Understanding Consumer Behaviour - Essay Example

? xxxxx No. 12345 BUSINESS: CONSUMER BEHAVIOR ABC Xxxxx xxxx College Department of Business Management 11 December, 2011 Table of Contents Contents Page No 1. Consumer Behaviour 03 2. Literature Review 03 3. Consumer Involvement Theory 05 3.1 High Involvement / Rational 06 3.2 High Involvement / Emotional 06 3.3 Low Involvement / Rational 06 3.4 Low Involvement / Emotional 07 4. Hierarchy-of-Effects Model (HEM) 08 4.1 Awareness 08 4.2 Knowledge 08 4.3 Liking 09 4.4 Preference 09 4.5 Conviction 10 4.6 Purchase 10 4.7 HEM in Coca Cola Marketing Communication and Promotion 10 5. Theory of Reasoned Action and Theory of Planned Behaviour 11 6. Consumer Decision Making Process 12 7. Production, Pricing, and Distribution Activities in Coca Cola 14 7.1 Production 14 7.2 Distribution 15 7.3 Pricing 15 8. Coca Cola and Consumer Behavior 16 Bibliography 19 1. Consumer Behaviour: Introduction Consumer behavior is the study of individuals, oragnizations, and their procedures with respect to the selection, security, and utilization of products, services, ideas or experiences to put a positive impression on the satisfaction and confidence level of consumer or society. Primarily there are four areas of application of consumer behavior. The first and foremost is marketing strategy and thats why consumer behavior is also termed as psychology of marketing. Obviously the main purpose behind any marketing strategy is to formulate and execute a better marketing campaign. For instance, the media schedule snake or fries advertisements in later afternoon because it considers that consumers are more food receptive during that period of day. It is natutal that each new product takes it time to gain popularity amongst consumers, therefore, the introductory companies need to be finacially strong to stay afloat untill their product achieves commercial dominance. Further, it is necessary to make the initial customers plaese because they will actually play the most important role in launching a succeessful campaign. The second applicarion is public policy i.e. to gather the data of ceneral trends of the target market and the atracts thge attiyudes of consumers towrds some specific brands or products. 2. Literature Review There are number of words which are interchangeably used such as buyers, customers, or consumers. Wayne and Deborah (2009) define the term consumer behavior as “Consumer behavior reflects the totality of consumer’s decisions with respect to acquisition, consumption, and disposition of goods, services, activities, experiences, people, and ideas by (human) decision-making units.” (Wayne & Deborah, 2009, p. 3) The main aim of literature review is to provide an inclusive description about different models and theories of consumer behavior in context of generating positive attitudes related to some particular products or brands. Models and theories are selected which have a core relationship between consumer behavior and marketing strategies. The other main area of literature review is to specifically review the effects of celebrities on some certain products. One way of analyzing the markets is to review and examine the projected goals through customer satisfaction, communication, and anticipation. It is quite normal that marketers conduct public surveys to judge the consumer behavior and to find out their primary target market. By doing so, they understand the needs of their customers better than competitors and therefore implement their strategic marketing more effectively (Jobber, 2001 and Peter & Olson, 2008). Marketing researchers assert that attracting the new customers to a particular product is much cost effective and harder as compared to retain the existing customers, therefore organizations apply ‘Below The Line (BLT)’promotion model to keep the existing customers loyal with the organizations and to attract the potential customers through some comprehensive advertising campaign and marketing plan (Lanman, 2003). There are certain types of industries which primarily are influenced by cultures and social norms e.g. marketing of fashion items and styles. Marketers relevant to such business field use celebrity endorsements which are considered as a direct expression to the customers (Bohdanowicz & Clamp, 1994). The mind setting and decision making process in purchasing of an item is complex because consumer behavior is always dynamic and influenced by several financial, social, and cultural factors (Solomon, 2006). Since consumers buy some product either for their own use or to give it to someone for use or as a gift, therefore, the first step in purchasing of an item is need recognition with respect to social or emotional perspective of the consumer. This need recognition depends on the significance of the problem and the disparity between the present and desired situation. In case the gravity of recognition is quite high, then few more stages pass through prior to make any decision e.g. searching of information and its evaluation process (Foxall, Goldsmith & Brown, 1998). As products are generally constrained with social status, values, and self-esteem, therefore these changing forces not only evaluate the gravity of problem but also unveil the individual’s personality (Entwistle, 2000). The evaluation process involves the level of involvement of the consumer specifically with respect to price as it is considered as the primary indictor of involvement level because this is the area where consumers spend their time more than any other evaluation. The consumer behavior is highly influenced on the quality and services either close to his/her expectations or not (Schiffman & Kanuk, 2010). Consumers, being part of the same society, get inspirations from different types of people and it is quite significant for marketers to have a good idea about those people and their roles who influence the decision making process of their consumers. By knowing about these people, a much better strategy can be formulated aiming at those people as well (Kotler et al, 1998). Initiator is the first person who thinks or proposes of buying a particular product or service. Influencer is the man keeping an aggregative weight in making the final verdict. Decider is ultimately the final authority declaring decisions on purchase of an item or parts of it. Buyer carries out the actual purchase while user is actually the consumer of that product or service. Marketers use several theories and models to attract the consumers and change their behavior by influencing positive attitudes towards different brands. Some of these theories are discussed below. 3. Consumer Involvement Theory This theory basically deals with the understanding of psychology and behavior of primary target market and elaborates how much time, collaboration, and resources are used in the purchasing process (Creighton, 1981). The theory is combined with the comparison between rational and emotional motivations and describes the categories as reason vs. impulse, logic vs. desire, and passion vs. prudence. Consumers have different cognitive approaches towards products. 3.1 High Involvement / Rational Expensive business purchases are involved in this category e.g. new infrastructure, technological advancements, new establishments of offices and lease as well as the organizational insurance plans. As far as consumer is concerned, this category tends to be connected with high cost. It includes purchase of products or services, purchase of home or car, or purchase of electronic accessories etc. 3.2 High Involvement / Emotional Business activities or purchases such as advertising, office design, and the hiring of certain employees fall in this category. For consumer point of view this category pertains to routine life activities like plans on holiday, weddings, jewelry and purchase of perfumes etc. Up to some extent purchase of car or home can also be considered as an example of this category. However, all activities depend on consumer’s bargaining power, financial background and strength, and the cultural values. 3.3 Low Involvement / Rational This category of Consumer Involvement Theory includes those things which consumers buy without specific intention and thought. A social dinning out at McDonalds is an example of it. Similarly consumers’ purchase of medicine also falls in this category. The major challenge to the marketers is to change the old habits of consumers and get them with new products. A list of promotional steps is made like “try it once”. This kind of slogan compels the consumers to have the item just for a check and once they do it, another strategy is applied to ensure their arrival back. Coca Cola uses broachers and coupons for this kind of marketing and by doing so today it has become a word of mouth at global scale. 3.4 Low Involvement / Emotional Here purchase of an item or service is just based on some short living emotions and consumers do not intend to think a lot on it. The purchase of DVDs, toffees, a cup of coffee, a birthday gift or card, and an entertaining magazine etc are some examples of this category. The challenge for marketers is to communicate their message to the consumers to make them consistent with respect to their products. Coca Cola uses celebrities (sportsmen or actors) who earn instant reception and recognition to the product. The use of music has also shown positive results to Coca Cola as it keeps the audience and users emotional. Consumer Involvement Examples Rational Emotional High Involvement Financial services or a car for a utilitarian car purchase Jeweler, travel, or a car for an auto-enthusiast Low Involvement Routine tasks e.g. purchase of toothpaste or cola Impulse routine purchases e.g. cinema tickets or candy (Source: Laurent & Kapferer, 1985) 4. Hierarchy-of-Effects Model (HEM) There are numbers of theories and models which marketers apply to motivate the consumers towards the positive attitudes of their brands, however, the Hierarchy-of-Effect Model is considered as the predominant model of advertising because it elaborates the goals of advertising without any ambiguity. This model presents six steps which a consumer takes while purchasing a product or service. These steps include awareness, knowledge, liking, preference, conviction, and purchase (Clow & Baack, 2007). Advertising theories and their applications cannot persuade an immediate behavioral response amongst the target market; however, consumer behavior can be altered and convinced through some series of mental effects. The triangle shown on next page provides a clear concept of this model. 4.1 Awareness It is the first element of Hierarchy-of-Effect Model which states that if consumer market does not know about a specific product then marketers are required to create awareness amongst its target consumers through repeated simple messages. This repeated advertising create name awareness to the consumer, however, the process is not so simple. Capturing of consumers attention is even not enough to make them feel about the brand recognition. Coca Cola uses the word ‘Coke’ to enhance the consumers’ awareness. 4.2 Knowledge It is quite possible that consumers might have good awareness of the product, but have no good idea about the brand. Here comes the application of knowledge. Marketers advertise the brands with specific information of the product like its benefits to health, its competitive edge over its rivalries, and information about the appearance of the product. 4.3 Liking If consumer have awareness and sufficient knowledge about the product, even then it is not necessary that the target market will like the particular item. In case marketers find some less reception from consumers’ side, then before convincing the audience, it will be obligatory to resolve the reservations of the consumers regarding the product. Coca Cola gained a negative response from target markets with respect to appearance of the coke bottle. Later on, the authorities work on it and the existing shape of the bottle got wide spread popularity. 4.4 Preference Since all marketers face the challenges from their competitors in their respective industry, therefore, a successful competitor wishes that his/her product may get preference over the other existing products. Marketers and manufacturers can promote their brands by improving the standard, quality, look, and distribution of the product. Pepsi is the leading rivalry of Coca Cola and in order to get the dominance over the target markets, Coca Cola launches the campaigns to know the preferences of the consumers through public surveys or customers’ feedback programs. 4.5 Conviction Consumers’ preference of certain product is good for a marketer but essentially not adequate as they wish to achieve the confidence of target audience at optimum level. The manufacturers’ role is more demanding here to maintain the quality of stuff as per the demand of target market and thus for gain a permanent conviction from consumers. 4.6 Purchase It is not away from normal that despite of achieving all above five steps of Hierarcchy-of-Effects Models, a marketer may not observe projected sale. Its target audience may still wait for more information or any other new brand to purchase. Here the role of advertiser becomes very much important to clarify the pros and cons of the product and convince the consumers to buy it right now. 4.7 HEM in Coca Cola Marketing Communication and Promotion The biggest achievement of coca cola is that its target markets consist of all people of all the nations. “Building cross-cultural relationships, in particular, is why we are the largest beverage company in the world…and why nearly 80 percent of our revenue and profits come from outside North America” (Kent, 2007). Coke’s good and professional business ethics provide it a competitive edge in handling its business against other companies of the same industry. To keep its customers updated with respect to its brands, Coca Cola uses Hierarchy-of Effects Model for its advertising. For example numbers of promotional phrases are advertised through its websites like “The choice is yours…” and “Satisfying your needs” (http://www.cocacolacompany.com). Coke also offer separate links to its consumers to get awareness about the taste, sweeteners, and hydration. Additionally Coca Cola applies other techniques to promote its products like painted buildings, billboards, songs, ads on TV and radio, and seminars. Of course these advertising and promotional models change the purchasing trends and consumer behavior of target markets. In order to enhance the consumer knowledge, awareness and conviction, Coca Cola offers online Coke Solutions to the retailers’ interest e.g. crew program, better beverage marketing, innovations and insights. 5. Theory of Reasoned Action (TRA) and Theory of Planned Behaviour (TPB) This theory was originally created by Martin Fishbein and Icek Ajzen in 1967 and then further research was done during 1970s. Initially the theorists intended to work on theory of attitude but later on the research took them to develop the theory of attitude and behaviour. TRA assumed that consumer behaviour essentially develops under the control of individual and the implications of their acts finally decide either to purchase something or not. It means the individuals’ intentions have a strong relationship with behaviours. TRA states that behaviour is actually the outcome of three functions i.e. (1) attitude towards a particular action or aspect, (2) the subjective norms towards that action, (3) behavioural intentions. Thus TRA clarifies that consumers’ behavioural intentions are based on the individual’s attitude and subjective norms i.e. BI = A + SN. Fishbein and Ajzek found that behaviour is predicted without considering the attitude and norms equally. Miller (2005) writes: "Indeed, depending on the individual and the situation, these factors might be very different effects on behavioural intention; thus a weight is associated with each of these factors in the predictive formula of the theory. For example, you might be the kind of person who cares little for what others think. If this is the case, then the subjective norms would carry little weight in predicting your behaviour." (Miller, 2005, p. 127) Theory of Planned Behavior is the researched and revised version of TRA which is considered as one of the most predictive persuasion theories. The theory states that the combine effects of individual’ attitude along with subjective norms and perceived behavioral control portraits the individual’s behavioral intentions and behaviors (Sniehotta, 2009). 6. Consumer Decision Making Process The main aim of any kind of advertising is to convince the consumers to make the final decision regarding the purchase of some specific brand, item or service. Apparently it seems a simple process but in reality the consumer decision making process is very complex and involves certain stages to reach on some concrete decision. The consumers want to clarify the need recognition on top priority and they come to know it through the search of relevant information. Then they have to analyze several options with respect to their need recognition and after that purchase the special product. The last step is the reaction of consumers after making the final deal of purchase. Marketing trends help the consumers to understand the need recognitions of a particular product by comparing its current status and the desired status. Information search involve internal and external research. In the context of consumer behavior, the internal research include the personal experiences or knowledge of the individual with respect to some specific problem while external research is done when internal research is inadequate in terms of past experience and knowledge or when the cost of gathering the information is reduced. Previous experience, interests, social visibility, and situations are the factors which influence the consumers’ involvement. Cognitive Dissonance is those psychological discomforts which are created by the inconsistencies of an individual’s belief, attitude, and actions. It varies as depending upon the intensity of the issue and gravity of inconsistency. External Research Situational Time, information, availability, quantity, and format Consumer Knowledge, involvement, belief and attitudes, demographics, Product Differentiation, perceived risk, price, and stability Retail Distance and differentiation 7. Production, Pricing, and Distribution Activities in Coca Cola 7.1 Production It is an approach utilized by Coca Cola to provide both of frosty beverages which might be of similar value to buyers at anytime. Moreover, these products are associated with top quality so as to take on some others in the particular international industry. Coca Cola is the world’s leading soft drink company and since it is inexpensive and convenient item, therefore besides grocery stores, picnic spots, hotels, and resorts, it is also available on gas stations, convenient stores, schools, theme parks, airports, railway stations, office canteens and small shops etc (Lamb, Hair, & McDaniel, 2008). The packaging of red and white Coca Cola product is the most recognized product of the company and its packaging involves three important roles. (a) Containing and preserving the product (b) Advertising of the product (c) Convenient use of the product Coca Cola has adopted the consumer involvement theory is its production strategy and after having a huge dominance over the target market, it has gained a high level conviction from its customers over the entire globe. Production is the technique of Coca Cola to generate a wide variety of items to ensure that everybody of United States, other countries, as well as of any age group could possibly ingest them all. Furthermore, beverages are manufactured in numerous styles to enable the consumer behavior to end up being paid for by every individual in the world irrespective of whether affluent or poor (Paley, 2006). Although, Coca Cola distributes its items to everyone of its buyers in the entire world, yet, there are a few beverages which concentrate on specific consumer involvement theory. For example, the eating products objectively focus on senior citizens who are associated with age group of 35 to 39 years. Similarly, beverages related to sports activities, focus on the individuals who undergo lots of exercise and training while the soft drinks generally spots the youngsters the ages associated with 5 to 12 years (Zurkuhlen & Meeker, 1987). 7.2 Distribution The distribution strategies utilized by Coca Cola have given it plenty of revenue and leading standings in the global economy. Primarily, the Coca Cola Organization operates through its sub-offices in around 250 countries in the entire world with more than 450 brands and 2800 beverages. Furthermore, in all these countries there are processing plants which smoothly execute the job of product circulation (Zurkuhlen & Meeker, 1987). The packaging and supply of these products is done with respect to the consumer behavior of a particular country or region. Coca Cola is dependent on bottle manufacture companies and retailers. Although the company has no control on distribution channel, however, it communicates its clear-cut policy guidelines to all the entities of its distribution channel. 7.3 Pricing Status quo is the root of pricing strategy of Coca Cola and this strategy tends to be the most effective in the beverage market (Pride & Ferrell, 2008). The reason is sure i.e. its competitiveness structured pricing strategy has enabled it to stiffly contend with some other refreshment providing corporations. For Coca Cola, the basic requirement in pricing is to stay in competition with its rivalries i.e. pricing of meeting the competition. Prices are generally set by retailers on local scale depending up on the growth rate of the brand. Grocery and departmental stores set mutual contracts to sale the Coke and Pepsi for a particular time period. Retailers apply Theory of Planned Behavior to give a specific direction to consumer behavior with respect to a particular brand over a specific timeframe. 8. Coca Cola and Consumer Behavior According to Zyman “changing the consumer behavior is the factor around that which was earlier than” (Zyman, 2007). Researches provide four fundamental definitions of change in consumer behavior. According to Nickols (2006), management of buyer changing is a process of handling the changes, a discipline of skilled exercises, some sort of understanding along with facts as well as a command system. He explained that the principal aim of management of consumer behavior is always to effectively putting their attitudes into actions. Additionally the modifications being dealt are dependent on the management in the corporation. Coca Cola is probably the most famous organizations on the planet. Over the years, The Coca-Cola Corporation surely could withstand the hindrances which took place and through advertising models like TRA, TPB, and other applications, the organization applied change administration as effectively as possible to hold up against the challenges. Alterations in consumer behaviors are a result of several different models which are influenced by the external atmosphere, internal alterations and the hands-on response to probable risks and complications (Bokaie, 2007). In terms of external environment during the previous generations, the Coca-Cola Company has experienced numerous adjustments. In this context, it has modified the administration of the business many times. The most effective example is the era of World War II. The corporation retained the rank and could go into fresh market segments simultaneously. Rather than lying-low as a result of battle, the business evolved into much more aggressive by means of delivering free of charge beverages for the US defense forces during the World War II. By this, the organization struck two birds with a single stone. First, because of the carbonated refreshments dispatched by Coca Cola, it grew to become a loyal sign. Secondly, the organization acquired benefits of the circumstance and founded the item in newly-occupied nations by the coalition forces. Due to this, Coca Cola organized the consumer response more effectively on global scale and thus improving the path to its post-war business expansion. Coca Cola is a soft drink which is widely used to minimize the thirst. Since thirst can be minimized by drinking a glass of water as well, therefore, the consumption of Coke can be considered as a want instead of need. however the consumption will be based on their cultural and social values. Coca Cola has used number of strategies over the years to maximize its growth and to maintain its leading standing in beverage industry of the world (Bokaie, 2007). In order to manage its business with respect to consumer behavior, some of its leading actions are highlighted. Coca Cola attracted the target market successfully through its production strategies by providing both frosty and cozy beverages which might be of similar value to consumers at anytime. Since the products are of highest quality, therefore the company enjoys the preference and conviction aspects of consumer behavior. The advertising plan of Coca Cola is influenced by the application of Hierarchy-of-Effects Model as beverages are manufactured in numerous styles to enable the consumer behavior and attitudes to end up being paid by every individual in the world irrespective of whether affluent or poor (Paley, 2006). Coca Cola enterprise pricing tends to be the most effective in the beverage market. 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