence and freedom. Secondly, we have what we may call the desire for reputation or prestige (defining

it as respect or esteem from other people), recognition, attention, importance or appreciation. These needs have

been relatively stressed by Alfred Adler and his followers, and have been relatively neglected by Freud and the

psychoanalysts. More and more today however there is appearing widespread appreciation of their central

importance.

5. The need for self – actualization. - Even if all these needs are satisfied, we may still often (if not

always) expect that a new discontent and restlessness will soon develop, unless the individual is doing what he

is fitted for. A musician must make music, an artist must paint, a poet must write, if he is to be ultimately happy.

What a man can be, he must be. This need we may call self-actualization.

According to Maslow’s theory of needs as mentioned above, can be concluded that the hierarchy of

needs or motivation of mankind which has 5 stages, from the basic needs stage to higher stages respectively,

including; the physiological needs, the safety needs, the love needs, the esteem needs and the need for self –

actualization.

2.5 Consumer decision making

This theory in economics, psychology, philosophy, mathematics, and statistics is concerned with

identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the

resulting optimal decision. It is closely related to the field of game theory as to interactions of agents with at

least partially conflicting interests whose decisions affect each other.

Most of decision theory is normative or prescriptive, i.e., it is concerned with identifying the best

decision to take (in practice, there are situations in which "best" is not necessarily the maximal, optimum may

also include values in addition to maximum, but within a specific or approximative range), assuming an ideal

decision maker who is fully informed, able to compute with perfect accuracy, and fully rational. The practical

application of this prescriptive approach (how people ought to make decisions) is called decision analysis, and

aimed at finding tools, methodologies and software to help people make better decisions. The most systematic

and comprehensive software tools developed in this way are called decision support systems. Since people

usually do not behave in ways consistent with axiomatic rules, often their own, leading to violations of

optimality, there is a related area of study, called a positive or descriptive discipline, attempting to describe

what people will actually do. Since the normative, optimal decision often creates hypotheses for testing against

actual behaviour, the two fields are closely linked. Furthermore it is possible to relax the assumptions of perfect

information, rationality and so forth in various ways, and produce a series of different prescriptions or

predictions about behaviour, allowing for further tests of the kind of decision-making that occurs in practice. In

recent decades, there has been increasing interest in what is sometimes called 'behavioral decision theory' and

this has contributed to a re-evaluation of what rational decision-making requires.[ Anand, Paul (1993).

Foundations of Rational Choice Under Risk. Oxford: Oxford University Press. ISBN 0-19-823303-5.]

2.5.1 Seven decision - making strategies

What this all led to was the development and exploration of a series of useful consumer

decision-making strategies that could be exploited by marketers. For each product, mar- keters needed to

understand the specific decision-making strategy utilized by each consumer segment acquiring that product. If

this were done, marketers could position their product in such a manner that the decision-making strategy

would lead consumers to select their product.

The first two strategies are called compensatory strategies. In these strategies, consumers allow a

higher value of one at- tribute to compensate for a lesser value of another attribute. For example, if a consumer

is looking at automobiles, a high value in gas mileage might compensate for a lower value in seating space. The

attributes might have equal weight (Equal Weight Strategy) or have different weights for the attributes

(Weighted Additive Strategy). An example of the latter might be to place twice as much importance on gas

mileage than seating space.

The next three strategies are called noncompensatory strate- gies. In these strategies, each attribute of

a specific product is evaluated without respect to the other attributes, and even though a product may have a

very high value on one attri- bute, if it fails another attribute, it is eliminated from con- sideration. From Simon,

the first of these is Satisficing, in which the first product evaluated to meet cutoff values for all attributes is

chosen, even if it is not the best. The second of these strategies, Elimination by Aspects, sets a cutoff value for

the most important attribute, and allows all competing products that meet that cutoff value to go to the next at -

tribute and its cutoff value. The third strategy, Lexigraphic, evaluates the most important attribute, and if a

product is clearly superior to others, stops the decision process and se- lects that product; otherwise, it continues

to the next most important attribute.

The next two strategies are called partially compensatory strategies, in that strategies are evaluated

against each other in serial fashion and higher values for attributes are con- sidered. The first of these strategies

is called Majority of Conforming Dimensions, in which the first two competing products are evaluated across

all attributes, and the one that has higher values across more dimensions, or attributes, is retained. This winner

is then evaluated against the next competitor, and the one that has higher values across more dimensions is

again retained. The second partially compen- satory strategy is called Frequency of Good and Bad Fea- tures, in

which all products are simultaneously compared to the cutoff values for each of their relevant attributes, and the

product that has the most “good” features that exceed the cutoff values is the winner.

There are other expansions upon these seven basic consumer decision-making strategies, but they are

generally captured as shown above. However, two major areas of marketing theory also help to provide

additional explanatory power to these strategies.

2.5.2 First marketing theory ( Consideration )

In this theory, consumers form a subset of brands from which the decision-making strategies are

applied. For example, if asked to enumerate all the restaurants that one could recall, the

list might be quite extensive for most consumers. However, when a consumer first addresses the question of

where to dine that evening, a short list of restaurants that are actively considered is utilized for the

decision-making process. Mul- tistage decision-making models were summarized by Allan Shocker, in which

the increasing complexity of a decision produces more steps in the decision process. In essence, more cognitive

effort would be expended in evaluating mem-bers of the consideration set and reducing that number to an

eventual choice.

2.5.3 Second marketing theory ( Involvement )

The second marketing theory is called Involvement, in which the amount of cognitive effort applied to

the deci- sion-making process is directly related to the level of impor- tance that the consumer places on

acquisition of the specific product. For example, there is rarely a significant amount of decision -making applied

to the selection of a pack of chew- ing gum at the grocery store checkout counter, but there is a much greater

amount of decision-making effort applied to the purchase of a new cell phone. This degree of involvement is

not necessarily a function of the price, but is more related to the perceived impact on the quality of life of the

consumer. The quality of life can come directly from the benefits sup- plied by the product, or can come

indirectly from the social accolades or sanctions provided by members of the peer group.

2.5.4 The consumer decision making process

The decision making processes undertaken by consumers in regard to a potential market transaction

before, during, and after the purchase of a product or service. More generally, decision making is the cognitive

process of selecting a course of action from among multiple alternatives. Common examples include shopping

and deciding what to eat. Decision making is said to be a psychological construct. This means that although we

can never "see" a decision, we can infer from observable behavior that a decision has been made. Therefore we

conclude that a psychological event that we call "decision making" has occurred. It is a construction that

imputes commitment to action. That is, based on observable actions, we assume that people have made a

commitment to effect the action.

In general there are three ways of analysis consumer buying decisions. They are:

1. Economic models - These models are largely quantitative and are based on the assumptions of

rationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumer theory.

Game theory can also be used in some circumstances.

2. Psychological models - These models concentrate on psychological and cognitive processes

such as motivation and need recognition. They are qualitative rather than quantitative and build on sociological

factors like cultural influences and family influences.

3. Consumer behavior models - These are practical models used by marketers. They typically

blend both economic and psychological models.

Neuroscience has become both a useful tool and a source of theory development and testing in

buyer decision-making research, and using neuroimaging devices in order to investigate consumer behavior

developed under the name of Neuromarketing. What is going on inside the head of the consumer as measured

by various neuroimaging and biological correlates like genes and hormones can provide new insights and new

ways to test theory, so this is a great opportunity for the decision-making researcher.[Yoon, C.; Gonzalez, R.;

Bechara, A.; Berns, G. S.; Dagher, A. A.; Dube, L.; Huettel, S. A.; Kable, J. W.; Liberzon, I.; Plassmann, H.;

Smidts, A.; Spence, C. (2012). "Decision neuroscience and consumer decision making". Marketing letters

(Springer Science+Business Media, LLC 2012) ] There are 5 stages which a consumer often goes through when

he/she around their Purchase. These stages also exist because of normal human psychology. These 5 stages are :

1. Problem/Need Recognition- This is in general the first stage in which the consumer recognizes

that what essentially is the problem or need and hence accordingly a consumer can identify the product or kind

of product which would be required by the consumer. Page text.[Kotler, Philip. Pearson Customer Publishing.

Retrieved 28 December 2012.]

2. Information Search- In information search, the consumer searches about the product which

would satisfy the need which has been recognized by the consumer in the stage previous to this one.[2]

3. Evaluation of Alternatives - In this stage, the consumer evaluates the different alternatives

which the consumer comes across, when the consumer was searching for information. Generally in the

information search the consumer comes across quite a few products and thus now the consumer has to evaluate

and understand which product would be properly suited for the consumer.[Kotler, Philip. Pearson Customer

Publishing. Retrieved 28 December 2012.]

4. Purchase-After the consumer has evaluated all the options and would be having the intention

to buy any product, there could be now only two things which might just change the decision of the consumer

of buying the product that is what the other peers of the consumer think of the product and any unforeseen

circumstances. Unforeseen circumstances for example in this case could be financial losses which led to not

buying of the product.[Kotler, Philip. Pearson Customer Publishing. Retrieved 28 December 2012.]

5. Post Purchase Behavior-After the purchase the consumer might just go through post purchase

dissonance in which the consumer feels that buying the other product would be better. But a company should

really take care of it, taking care of post purchase dissonance doesn't only spread good words for the product

but also increases the chance of frequent repurchase.[Kotler, Philip. Pearson Customer Publishing. Retrieved 28

December 2012.]

Figure 12: Belch et al. (2012) Consumer decision-making model

2.6 Conclusion

This study can begin with theories related that main value of product, pattern , attribute , potentiality

of product for to know the decision making of customers in product puchase.

According to the study on factors documents and related researches, can be concluded that marketing

mix factors influence consumers acceptance. These are the important factors that marketer makes an effort to

mix for the purpose that successful own and competitive ability with rivals in market.