Coca-Cola Company: Affecting the Consumer Decision-Making Process - Case Study Example

Consumer Decision Making Name Institution Course Lecturer Date Executive Summary 3 Overview of the Product-Coca-Cola 3 Consumer Decision Making Process 4 External Factors Influencing Consumer Decision Making 5 1. Culture 5 2. Sub-Culture 6 3. Social Classes 8 4. Reference Groups 10 Functions of reference Groups 11 5. The Family 13 6. Opinion Leaders 14 7. Diffusion of Innovations 14 Public Policy and Consumer Protection 16 Conclusion 17 References 18 Executive Summary The consumer decision making process is influenced by both internal and external factors. The external factors include reference groups, the family, social class, cultural and sub-cultural aspect. These factors have different levels of influence on the decision making process. Some are more influential than the others. This paper looks at external factors that affect the consumer decision making process for the case of Coca-Cola. It looks at these factors in depth and discusses the influence that they have and how the company deals with them in its marketing efforts. Overview of the Product-Coca-Cola The Coca-Cola beverage was developed in 1886 by John Stith pemberton. He later sold the brand and formula to Asa Candler in 1889 who later registered the Coca-Cola Company in 1892. The story of Coca-Cola since then has been remarkable. In 196 the company would start manufacturing its unique bottles which it uses to date. The company went beyond the U.S boundaries in 1928 under Robert Woodruff who was the company president at the time. In the 1960s, the company expanded its product range by developing new flavors such as Sprite, Fanta and Fresca and also acquired Minute Maid company. This brought a completely new line of products to the company, greatly changed its image and opened up new markets thereby increasing its sales volumes. The story was no different in the 1980s when the company became renowned for its incredible innovativeness that ultimately changed the company. It introduced diet coke which instantly became the world’s most famous low-calorie soft drink. The company continues to grow and today is the unbeatable market leader in the World soft drink market. Its products have markets all over the globe. Every day, over 1.4 billion Coca Cola products are sold (Brief company history, 2011). Most of the marketing efforts undertaken by companies and marketers are aimed at influencing the decision making process of the consumers. In marketing, the consumer means everything. This is the person who buys a product or service in order to satisfy his needs at a convenient place and through monetary consideration. Marketers need to understand consumer behavior which is defined as “the study of consumers and how they decide on the good or service to choose, consume and dispose among the many available choices to choose from.” understanding consumer behavior is critical for marketers as it can guide their marketing activities, messages and focus (Defining Consumer Behavior, 2014). Consumer Decision Making Process Before a consumer buys a product or service, he goes through stages in making that decision. These are: problem recognition, information search, evaluation of alternatives, purchase decision, purchase and post purchase evaluation. The actual purchase is just one stage of the process. It is not all decision processes that will lead to purchase and it is not all consumer decision that involves all the stages (Romm & Sudweeks, 1998). The decision making process is influenced by both internal and external factors. External influences lay a vital role in determining the decision that a consumer will make. These include: culture, subculture, reference groups, social stratification, demographics, families, households, geographics and marketing activities. Coca-Cola understands these factors and incorporates their understanding in its marketing approach. External Factors Influencing Consumer Decision Making 1. Culture Culture is the most important external consumer decision making factor. This is because human behavior is shaped by culture. It is defined as the characteristics of a given group of people pertaining to such aspects as language, religion, social habits, cuisine, music and arts (Zimmermann, 2012). The interaction between humans and their culture determines their behavior. When it comes to a consumer, he is influenced by his culture when deciding what to buy. He is subconsciously guided by his culture because it sets the boundaries within which he can think and act. Culture defines what is acceptable and what is not. If a commodity is not culturally viewed positively, a consumer will avoid it. It is therefore imperative form marketers to ensure that the products they market are acceptable to different cultures. Coca-Cola has managed to do this through decades of relentless vigorous marketing in both new and old markets. Human culture is of a scholastic nature meaning it is acquired. It is learned through imitation and observation of the reward-punishment process in a society. A child learns the symbols of his culture from his family, friends and teachers. This is how culture is leaned and transmitted to other generations and it has a great influence on a person’s behavior, thoughts, reactions, beliefs and sensitivity to surrounding issues. For a brand, it is necessary to understand cultural factors in each market and adapt its product to suit that market in its marketing strategy. This plays a vital role in the habits, perception, expectations and behavior of consumers thereby determining whether they will buy the product or not. For instance, in the West, it is an acceptable social norm to invite friends for a drink at home whereas in Eastern cultures such as Japan, it is preferable to invite such people for an outing in a restaurant. Usage and consumption times area also different for different societies and as such, marketers must take this into consideration. Coca-Cola advertises its products using different approaches in different cultures. They are customarily marketed as refreshment and social drinks which augur well for most cultures. Since Coca-Cola’s market encompasses the entire world consisting of thousands of cultures, it has a dynamic way of dealing with different markets and cultures. In its website, it has specific pages dedicated to consumers from different parts of the world. The pages target people from general cultures such as African-Americans, Latin Americans, Asians, Japanese, Africans, etc. It has different messages relevant for the different groups. The website also has a map in which viewers choose the language in which they want to access the website. Brands strive to ensure that majority of the consumers feel recognized and Coca-Cola does this by ensuring the website is available in different languages to be useful for as many people as possible (Kosko, 2013). 2. Sub-Culture A sub-culture is an identifiable small social structure within a large dominant culture. It is composed of people who share similar behaviors, values, symbols and attitudes which distinguish them from the large dominant culture (Atkinson & Young, 2008). In other words, subcultures can be viewed as nationalities, ethnic groups, gender, age groups, and religions. Brands take subcultures into consideration when laying out their marketing programs. This helps adapt a commodity or communication strategy to the values and norms of a particular segment of the consumer base. Coca-Cola uses geographic segmentation in its marketing program which focuses on subcultures. For instance, the marketing approach in India is different from the one used in Pakistan even though the two countries share cultures with some similarities. The flavors are also different from country to country and are reflective of the cultures of people in any particular region. Subcultures are distinguished by unique beliefs, customs and values. They are also distinguished by central core cultural themes, languages used and self identification. These subcultures can be ethnic, religious, geographical, regional, racial and age-based. In Australia, ethnic subcultures include Asian-Australians, Whites, Sojourners and indigenous cultures such as Aboriginals. The main Religious subculture is Catholic Christians. The main sub-cultural division that plays a major role in consumer behavior for the case of Coca-Cola is age. For marketing purposes, it can be divided into generation-X and generation-Y. Generation-X is for those born between 1965 and 1979 while generation-Y is those born between 1980 and 1994. The groups require different marketing approaches. Generation-Y is young, open to change, technologically sophisticated, influenced easily by reference groups, confident, optimistic and disloyal to brands. Generation-X on the other hand is highly educated, spends a lot on recreation, and is concerned with job satisfaction more than with salary and purchases reputable brand names. Coca-Cola targets these groups depending on their ages. For generation-X, it is easy to market the brand because it has a reputable name worldwide and is renowned as a recreational drink. On the other hand, marketing to generation-Y is tricky because the group is disloyal to brands and is adventurous. However, the task is made easier because these people have grown up drinking Coca-Cola and most were induced to like it at an early age at the family level. Teenagers are increasing being assigned the role of buying goods for their families such as foods and drinks. This is because they enjoy shopping and have more free time than their parents. Marketers such as Coca-Cola must therefore target them in their ads and promotional campaigns. To gain their attention, the adverts have to be humorous, have clear messages and be honest. They have a high need to be accepted by their reference groups such as family and friends and therefore easily change brands if they do not meet their expectations. Young adults on the other hand live each moment as it comes and not for the future. They view adverts as a form of entertainment and get bored due to over commercialization (Blackwell et al. 2001). 3. Social Classes These are groups of which are similar and are ranked against one another with respect to a given form of social hierarchy. For large groups, they also have similar values, interests, lifestyles and behaviors in people belonging to the same social class. Social classes can be divided into: Lowe class- this class is made up of blue-collars. It consists of semi-skilled, skilled and service personnel. It also has the people with limited skills as well as the unemployed. Its spending power is low and they mostly spend on the necessities only. They prefer affordable goods. Brands can target them by developing low-end cheap products. Middle class- this includes the relatively rich families, owners of small companies and relatively successful businessmen. Highly-educated individuals, teachers, office clerks, ambitious individuals, owners of small businesses and technicians belong in this class. They are normally ambitious and work hard to try to get into the upper class. Upper class- this includes the rich and well-established families, professionals and entrepreneurs. They prefer spending on valuable and high-end commodities and establishments. The people from each class have distinct consumption patterns and desires. Social classes are determined by factors such as occupation, income levels, wealth, personal prestige, association, power, class conscience and succession. Occupation is the best indicator of a person’s social; class as income is almost always dependent on one’s occupation. It also determines the consumption patterns of a person as well as behavior. Consumers are generally at ease when surrounded by people with whom they share a common social class (Jeraisy, 2008, p.130). Consumers from the middle class level and upper class level generally consume better goods than those in lower class in terms of price and health. They tend to go for balanced diets and food products that are generally viewed as healthy. For marketers, they can focus on specific messages implying that their products are healthy in order to attract these groups. They do this guided by the fact that consumers in general care for their well being and are generally inclined to go for products that are good for them. Coca-Cola for instance came up with Diet coke in 1982 which gained instant popularity due to its sugar-free nature. It quickly became its leading product in sales volume. Diet |Coke has specialized on markets of people who take low sugar regimes such as those concerned with high calorie intake. Marketing this product has been very easy for the company when targeting the high and middle classes because these are the people who are mainly concerned over their health and regularly watch what they take. 4. Reference Groups Reference groups involve the use of other people as a basis for comparison by consumers. Consumers look up to other people as their point of reference when forming their response and deciding whether or not to purchase a given product. All reference groups have particular forms of behavior and all the members are expected to conform to them so as to avoid falling out of the group. All people belong to social groups with which they identify and which influence their decisions. These groups are formed on the basis of social origin, place of residence, age, hobbies, work, leisure etc (Strydom, 2004, p.55). Reference groups are divided into four categories: Primary- These are the most influential and they include family and friends. They are characterized by informal, frequent and personalized contact hence they are very influential. This explains why similar-minded people do similar things together. Secondary- these have limited interpersonal interactions and are less comprehensive and more sporadic. As a result, they are less influential compare to primary reference groups. These include schools, religious groups and community organizations. Aspirational groups- these portray he desire to adopt the values, behaviors and norms of other people with whom individuals aspire to associate. As such, consumers decide what they deem to be positive attraction and adapt themselves in that manner. This happens whether or not the aspiration is rational and achievable. Dissociative groups- these are groups which portray less desirable appeals. Here, individuals reject the values and behaviors of particular groups. The motivation steers the individuals towards other groups. Functions of reference Groups 1. The information function Reference groups provide information to consumers which aid them in decision making. Consumers are continually looking for information to guide them in decision making and since they consider reference groups as reliable sources, they rely on their information and guidance. 2. The Utilitarian function Reference groups provide members with a sense of belonging, emotional stability, interaction and mutual respect. Members try to realize the goals, expectations and hopes of the group and in return win the sympathy and respect of the group. 3. The value-expressive Function This results from the need for a sense of belonging and affection by individuals. Adopting the opinions of a reference group helps achieve this need (Jeraisy & Abdurrahman, 2008, p.139). The influence of reference groups is affected by several factors. The degree of influence is dependent on the nature of the product and the individual. Some of these factors are: Information and experience. A person who has knows about an product and has used it in the past will not be influenced a lot by the advise or examples set by others. On the contrary, a person who has no first-hand experience with a product is likely to only rely on the advice of others. For Coca-Cola, majority of the people has taken its products and therefore have first hand information about them. They therefore make informed decisions and don’t entirely rely on the opinion of others. Credibility, attractiveness and the power of a reference group. Any reference group perceived as being attractive and credible can easily influence a person’s decision making. For instance, if a celeb is seen taking Coca-Cola, his/her fans are likely to follow suit because they deem him/her as attractive and credible. Additionally, if consumers are concerned with approval and acceptance of the people they like, they are very likely to adopt their brand, product, and other behavioral characteristics. Conspicuousness of the product- the conspicuousness of a product determines how influential a reference group can be. Visually conspicuous products are those that stand out and are noticeable to the eye while verbally conspicuous ones are those that are easily talked about by people. Conspicuous products are more likely to be purchased than those that are not conspicuous. Consumer conformity and reference groups- the ability of reference groups to change the consumer opinions and attitudes is important for marketers. A reference group should be able to make individuals aware of a product and fall in love with it through positive influence. Consequently, consumers adopt the attitudes and behavior of the reference group which legitimizes the decision to use the same products as a group. Application of the reference group concept- advertisers try to use reference groups when communicating to their markets. They use group situations to advertise their products. For instance, Coca-Cola can advertise its refreshment drinks as suitable for group outings and birthdays parties. When portrayed this way, consumers will find the products great when they are going out together in groups as a family or with friends (Londhe, 2006, p.711-712). Celebrity endorsement for brands is crucial for the success of marketing efforts. Brands use celebrity endorsement mainly for credibility in order to appeal to the general masses. For a celebrity endorsement to be successful and effective, the endorser has to be attractive to the society and have a positive image (Roll, 2006, p.86). Coca-Cola has used the strategy of celebrity endorsement over the years and its products are currently endorsed by celebrities such as Alex Morgan, Amy Purdy, Common, Drake, Marlen Esparza, Angela Ruggiero, Ryan Seacrest and David oliver among others. Endorsement by celebrities enhances brand credibility. 5. The Family The family is an influential factor in the consumer decision making process. This is because it forms a socialization environment in which individuals evolve, acquire values and shape their personality. It also influences his consumer habits and perception of the products that he buys. Generally, people retain the consumption habits they are brought up within their families. Family habits and perceptions influence consumer buying behavior and decision making. For instance, if you used to drink Coke when you were young and your parents told you it is the best soft drink, you are likely to drink it all your life with the same mentality that it is the best soft drink. However, if they told you that it is not good for health and is full of sugar, you are likely to keep that mentality and avoid it altogether. For brands, it is therefore good to ensure there is a positive message about it among consumers. Successfully integrating the family in the marketing message is a challenging job for brands but once it is achieved, the success that follows is immense. Brands that are portrayed as good for a family leave a lasting attitude among families that use them. It is therefore imperative for brands to be seen as good for the family so as to become habitual among families because the children are likely to remain loyal to them throughout their lives. Coca-Cola advertises itself as a family refreshment drink and this message resonates well with families. As a result, of its consumers started consuming as kids and continue to do so throughout their lives (Perreau, p.12 2013). 6. Opinion Leaders Opinion leaders are people who are able to frequently influence the attitudes or behaviors of others. They are valuable sources of information for several reasons: firstly, they are competent technically hence more credible. Secondly, they pre-screen, evaluate and synthesize product information in an impartial manner. Lastly, they are socially active and are highly connected in the communities they live in (Spielberger, 2004, p.491). Just like reference groups, the role of opinion leaders varies across cultures. This means in some cultures opinion leaders may have a huge influence whereas in other cultures the influence may be insignificant. In individualistic cultures, opinion leaders get their information from the media but in collectivistic cultures, they get their information from their social networks and the information gathering process is an unconscious one. In collectivistic cultures, the flow of information is so strong and informal that people are even not aware that they are getting information and from whom they are getting it (Mooj, 2011, p.203). 7. Diffusion of Innovations Diffusion of innovations is the process by which acceptance of new products and services is spread through communication to the target market over time. The spread of this information is done through sales people, mass media and informal communications. Before consumers adopt new products, they go through a process with various stages such as awareness, information search, trial, evaluation and adoption. The importance of its stage depends on how much a particular consumer knows about the new product. Before the spread of information about a product is spread to saturation, it takes a certain amount of time. Marketers therefore have to understand the factors that influence the spread of information for every market segment and utilize them (Prasad, 2009, p.85). The diffusion process has four elements: the innovation, the communication channel, the social system and time. The innovation can either be firm-oriented, product-oriented, services-oriented, market-oriented or consumer-oriented depending on the target. The channels of communication determines how quickly information about a product spreads in the market. The main communication is between marketers and consumers and among consumers themselves. Consumer information comes from various sources. These can be personal such as family, neighbors, friends and acquaintances. It can also be commercial from sources such as sales people and adverts. The social systems determines the rate of diffusion of innovation. The orientation of the social system defines the market environment in which marketers must operate. The modern social systems have positive attitudes towards change and use advanced technology. They have skilled labor force, have desire and respect for science and education and emphasize on ordered and rational social relationships. Lastly, time affects diffusion of innovation in three ways: the amount of purchase time, the rate of adoption and in identification of adopter categories. Public Policy and Consumer Protection The Coca-Cola company has a clearly outline public policy and the company believes in corporate governance. It participates in political processes in countries such as the US to educate policymakers and help develop reasonable policies which impact on its business and associates worldwide. Coca-Cola complies with all applicable legal requirements. Particular areas in which it pays priority include corporate taxation, environmental policy, and product-specific policies such as restrictions, regulations and taxes. Coca-Cola is subject to income tax in the countries in which it operates. As a major contributor to the world economy through jobs, community investments, taxes and general investments, Coca-Cola opposes tax policies which single out certain products and advocates for choice. Coca-Cola strives to use the best combination of energy sources as part of its environmental policy. It is continually improving the energy conservation and efficiency of its product-processing and distribution systems. It also advocates for policies which improve water quality, ingredients and distribution. On public disclosure, Coca-Cola’s public policy supports transparency relating to matters such as contributions to political activities. It complies with all the applicable laws. It supports trade associations and organizations that represent a wide range of views on public policy issues. The company also engages in corporate social responsibility activities by supporting communities from all over the world (Public Policy Engagement - The Coca-Cola Company, n.d.). On consumer protection, Coca-Cola strives to ensure that its products are safe for human consumption and that they pose no health risks. All its products are safe regardless of the type of packaging used. The beverage cans have been reviewed by independent scientists and confirmed to pose no public health risk. Government regulators throughout the world have also confirmed this. The level of exposure to BPA (Bisphenol A) in packaging poses no health dangers. By and large, Coca-Cola conforms to all public health regulations and requirements and its products are safe (The Coca-Cola Company, 2014). Conclusion As the world’s leading soft drink brand, Coca-Cola has done extremely well in its marketing communication. It understands consumer behavior well as demonstrated in its strategies. The understanding of the impact of reference groups, family, culture and subculture influence in decision making has enabled it remain the world’s most valuable brand. Coca-Cola also uses brand endorsement by celebrities in order to gain credibility to consumers. Through reference groups and opinion leaders, Coca-Cola has managed to build a culture of acceptance and good reputation among people from all walks of life. References Atkinson, M., & Young, K. (2008). A Subcultural history. Tribal play: subcultural journeys through sport (pp. 8-10). Bingley, UK: Emerald JAI. Blackwell, R., Miniard, P. and Engel, J. 2001. Consumer Behaviour. Ohio: South-Western Coca Cola: Brief company history. (2011, February 7). Coca Cola: Brief company history. 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