External Factors Influencing Consumer Decision-Making Process for Coke Consumers - Case Study Example

External Factors Influencing Consumer Decision-Making process for Coke Consumers Abstract Coca Cola Company exists to maximize the shareholders’ wealth through the creation of unique beverages. The company is also the leading producer of non alcoholic drink throughout the world. The company has adopted the international global market strategy, in which the brands describe the global market to be a single market with uniform strategy. The company has used the international global marketing strategy for many years and has improved the distribution and supply of its products around the globe. However, due to the ever-changing market trends, Coca Cola Company has continued to adopt new marketing strategy in order to survive the competition in the global market. Despite the company being the largest and number one in soft drinks, coca cola has continued to invest in designing new marketing strategies, which are country specific. The strategies are specific for country level to meet the cultural requirements of the citizen of these countries. This paper focuses on the external forces influencing the consumer decision making for Coke consumers; including, individual’s reference group, family, culture and sub-culture. TABLE OF CONTENTS Abstract 0 TABLE OF CONTENTS 1 Introduction 2 External Factors influencing decision making 3 Reference Groups 4 Family 8 Figure 1.0: A simple model of the socialization process 9 Culture 12 Sub-culture 14 Conclusion 16 References 18 Introduction Consumer purchasing behaviour is sometimes influenced by factors emanating from the external environment, which may be outside of their control. These factors have an indirect impact on the lives and consumption choices made by consumers. There are numerous external that influences buyers purchasing behaviour including an individual’s household structure, reference groups, culture and subculture (Lamb et al, 2011). Business owners and marketers refer to these factors as external influences since they emanate from the external environment and not from inside a person. In the face of global competition, consumers are being faced with an array of product selection. It has, therefore, become vital for businesses and marketers to understand the internal and external factors that influence purchasing decisions made by consumers. These factors work together to influence consumer-purchasing behaviour and are key to success of any business (Lamb et al, 2011). This paper seeks to examine the external factors influencing the purchasing behaviours displayed by coke consumers. Coke is a product of Coca-Cola Company, the largest manufacturer of non-alcoholic drinks globally (Lantos, 2010). This company has achieved tremendous success in the non-alcoholic beverages industry partly due to its effective strategies to understand and respond to consumer purchasing behaviours. According to Lantos (2010), Coca Cola Company keeps on monitoring any changes in consumer behaviours that may affect their profits and sustainability of their products in the market. In response, this company develops new innovative brands of coke to suit the diverse needs of different consumer segments. External Factors influencing decision making Coke is a soft drink that is often taken to reduce the need of thirst. However, other alternatives may be available to a consumer such as water and Pepsi. In such a case, the consumption of coke is mostly influenced by a consumer’s cultural environment. People also consume coke to relax, to cerebrate and to socialize with family members, playmates or age-mates (Wright, 2006). Sometimes, the choice to take coke is influenced by the feeling to associate with specific persons or groups in society. Therefore, the major external factors influencing purchasing decisions made by consumers of coke are the individual’s reference group, family, culture and sub-culture. Reference Groups A human being is a social animal who likes to live in groups. Groups comprise of individuals sharing similar values, norms and beliefs that influence the behaviours of the member (Sahaf, 2008). Members of a group interact to achieve mutual or individual goals. The extent to which a group exerts influence on the behaviour of a member depends on his or her attitude towards the group (such as status and pride) and nature of the group (including cohesiveness, exclusive membership and frequency of interaction). Groups can be categorized as either membership groups or symbolic/non-membership groups. Membership groups refer to groups that one belongs to such as family while symbolic groups refer to those that one aspires to belong to (Sahaf, 2008). An individual aspiring to belong to a given football club would be said to belong to that symbolic group. A person may also regard his membership to a group as either primary or secondary. Primary groups are essential to a person, are more cohesive and the members interact frequently. These include family friends, business group, peer group and working colleagues. On the other hand, secondary groups are less valuable to an individual and are less cohesive. Examples of secondary groups are sports group and women kitty party. Furthermore, groups can either be formal or informal (Sahaf, 2008). Formal rules are guide by written rules of the association. Examples of formal groups are business groups and working colleagues. On the other hand, informal groups occur naturally and are not guided by written rules. They include sports group, women kitty party, peer group, friends and party. Sometimes, individuals form general or specific attitudes or values that guide their behaviours by referring to specific groups or persons whom they may not interact directly with. Any persons or groups that serve as frames of reference for people in making decisions are called reference groups (Botha et al, 2006). Reference groups can either be normative or comparative. Normative reference groups tend to influence general attitudes, values, beliefs and behaviours of a person while comparative reference groups only serve as point of comparison for a person in forming specific values, attitudes, beliefs and behaviours. Noel (2009) identifies four types of membership groups, namely, contactual, inspirational, disclaimant and avoidance groups. Contactual group is a group in which an individual is a member and has direct contact with the members. The attitudes, values, beliefs and behaviours upheld in such groups have a positive influence to members. An inspirational group is a group which non-member aspires to belong to (Noel, 2009). An individual aspiring to be a member of a given golf club would be said to belong to an inspirational group. The behaviours, values and beliefs of such a group tend to have a positive influence to the individual aspiring to be a member. A disclaimant group is a group that a person belongs to, but whose values and behaviours of the members have a negative influence. An individual may join such groups and reject the values with negative influences. Finally, an avoidance group is a group that an individual avoids membership as it is deemed to have a negative influence (Noel, 2009). In marketing, reference groups are individuals that serve as points of comparison for consumers in forming attitudes towards a product, and in guiding their purchasing behaviours. Williams (2012) identifies six main types of groups that influence consumer decision-making, namely, friendship group, work group, shopping group, brand communities, virtual communities and consumer-action groups. There are various factors that determine the extent to which reference groups influence purchasing behaviours of consumers (Williams, 2012). One of these factors is the amount of information and experience that a consumer has regarding a product. Consumers exposed to too much information, and with experience regarding a product are less likely to be influenced by reference groups. Secondly, the inclination of a consumer to purchase a particular product is influenced by the attractiveness, credibility and power of the reference group. A reference group that is powerful, attractive and that have a good reputation has a greater influence consumer purchasing decisions. According to Williams (2012), the influence of a group on a consumer’s purchasing decisions may vary according to verbal or visual conspicuousness of a product. A conspicuous product is that which stands out and is easily noticed by consumers. The level of consumer conformity determines the level of the reference group influence. Williams (2012), in his studies, stated that this depends on attractiveness, clarity of goals, credibility, expertise and the level of past success of the group. Also, the level of conformity depends on a consumer’s level of desire for conformation, control and affiliation, need to be liked and fear of negative evaluation. In addition, the level of conformity depends on the level of encouragement of the reference group on the recipient to conform. This depends on the extent to which; a reference group makes the recipient aware of a specific product; provides the recipient with the opportunity to evaluate his attitudes against those of the group; influences the recipient to adopt group norms, values and attitudes; and legitimizes the decision to use a given product as a group. According to Pride and Ferrell (2011), advertisement appeals also determine the impact of the reference group in influencing consumers. Organizations and marketers often use opinion leaders to communicate their marketing messages to consumers. Opinion leaders are persons who informally influence attitudes and actions of others by their actions or by giving opinions. Pride and Ferrell (2011) identifies five main categories of opinion leaders, namely, celebrities, experts, common man, organizational executives or employees and trade characters such as cartoons. As Lamb and Hair (2010) explain, the loyalty that consumers have on coke has been reinforced by reference groups. To start with, Coca-Cola has created a virtual community in the internet that provides a chance for fans all over the world to interact and discuss issues related to this company and their products. Also, Coca-Cola has created a club of close fans who like collecting the company’s merchandise that holds several meetings and conventions annually. As Lamb and Hair (2010), explains, such groups encourage members to feel more positive about a product. Loyalty is enhanced when people sharing the same interests in the same brand meet or discuss issues related to the brand and the probability of switching to alternative products is reduced. These meetings and discussions have made group members become more emotionally attached to coke and to be genuinely concerned about the welfare of Coca-Cola Company (Lamb & Hair, 2010). Coca-Cola has sponsored big events in the past such as FIFA World Cup, Youth Olympic Games, Special Olympics and NASCAR Racing (Lamb & Hair, 2010). These events bring people with similar interests together where they form sub-cultural groups. Fans may come from different countries, racial backgrounds or geographical regions, but they end up sharing common beliefs, attitudes and traits due to cohesiveness and their desire to share one identity. Consequently, members of these groups would accept coke and are still motivated to take it as long as they still feel the sense of belonging to these groups (Lamb & Hair, 2010). Finally, Coca-Cola enhances the loyalty of coke consumers by inviting celebrities to appear on the company’s ads. In order to influence the younger generation to take coke, Coca-Cola Company hired basketball star, Lebron James, to be a spokesman during advertisement for sprite. By doing this, Coca-Cola assumed that appearance of James would encourage the younger market to drink coke in order to identify with him (Lamb et al, 2008). Family A family refers to two or more persons living together who are related by marriage, blood of adoption. A family may be referred as a household, though not all households are families. A household is made up of persons who live together, but they may not be related by blood, marriage or adoption such as roommates, unmarried couples, boarders and family friends. Lamb et al (2008) identified for types of family households, namely, married couples, nuclear family, extended family and single-parent family. Examples of non-family households are roommates/friends unmarried couples and boarders. Families influence the buying behaviours of the members through the socialization process. Children acquire interpersonal skills, moral and religious principles, manners, dress and glooming standards and speech from their parents Lamb et al (2008). What a child sees from parents and older siblings becomes his or her culture or lifestyle. Experiences may be reinforced or modified as a child grows into adulthood. Socialization of children within a family is of concern to marketers since children acquire consumption behaviour from parents and older siblings. On the contrary, teenagers and adolescents tend to acquire their consumption behaviour from their friends. Socialization is an ongoing process and it extends to adulthood as shown in figure 1.0. Married couples form a consumption unit in which each member influences consumption behaviours of the other. Figure 1.0: A simple model of the socialization process Source: Bray (2008) Children acquire brand preferences or loyalties, some of which are transferred to other generations later in life, a process known as an international brand transfer or international socialization. Children may also influence consumption patterns of their parents. There are three basic functions of families in enhancing child consumer socialization, namely, provision of financial security, emotional support (including intimacy, love and affection) and suitable lifestyle. As Sokolowski (2011), explains, different family members contribute differently to the decision-making process. There are influencers, gatekeepers, deciders, buyers, preparers, users, maintainers and disposers. Influencers are those who provide other family members with information about a brand or service. Gatekeepers control the flow of information about a brand or service within a family. Deciders determine whether or not a product or service should be purchased, used or disposed. Buyers purchase a particular product or service. Preparers transform a product or service into a form that is suitable for consumption. Users consume a particular product or service. Maintainers repair or service a product to enhance continued satisfaction. Disposers carry out the disposal of a particular product or service (Sokolowski, 2011, p. 6). There Sokolowski (2011) identifies four major types of families depending on the relationship between parents and children, namely, tactical families, easygoing families, autocratic families and malleable families. In tactical families, children discuss issues openly with their parents but parents retain control. In some families, children are involved in decision making process and children agree with them most of the time. These are known as easygoing families. In Autocratic families, parents retain power and authority and children are rarely involved in decision making. In malleable families, opinions of children are taken into account when they insist. Decision-making at the family level may be dominated by the husband or wife. In some families, both husband and wife are involved in decision-making. According to Wright (2006), family lifecycle is critical to marketers since lifestyles and stages through which families pass tend to influence consumption behaviors. The traditional family life cycle starts with young singles, moving to young married couples without children, then to married couples with at least one child, to older couples with independent children and ending with the dissolution of the family unit. These stages form consumer segments with different needs and consumption patterns. The non-traditional family life cycle comprises of modifications to the traditional life cycle driven by divorce and later marriages. Source: Cristea, (2007) As Mesbahi (2012) explains, Coke is one of the few products that are enjoyed by all family members, irrespective of their ages. In many countries, coke is perceived as a symbol of fun, joy and laughter. Thus, it is taken during family cerebrations and family functions. In most cases, people feel that coke provides them with the opportunity to share happy, quality moments with family members. Young children learn from their parents and older siblings about the importance of coke and get motivated to adopt it as a suitable brand as they grow into adulthood. However, studies indicate that more sales of coke are done to people of ages between 10 and 35. Mesbahi (2012) explains that this group often gathers information about coke in Twitter and Facebook pages and influential blogs that motivate them to accept the brand. This group is always in the frontline in providing information to their families about coke. Coca-Cola has also innovated numerous brands of coke that suit different needs and preferences of family members. Coke is a low-involvement and purchasing, consumption or disposal decisions made within a family require little or no efforts. In fact, most families consume coke based on habits that have been developed over time (Mesbahi, 2012). Culture Culture refers customs, beliefs and values that guide the behaviour of an individual within a society. Beliefs and values refer to the accumulated feelings that a person has about things. Customs refer to the accepted modes of conduct in specific situations within a society. Culture influences consumers through beliefs, values, norms and attitudes established by the society (Wright, 2006). The artefacts of culture are passed down to succeeding generations through institutions such as religion and family. Individuals view themselves in terms of their culture and react to the external environment based on their culture. As culture evolves over time, beliefs, norms, attitudes and values may be modified. Consumers may associate benefits of a product or service with the new values or may change it if it does not gratify the society. According to Lamb and Hair (2010), culture influences three main constructs of human behaviour, namely, ethics (including moral, immoral good and bad behaviours) aesthetics (such as pleasant, unpleasant, beautiful and ugly) and doctrine (social, political and ideological). The impact of culture on individuals is so natural that it is often ignored. Only when exposed to different cultures that a person understands the extent to which their culture has moulded his or her behaviours. Culture reveals itself in the society at three different subjective levels, namely, supranational level, national level and group level. Supranational level reflects different dimensions of cultures of different societies or nations. National level refers to the dimensions of culture of a nation, with reference to citizens. Group level reflects the dimensions of cultures of different groups within a nation or a society such as families, religions and reference groups (Lamb and Hair, 2010). One important aspect of culture is that it satisfies the needs of individuals. It offers direction, suggestion, problem solving methods, orders and standard practice to the people, which are tested and effective in satisfying social, psychological and physiological needs. For instance, it informs people on eating habits, worships, dress codes and practices, and rituals about birth and death. As Tyagi and Kumar (2004) explain, culture is enduring and consistent. People follow it as long as it satisfies their need. Culture is learnt through formal, informal and technical modes. Learning of one’s own culture is known as acculturation while learning of other cultures is called ac culturation. To acquire culture, people communicate with one another through language or/and symbols. For a practice, belief or value to be considered a cultural characteristic, it must be shared by a significant number of people within a society (Tyagi & Kumar, 2004). Various institutions that exist within the society such as family, houses of worship, schools and mass media, facilitate the sharing of culture. Culture is dynamic and keeps on changing as changes occur within the society driven by development in technology, wars, migration, changing values and resources availability. Culture can be measured though measurement of motivation, personality, perception and attitude. Other efficient methods are content analysis, social trends research, consumer fieldwork and the use of value measurement survey instruments. As Tyagi and Kumar (2004) explain, identification of core values upheld by consumers in a society is essential for a marketing campaign to be successful. As Mesbahi (2012) explains, Coca-Cola Company is aware of values, beliefs, perceptions and attitudes of consumers in all nations. Since all nations have distinct cultures, the marketing plan of Coca-Cola focuses on culture of every nation. This company ensures that prices of all brands, promotional programs and the brands themselves are suitable to cultures of the targeted nations. For instance, Christmas is an important festival for the people of Britain. Coca-Cola cerebrates this occasion with them. On the other hand, Coca-Cola cerebrates the blessing month of Ramadan with people of Pakistan. Where necessary, Coca-Cola tries to adjust to a nation’s culture in order to succeed. For instance, this company withdrew a two-litre bottle from Spain because it did not fit in local refrigerators (Mesbahi, 2012). Sub-culture A society with a common culture may be subdivided into various groups known as sub-cultures on the basis of demographic (gender, age, occupation, language and region) and socio-cultural (religion, social class and nationality) variables. A sub-culture is a social group with distinct beliefs, values and behaviours existing within a national culture. However, sub-cultures existing within a larger, more complex society share core values, norms and beliefs, irrespective of different traits they may portray (Tyagi and Kumar, 2004). In most nations, there are sizeable proportions of persons with roots in other countries. For instance, there are a sizeable proportion of persons working and residing in Australia, with roots in Asia (especially Vietnamese and Chinese). Others visit Australia for holidays or to study. The Aboriginal and Torres Strait Islander, on the other hand, are the indigenous Australians and exhibit different traits from the immigrants. Generally, the three social groups show different behaviours in purchasing of goods such as cultural artefacts and ethnic foods. Similarly, in any nation, there are different groups of people belonging to different religions, faiths and beliefs (Wright (2006). In Australia, world major religions such as Christianity, Muslim, and Hinduism are represented. There are also subdivisions or sects such as Christianity and Jewish within Christians and Sunnis and Shias within Muslims. Though religion plays a less significant role in determining the values, beliefs and customs of the Australians, the various subdivisions portray distinct purchasing behaviours. In most nations, people have a sense of regional identification mostly triggered by nations’ physical diversity and size and a wide range of geographic and climatic conditions. For instance, Australia is divided into northern and Southern regions (Wright (2006). The purchasing behaviours of people from the northern region are different from those of people from the southern region. Water heaters are used in Northern Australia but are rarely used in Southern Australia. Consumption behaviours exhibited by Australians living in rural areas are also different from those portrayed by Australians living in urban centres. Subdivisions within a culture can also be based on race. As mentioned earlier, there is a sizeable group of people from different racial backgrounds that have migrated into Australia from non-English Speaking nations. Though segmentation of population based on race discouraged in Australia, it cannot be ignored that people from the different races show distinct purchasing behaviours. As well, the main culture within a nation or a society is subdivided on the basis of age (Pride & Ferrell, 2011). People of different ages or family life cycles portray different consumption behaviours. The distinct subcultures on the basis of age are generation Y (born between 1980 and 1994), generation X (born between 1965 and 1979), Baby Boomers (aged between 45 and 65 years) and elders (aged above 65 years). Each of these groups has distinct preferences for products and services. Gender can also be used as a subculture within the main culture. Numerous studies have shown that men are different from women in numerous ways, including in their consumption behaviours (Pride & Ferrell, 2011). According to Paracha (2012), Coca-Cola tries to stress different values in order to appeal to different sub-cultures. This company stresses values such as happiness, friendship, family, being cool and exercise. For this reason, coke appeals to a range of people from different customer segments. For instance, this company has developed diet soft drinks that are targeted at people of ages between 25 and 39 years. PowerAde sports water is targeted at consumers who do sports. Winnie the Pooh sipper cap Juice Drink is meant for children between 5 and 12 years. Generally, Coca-Cola has innovated more than 100 brands to fulfill the needs of different subcultures Paracha (2012). Conclusion In conclusion, it is vital for marketers to understand the external factors that affect consumers’ decision-making process, in order to formulate effective response strategies. These factors determine what a consumer will purchase and the amount he or she will purchase. As such, they play a great role in enhancing organizational success. As mentioned in this paper, the major external factors influencing consumption behaviours of coke consumers include reference groups, family, culture and sub-culture. Coca-Cola Company has done extensive research to determine these factors and has developed effective response strategies that have played a great role in enhancing success of this company. 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