Consumer Decision-Making Models: Smith v. Howard and Sheth

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Table of Contents

Introduction
Examining the Smith (1998) Consumer Decision Process Model
Understanding Consumer Segmentation, Targeting and Positioning
Examining the Howard and Sheth (1996) CDP Model
Connection of Income Level with the Decision Making Process
Reference List

Introduction

It is rather interesting to note that various theories of consumer decision-making processes always seem to assume that consumers pass through distinct stages/steps before, during and after the process of selecting a particular product to buy or service to utilize. On the other hand, Van der Merwe (2010) states that this may not necessarily be the case since not all consumers pass through a particular decision-making process and in some instances, consumers may in fact skip certain stages all together (Van der Merwe, 2010: 11 – 16).

What must be understood is that an average consumer is influenced by a myriad of different factors that affect the way in which they choose to patronize a particular product or service (Sahoo, 2011: 57 – 63).

This can range from various psychological reactions such as the way in which they think and feel about different products (i.e., brand perception) to the way in which the market environment they are currently present in affects the way in which they perceive a particular product or service (i.e., local culture, their family, local media influences, etc.) (Danziger, 2004: 5).

For example, the 2008 financial crisis and the subsequent financial recession we are currently experiencing have greatly affected the way in which consumers perceive particular products or services at the present. Prior to 2007 an ordinary guest at a hotel would not balk at a price of $100 a night while at the present this would result in a certain degree of hesitance due to the atmosphere of economic uncertainty that has reduced consumer spending habits in the hospitality industry to all-time lows.

It must also be noted that various theories of consumer decision making processes, such as the Howard -Sheth model, always seem to focus on price and quality yet neglect to take into account the processes that went into the creation of a particular product or service that consumers are increasingly becoming more concerned about within this postmodern period (Hallin & Marnburg, 2007: 364 – 371).

For example, various studies have shown that due to the growing trend in environmental conservation many consumers would be willing to spend money on products that indicate that they were created through environmentally beneficial practices rather than products that do not have such a distinction (Hallin & Marnburg, 2007: 364 – 380).

This has given rise to the concept of corporate “green washing” where corporations indicate that their products were created through environmentally conservative methods but in fact follow ordinary resource wasting procedures.

Even with such disreputable practices currently being done enough industries do see the benefits that going green has for both their operational capacity and their ability to appeal to consumers and as a result many choose to change their operational models to account for added environmentally beneficial practices. This practice is not limited to the manufacturing sector but has come to encompass the hospitality industry as well.

The fact is that the methods of operation of various hotel chains are considered wasteful and actually contribute to operational costs and environmental deterioration (Lin, Lee & Wu, C 2009: 5613 – 5619).

While this varies from hotel to hotel, wasteful costs such as excessive water and electricity use as well as continuously replacing soap, shampoo and sheets despite no inherent need has actually resulted in an adverse reaction from various environmentally-conscious consumer groups resulting in a distinct reduction in hotel patronage.

Research into this particular change in consumer behavior in the postmodern hospitality industry by Lin, Lee and Wu (2009) reveals that consumers were actually willing to pay more for a hotel room despite the room size and amenities being the same as a rival hotel in the same location due to the fact that the hotel they chose to stay at emphasized that it implemented measures of environmental conservation (Lin, Lee & Wu, C 2009: 5613 – 5619).

This particular trend has also been clearly seen in various consumer products such as tissues, paper, toilet rolls, building materials, etc.

When examining the consumer decision-making process in these particular instances what occurs is not only a decision to resolve a current problem (i.e., buying food when they’re hungry or getting a hotel room to sleep in) rather what also happens is the necessity to fulfill a “higher need” in terms of what patronizing a particular product or service means to a customer.

This particular behavior isn’t without a certain degree of precedent. In various countries there have always been campaigns to buy “locally” in that consumers should patronize locally made products over ones that have been imported. The strategy local governments use in this particular case is to target feelings of national pride and loyalty, which would then result in various local industries gaining more momentum due to more sales thus resulting in more revenue for local government units.

A similar principle can be seen at work in the postmodern hospitality industry wherein product choice is not governed by just price and quality but rather by the processes that go into it that consumers have increasingly been taking into consideration before patronizing a particular hotel chain. This has not been limited to the growing awareness regarding environmental conservatism but various other factors as well.

Taking this into consideration it must be questioned whether consumer decision process models such as the Howard and Sheth model have become too all-encompassing in order to take as many of these factors as possible into consideration and thus have become rather vague in their presentation of proper consumer behavioral data.

In fact ( ) has stated that attempts to rationalize and create a complete analysis of all possible outcomes of the consumer decision making processes will become so complex that it will exceed the ability for people to be able to process it and as such it is unrealistic to think that a rational model that encompasses all aspects can actually be realistically developed.

It is based on this that this paper will examine both the Smith (1998) model, which is a simplified generic consumer decision-making model with the Howard and Sheth (1996) model, which is far more complex and contains more factors in the decision-making process. By examining both models and applying them to the postmodern hospitality industry this paper will be able to determine the extent in which they are vague and encompassing.

Examining the Smith (1998) Consumer Decision Process Model

The Smith (1998) CDP model has the following stages: the problem recognition stage, the information search, the evaluation stage, the decision stage, the buying stage and finally the post-purchase dissonance stage which either results in product/service satisfaction creating brand loyalty or product dissatisfaction which causes brand rejection.

When applying the Smith (1998) CDP model to the postmodern hospitality industry today we can actually skip ahead to the stage constituting the information search and evaluation steps since it is already quite obvious that the problem recognition stage consists of a consumer needing a hotel to stay at.

Going back to model, it can be seen that there are two arrows going from the stage involving the information search to the evaluation stage and back to the information search stage as well. This is particularly important to take note of since it encompasses the what modern-day consumers of the hospitality industry do today in terms of their use of the internet in examining user-made reviews and websites regarding a particular hotel chain and whether it would suit their needs.

What must be understood is that a modern-day hospitality guest greatly differs from one 20 or 30 years ago. With the advent of the internet comes the ability for hotel guests to evaluate a hotel based on what they see online (Jones & Chen, 2011: 83 – 95). This greatly affects the decision making process of consumers since it enables them to instantly know whether a particular hotel is bad, lacks particular amenities or is too expensive before they try it out (O’Connor, 2010: 754).

This differs from past situations where consumers had to physically go to the hotel or know someone that had stayed there in order to gain a non-biased evaluation of the services present.

Taking this into consideration, the Smith (1998) CDP model does initially portray an accurate representation of the how consumers search for information on hotels online, evaluate what they find and then search again based on new findings. It is this particular aspect of consumer decision making that hotels can utilize it by creating a sufficient online presence the presents the hotel in a positive light.

This generalized model can also be utilized in terms of evaluating the “higher need” necessity that was mentioned earlier on in this paper. As mentioned earlier, consumers of the postmodern hospitality industry often have inherent behavioral predilections that go beyond the price and quality of a particular hotel location (Blasik, 2011: 226).

This means that they consider other factors that don’t necessarily impact what most models see as “standard” means of evaluating consumer preferences. In the case of the postmodern hotel industry this encompasses new consumer preferences in terms of the environmentally sustainable actions of the hotel, the convenience that the hotel provides in terms of online booking, venue reservation and payment as well as factors related to online or over-the-phone customer service management.

It was actually noted by Blasik (2011) that the postmodern hotel industry has become so affected by new consumer trends in decision-making processes that the operational guidelines of many modern-day hotels have been under a constant state of flux in order to accommodate new consumer preferences that aren’t necessarily connected to the quality or affordability of service (Blasik, 2011: 226).

From another point of view, Lee (2011) emphasizes that as the internet has made information more easily accessible this in effect has made the postmodern hotel industry more vulnerable in terms of negative criticisms which can and normally do impact the amount of consumers that patronize a particular hotel chain (Lee, 2011: 840).

While the Smith (1998) model does show the relevance of consumer information and searches and the evaluation process that goes into choosing a hotel, the overall simplicity of the model neglects to take into account the process of segmentation, targeting and positioning (i.e., a specific type of consumer in terms of economic position or social class for a particular type of product).

As such this model is rather vague in determining how a specific class of consumer chooses a particular type of hotel especially when taking into consideration various factors such as the distinctiveness of a hotel chain, particular amenities, prices and services that appeal to specific consumer niches (Watkins, 2002: 2).

Understanding Consumer Segmentation, Targeting and Positioning

The process of segmentation, targeting and positioning is a three-stage process used to determine what kind of consumers exist, what type of consumer the business is best off catering to and finally optimizing the method of operations/services of the business in order to take advantage of that chosen segment and distinguish the business from its various competitors (Simonsohn, 2011: 1 – 11).

In the case of this paper, this takes the form of identifying the various groups of hotel patrons choose to patronize a hotel in a specific location on a daily basis.

The reason behind this is rather simple, just as consumers in the auto market have varied tastes (i.e., some preferring speed to luxuries or roominess and safety over external appearance) the hospitality industry also has various consumer segments that desire different things out of the various hotels (i.e., comfort and luxury over price and affordability and vice versa).

It must also be noted that a business cannot be all things to all people since only a limited number of operational procedures can be implemented at any one time.

As such businesses tend to specialize in meeting the needs of specific consumer groups due to the higher rate of profitability rather than a generalized approach towards company operations (Simonsohn, 2011: 1 – 11). Consumers do take this into consideration when choosing a particular hotel to patronize with different hotel themes, amenities and varying offers appealing to specific consumer segments (Simonsohn, 2011: 1 – 11).

The generalized nature of the Smith (1998) CDP model doesn’t emphasize differences in consumer classes when it comes to choosing particular hotels. While it can be assumed that in the information search and evaluation stage consumer decisions regarding their inherent class, economic capacity and thus their ability to afford higher or lower rates is being undertaken it isn’t specifically emphasized at all.

While the model is straight forward in emphasizing that through information searches consumers are able to evaluate a product/service and then make a decision to buy or utilize it the fact remains that it neglects to take into account several outside factors.

For example, the model lacks the capacity to show alternative possibilities such as brand comprehension, motives as well as choice criteria which are necessary in determining how a consumer will react when presented with a particular consumer purchase decision. Though its simplicity makes the Smith (1998) model applicable to a wide range of possible circumstances the fact remains that when it comes to certain specifics in the consumer decision-making process the model falls short of expectations.

Lastly, the Smith (1998) model assumes that there are only two instances of post-purchase dissonance resulting in either product satisfaction, which creates customer loyalty or product dissatisfaction, which creates a degree of brand rejection (Harris & Daunt, 2011: 834 – 850).

While it may be true that this is applicable to a great number of cases it isn’t specifically applicable to the postmodern hospitality industry, especially when taking into consideration the current economic climate.

The 2008 financial crisis deeply affected various hotel chains around the world due to the sudden decline in consumer spending and international travel, which was the primary source of revenue for various hotels since international guests made up the bulk of their clients. In this particular instance, it isn’t that consumers weren’t satisfied with the services of the hotel but rather that they were no longer capable of affording to stay at the hotel.

The Smith (1998) neglects to take into consideration subsequent changes in the economic capability of consumers in its attempt to encompass the entire breadth of generalized consumer decision making regarding a particular product.

While it may be true that Smith (1998) is applicable to a lot of cases of consumer decision making and subsequent product patronage the fact remains that it doesn’t sufficiently examine all the necessary facets required in a proper consumer decision making process that sufficiently examines the nuances behind hotel patronage.

Examining the Howard and Sheth (1996) CDP Model

It is actually quite interesting to note that the Howard and Sheth (1996) consumer decision making process model is actually one of the most frequently quoted models currently utilized in the study of consumer behavior (Valentini, Montaguti & Neslin, 2011: 72 – 85).

The reason behind this is quite simple, the model effectively highlights the importance of various inputs that influence the consumer buying process and as such suggests various methods in which consumers arrange/orders these inputs before they make a decision regarding what product to buy or service to patronize (Valentini, Montaguti & Neslin, 2011: 72 – 85).

On the other hand, it cannot really be stated that the Howard and Sheth (1996) CDP model is perfect in the sense that it is able to address all possible buying behavior rather the model does have certain inherent limitations and aspects that lend it a distinct vagueness when applied to particular markets. As such the purpose of this section is to both examine the Howard and Sheth (1996) CDP model and determine the extent that it is vague and encompassing when applied to the postmodern hospitality industry.

The Howard and Sheth (1996) model suggest that there are three levels in the decision-making process of a consumer. The first level involves extensive problem-solving in that during this particular level consumers don’t have any information (i.e., basic or comprehensive) regarding a particular product or service and as such will actively seek out information in order to know more about the product or service in question before making a decision to purchase or patronize anything (Leonidou, Leonidou & Kvasova, 2010:1319 – 1344).

The second level of the Howard and Sheth (1996) model is limited problem-solving. This consists of consumers that have a certain amount of information (though not substantial) regarding a particular product or service and in order to make their purchasing decision some comparative information has to be taken into consideration (Leonidou, Leonidou & Kvasova, 2010:1319 – 1344).

The third level in the decision making process is known as “habitual response behavior” in that a particular consumer is already well aware of the products available in a particular market as well as the differences between each type of brand or service and as such has already decided to purchase a product or patronize a service without further research (Leonidou, Leonidou & Kvasova, 2010:1319 – 1344).

It must also be noted that under the Howard and Sheth (1996) model there are 4 major sets of variables that need to be taken into consideration namely: inputs, perceptual and learning constructs, outputs, and finally external variables.

What must be understood is that input variables in the case of the Howard and Sheth (1996) model actually consist of three distinct types of information sources or stimuli that comes from within the environment of the consumer. The first originates from the product seller which comes in the form of product or brand information regarding physical brand characteristics while the second is the verbal or visual product characteristics.

Lastly, the third type is provided by the consumer’s social environment, which comes in the form of social influences such as family, friends or distinctions inherent to their social class. However, production is provided under influence of perceptual and learning variables, which affect a consumer and the subsequent consumer’s response. Any feedback from the customer is considered to be a direct result of the addition of these variables such as brand comprehension, changes in attitudes and attention.

While it may be true that the Howard and Sheth (1996) model has a far better method of explaining consumer decision processes through the use of inputs, outputs perceptual and learning constructs as compared to the Smith (1998) model the fact remains that the Howard and Sheth (1996) model neglects to take into account the importance of external factors which influence the consumer decision making process.

The reason behind this opinion is the fact that businesses don’t operate within a vacuum and have to deal with intense competitive environment forces on an almost daily basis (Mizerski, Golden & Kernan,1979: 123). What must be understood is that there are three components to market orientation that dictate how a company acts within a competitive environment, these are: customer orientation, competitor orientation, and inter-functional coordination.

In the case of customer orientation a company spends what resources it has in gathering data on the needs and behaviors of various consumers, the same can be said for competitor orientation however it focuses on competitors instead (Martin & Morich, 2011: 483 – 502).

In the case of the Howard and Sheth (1996) model while it is able to combine social influences, quality, price, attitude, motives and intention in order to create a comprehensive examination of consumer purchasing decisions it cannot be considered 100% applicable to the postmodern hospitality industry due to the fact that it suffers from the distinction of being vulnerable to external changes as seen in the case of the 2008 financial recession and significant shift in consumer purchasing behavior.

What must be understood is that the Howard and Sheth (1996) model is more of means of focusing on consumer-oriented responses yet focusing too much on consumer orientation can actually blind a company to changes in the market or may actually stifle innovation since the company focuses too much on consumer satisfaction rather than changing based on trends. This was seen in the case of the Jumeirah hotel group in the UAE and their investment into various hotel schemes that didn’t pan out due to lackluster consumer responses.

Connection of Income Level with the Decision Making Process

One of the positive aspects of the Howard and Sheth (1996) model is that it is able to incorporate the four fundamental concepts of consumer choice namely: rational behavior, preferences, budget constraints and prices when trying to determine what drives the decision-making process of consumers to choose a particular type of hotel.

In the Yunhi & Heesup (2010) study various hotel surveys for four different kinds of income streams were added namely: those below $1000, $1000 – $2000, $2000 – $3000 and income streams above $3000 (Yunhi & Heesup, 2010: 997 – 1001).

These levels of income were directly contrasted to the decision-making process of the customer. The study revealed that the greatest factor in the decision-making process for hotel guests was the price of the hotel, followed by the theme, then the location and finally the services offered. So far the Yunhi & Heesup (2010)study did show a proper correlation with the Howard and Sheth (1996) CDP model and gave sufficient evidence of its usability within the hospitality industry

It is the assumption of this paper that as income levels increase the propensity for consumers to go beyond the demographic of price and consider other factors in the decision-making process such as theme, location and services increases as well which also conform to the various assumptions given by the Howard and Sheth (1996) model.

In order to prove this point the four fundamental concepts of consumer choice will be utilized in order to trace consumer behavior in this paper and will attempt to explain how hotel guests make their decisions regarding what hotel chain to patronize.

The concept of rational behavior assumes that all consumers are rational individuals who try to use their earned income in order to derive the greatest amount of satisfaction/ utility. In other words, consumers try to get the most out of their income through rational buying behavior, which results in a maximization of total utility from the products or services used.

Such actions conform to the concept of preferences which is based on the fact that each individual consumer has his/her own personal preference towards a particular service or product that is currently available in the market from which they are able to derive the greatest amount of total utility/ satisfaction (Macinnis & Folkes, 2010: 899 – 910).

Consumers with greater incomes thus have a different set of preferences as compared to those who have lower income rates. What must be understood is that under the concept of budget constraints each consumer is assumed to have a fixed and finite income due to the limited amount of work in exchange for income each individual consumer is capable of achieving (Macinnis & Folkes, 2010: 899 – 910).

Due to the limited amount of income each consumer is capable of achieving they must choose, under the concept of price, to obtain the best combination of goods that maximizes their total utility while at the same time remaining within a certain price range.

In the Howard and Sheth (1996) model the point of view of the consumer, namely consumer preference, plays an important role in determining whether the total utility of the consumer knowing that the hotel they are staying in practices environmentally beneficial practices actually contributes to consumer patronage of that particular hotel chain.

It must be noted that while the concept of consumer preference plays an important role in the choice of a particular product or service the fact remains that the remaining concepts of rational behavior, budget constraint and price also play roles that can actually override the concept of preference (Anderson & Fok, 2000: 40).

While a consumer may prefer to stay in a hotel that has gone green, barriers to this choice in the form of higher prices which directly conflicts with a consumer’s inherent budget constraints would thus change their pattern of behavior to choose a more affordable solution in order to conform to what is rational.

This particular behavior can be categorized as the result of outside external variables, which the Howard and Sheth (1996) model are rather vague on. While the model is able to explain a great deal about what drives consumer preferences and behaviors it lacks sufficient instruments in being able to fully conceptualize the effect of external variables on consumer decisions.

One survey conducted in 2007 by the Association of Corporate Travel Executives revealed that while various travelers indicated that they would prefer to use a hotel that had gone green when traveling they often chose hotels with a much lower prices when given the choice. Surveys conducted by other studies yielded similar results where guests stated they would choose green hotels and would recommend green hotels to their friends, but when it actually came to their hotel of choice they went for affordability.

The problem with consumer opinion, as seen in the 2007 survey by ACTE and by other such studies, is that consumers can and often do change their preferences quickly when presented with a situation that is directly conflicts with what they perceive to be a violation of their maximization of their total utilities. At the present this takes the form of the 2008 financial crisis whose consequences have affected consumer purchasing decisions to this day.

While it may be true that the Howard and Sheth (1996) model can be applicable to today’s postmodern hospitality industry due to the breadth in which it is able to encompass several vital aspects of consumer behavioral practices, the fact remains that in the end the model is lacking in having sufficient instruments that examine the impact of external variables in changing consumer preferences.

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