Importance of Consumer Behavior and Understanding of Such Processes - Coursework Example

Name: Tutor: Title: Why consumer behavior and an understanding of such processes is useful from the perspective of the marketer Course: Date: Why consumer behavior and an understanding of such processes is useful from the perspective of the marketer Introduction The concept of consumer behavior denotes the study of factors that influence the choices that consumers make when searching, procuring, consuming, appraising and disposing off products of value. The choices made by consumers regarding purchasing of goods and services are influenced by both external and internal factors. Internal factors refers to individual consumer attributes such as level of motivation, perceptions and learning. Eternal factors are those influenced by parameters, such as reference groups, social class and culture. Marketing involves interactions between buyers and sellers with the objective of exchanging something of value for the mutual satisfaction of both parties. The marketing process can only be understood by analyzing consumer behavior, which reveals valuable insights that organizations can use for making decisions and developing marketing strategies. Decisions regarding the best market segments to target are made in consideration of consumer needs, attributes, and location and consumption patterns. The objective of this paper is to explore the importance of the study of consumer behavior from a marketing point of view. A case study of McDonalds will be employed to highlight factors that influence consumer behavior in the the fast food industry. With the drastic increase in competition owing to globalization, companies are compelled to readjust their strategies in order to win a competitive edge and optimize profits. Subsequently, work schedules have been significantly altered, with a majority of the working population getting more constrained on resources, especially time. With some workers taking up multiple jobs sometimes in different locations, scarcity of time has increasingly become a major challenge, and any developments that can help to save on time are highly valued. A major development that has emerged due to poverty of time is the concept of fast food. The fast food industry has drastically gained popularity in recent times, as more workers that are overwhelmed with hectic work schedules prefer to take quick meals in their cars, on buses and trains, and in their work places. MacDonald’s enhanced capacity enables it to serve over 47 million customers on daily basis. With 85% of the business operating as franchises, the company has developed an elaborate framework for training staff and monitoring performance in franchises to ensure they adhere to the organizations objective of producing high quality products and other value propositions. Importance of Consumer Behavior The importance of marketers studying consumer behavior is because recent developments attributed to globalization have resulted in increased global competition, as well as a drastic drift in consumer needs and expectations. Organizations also now have to address emerging concerns over the environmental protection, and development of more stringent policies aimed at protecting consumers. The 21st century has also witnessed a rapid increase in technological innovation, a development that has transformed the way business is done. Marketers are hence compelled to undertake comprehensive research on how to effectively employ new technological developments in developing and marketing products that meet rapidly evolving consumer needs and expectations. Originally, the basic principle of marketing was to motivate more buyers to purchase more products in order to increase revenue and earn more profits. This aggressive approach has since changed, as customers have become knowledgeable, more informed, and more demanding Marketing strategies are now designed to earn and win customers. To meet the requirements of a rapidly evolving market environment, marketers need to explore and consider the diversity among producers, retailers, consumers, the media, cultures and ultimately the psychological behavior of consumers. The essence of studying consumer behavior is to equip marketers with appropriate knowledge and tools for analyzing consumer needs and the factors that motivate the buying decisions that target consumers make. A comprehensive understanding of consumer behavior is of utmost significance to successful implementation of marketing strategies, as it makes it possible for marketers to predict future trends in the market. A study of consumer behavior provides marketers on insights on consumer preferences regarding what they buy, how they buy it, when and where they buy it, and how often they do it. Basic model of consumer influences MacDonald’s product and service portfolio presents a significant drift from traditional presumptions about market development. The company has clear programs in place for employee personal and professional development, and continues to invest in developing products that meet the diversity in consumer expectations. To streamline its service delivery, the company focused on hiring, training and motivating dedicated employees at all levels. An effective strategy in market segmentation and product positioning has enabled MacDonald’s to develop a distinctively loyal customer base. This has enabled the company to secure a competitive advantage and optimize its profits, by developing well-defined customer segments that are mainly made up children, the youth, as well as young urban families. A strategy of appealing to children has involved the introduction of the Happy Meal proposition, where children are offered is offered toys such as the hot Wheels, and a wide range of Walt Disney characters. The proposition initiated following an informal partnership with Walt Disney, and which has significantly popularized and enhanced the value of McDonald’s portfolio. Several outlets in major cities now provide playing facilities such as ‘Play Place”, where kids can play arcade games such as air hockey. The primary focus of MacDonald’s marketing strategy is to create an environment in outlets where it is fun to eat ones favorite meal. Research on consumer behavior indicates that motivation can be either negative or positive. Positive motivation occurs when consumers are given incentives to consume an item, while negative motivation discourages consumers from using the item. Schlosser (2002) notes that motivation can be through physiological, emotional, or cognitive factors. In this context, In order to appeal to teenagers, MacDonald’s has taken the imitative to appeal to teenagers and college youth by introducing aggressively pricing some items. This is in consideration of the fact that this category of customers is very sensitive to price. Additionally, the company has introduced in its outlets Wi-Fi facilities that greatly appeal to youth. MacDonald’s management strategy is based on the “5 P’s”, which stand for product, place, price, promotion and people. Product MacDonald’s primary objective has been to design and develop products that enhanced the overall experience of its customers. Its focus has been on developing products that are not only desirable in design, but also sellable and easily distributable. I order to ensure consumers perceive the quality of its products; the company has made use of trending designs in packaging, as well as guarantees. As part of its corporate strategy, the company has maintained a very limited product depth and width. Place MacDonald’s offers guarantees that its products will be available to customers at the right time, the right place and in the right quantities. The company’s place strategy is to promote outlets as places of happiness and fun. The outlets are managed with stringent requirements for high standards of cleanliness, an excellent ambience, as well as high quality services. Price When determining the price of products, marketers need to consider the options available for competitors to react aggressively. Pricing is considered in consumer behavior studies as the most critical aspect of an organizations product mix, as this is where the needed revenue and profits is generated. A major component of many pricing strategies is the provision of discounts that entice and appeal to consumers. MacDonald’s pricing strategy has focused on offering products with a price range that appeal to the lower and middle class categories. Some of its aggressive pricing initiatives are portrayed in its bundling of items such as the Happy Meal, Combo Meal and Family Meal. This strategy has enabled the company to augment its customer loyalty as well as profits due to increase in sales volumes. Promotion A significant aspect of effective marketing is developing efficient channels of promoting distributing products. McDonald’s has excelled in this area through frequent research and development of effective channels for advertising, promotion campaigns, personal selling, and direct marketing. These channels are developed in consideration of the values and expectations of customers. Advertising efforts seek to enhance product awareness, as well as creating a positive perception and feeling of the product. MacDonald’s product promotion strategy focuses on communicating the right content, to the right market segment through the mops suitable media platform. People Success in the fast food industry is largely attributed to its success in integrating the perspective and expectations of customers with product and service development. This integration in operations is exemplified in the emphasis of McDonalds on suppliers as customers, while treating its customers as co-producers of quality service. Factors affecting the consumer decision process Culture According to Hirschman (1985), culture refers to a complex composition of multivariate aspects that guide and control behavior within a system. They include laws, beliefs, morals, customs and other characteristics that define the behavior of an individual. Culture is a fundamental component of any organization, as it specifies what is perceived as acceptable conduct within an organization. An understanding of the cultural aspects that define a group of people provides marketers with the essential insight on the strategic options they can undertake in product differentiation and promotions to appeal to the needs of different market segments. According to Schlosser (2002) individuals who fail to conform to set customs of a system are are expected to face some form of penalty that could vary from disapproval, to complete banishment from the system. Individuals are pushed by social needs to learn from benefits of adhering to cultural norms, and from the consequences of deviating. Culture in overall is a very complex aspect, as it encompasses all factors that determine an individual’s behavior, feelings and thoughts. Culture comprises multiple interactions to the extent that a consumer may not easily notice how it influences their purchasing behavior. This informs the variance in consumer behavior among different organizations and different customer segments (Gupta, 2005). Within the larger domain of culture are smaller sub-cultures, which are segments of aspects that share a set of common attributes, values or activities (Bateman & Snell, 2004). For instance, religion as the domain culture is composed of other subcultures in form of denominations such as Christianity, Islam, Hindu and others. Gender is also divided into male and female as its subcultures. Bateman and Snell (2004) observe that culture and subcultures do not have clear-cut distinctions, as consumers often exemplify multiple attributes. A good example is a market segment that is composed of consumers from different racial backgrounds, subscribe to different religious beliefs, speak different languages, but have common preferences when making purchases. Social stratification and Demographics Social class denotes a hierarchical and homogenous social division that has members that are brought together by common interests and values, or behavior. Social class influences individuals make their purchase decisions. Contemporary market research indicates that social class or status is a most accurate predictor of consumption patterns, compared to income and occupation. Social class implies that that consumers are grouped according to their ability to access or own items that are considered to be of value in a given society. These include the amount of wealth, level of income, residence and level of education. Social class in industrialized countries is not distinctly classified, as a majority of the people fall in the middle-income category. However, in less developed countries, social structuring provides a framework of social expectations, including the respect that individuals can command. Social status is determined by factors that can be economic, social or political. Economic factors include level of income, occupation and wealth. Social factors are more to do with an individual’s interaction with the larger society. They include level of socialization, socialization and personal prestige. Prestige essentially denotes the respect that individuals command and have for others. Association concerns the similarities that a group of people has in lifestyle. Socialization pertains to the process of acquiring attitudes and skills that enable them to interact with members of a group... Political factors on the other hand involve the need for power, succession and class-consciousness. Power on the denotes the means and ways by which leadership emerges within a group, whereas Class consciousness refers to the level of awareness of the factors that distinguish individuals demo from other people An individual’s income level and amount of wealth are considered the most influential determinants of the purchasing behavior. Marketers need to evaluate the social status of their target market, as this significantly influences key marketing decisions such as product pricing, location of stores, and type of promotional activities. Demographic factors are aspects of population that describe groups of people based on the size, density, distribution and structural formation of the population. Demographic factors that influence consumer behavior include age, level of education, occupation and level of income. Contemporary research on consumer behavior focuses on particular aspects of the population that distinctively influence purchasing patterns, such as number of employed women, single-person households and ethnic diversity (Schlosser, 2002). Consumer needs and preference are largely determined by the age of targeted consumers. People in the same age bracket are more likely to exemplify similar attributes of behavior and expectations. An analysis of the needs and preferences of people of certain age is useful for marketers when it comes to developing products, segmenting the market and selecting the most appropriate type of promotional activity. Marketing Implication According to Macdonald and Sharp (2000), the culture of an organization evolves and adapts to new trends in the organizations environment. With time, the values associated with certain brands may cease to be of importance to the target market. This makes it imperative for marketers to employ regular product and market research to identify relevant adjustments that need to be incorporated in their portfolio. Bagri (2014) notes that McDonalds current strategy considerably takes into account the sub-cultural diversity of its target market. The companies menu is tailored to the increasing variation in the cultures of consumers in different countries where it has a presence. For instance, in India and china, the company has incorporated local food items in its menu to carter for the cultural preferences of local communities. In china, the company has come up with the oriental menu that meets the preferences in taste of its customers. In India and Pakistan, it has introduced the chicken tikka wrap that is packaged to appeal to the locals. Haili restaurants have also been introduced in London and New York to cater for the preferences of the Muslim population. A study and classification of the target consumers into categories based on their occupation enables marketers to identify and develop marketing strategies that are relevant and appealing to the target market. Occupation certainly determines the level of income, taste and ability to exercise more discretion when making buying decisions. As noted by Schiffman and Kanuk (2000), organizations often promote their brands as symbols of status or class. Schiffman and Kanuk point out that consumers are more likely to make purchasing decision that are correspond to behavior and values that the people they regard to be most important to them expect. The concepts of socialization, association and prestige are thus correlated when it comes to consumer behavior. A study of the educational and professional background of targeted consumers also provides useful insights on the on the content and type of promotional activities that would interest the targeted audience. By focusing on children and the youth, MacDonald’s has effectively tailored its products to appeal to these groups of customers. The company currently provides free internet most of its outlets, a concept that greatly appeals to college youths who wish to browse as they take their meals. The company’s outlets also provide portable Nintendo DS, which greatly appeals to teens. Conclusion A major development of the 21st century is the rise in the population of working women, migrant workers and foreign students that are concentrating in major cities of the world (Hirschman, 1985). This has increased the cultural diversity of these towns, a factor that has greatly altered and expanded the fast food industry. With the increase in the number of multi-national companies that are setting up affiliates across the globe, this has resulted in proliferation and density of immigrant workers in major cities. Cultural diversity has as result emerged as a key aspect that marketers ought to address when developing marketing strategies for multiple locations across the globe. References Bateman, T. S., & Snell, S. A. (2004). Management: The new competitive landscape [2nd Ed.]. McGraw-Hill: New York, NY. Hirschman, E.C. (1985). Cognitive processes in experimental consumer behavior. Research on Consumer Behavior, 1, pp. 67-102. Hamansu, S. M. (2008). Consumer behavior [cit. 05.12.2010] Available at http://knol.google.com/k/consumer-behaviour# Macdonald, E., & Sharp, B. (2000). Brand awareness effects on consumer decision making for a common, repeat purchase product: A replication. Journal of Business Research 48 (1), 5- 15. Schiffman, L. G., & Kanuk, L. L. 2000. Consumer behavior (7th ed.). Upper Saddle River, NJ: Prentice-Hall. Schlosser, E. (2002). Fast food nation. New York, NY: Perennial. Read More