Model Of Buyer Behavior In Flooring Industry - Essay Example

Model Of Buyer Behavior In Flooring Industry Table of Contents Table of Contents 1 Abstract 2 Introduction: Flooring Market in UK 2 PESTL Analysis 3 Carpet Industry in Denmark 7 Carpet Suppliers around the world 8 The Buying Process 9 The Buying Centre: Involved People in the process 14 The Initial and Final Decision Makers 15 References are Important 16 Marketing Plan 17 Conclusion 18 Reference 20 Abstract Flooring industry is one of the most flourishing businesses in many nations. The study deals with the concept of purchase decisions making in relation to the flooring industry of United Kingdom. The carpet industry constitutes the bulk of the flooring industry. The major producers and importers of carpets are Iran, Pakistan and Afghanistan. The study attempts to analyse the flooring market in United Kingdom, with special emphasis on the carpet industry. It tries to identify the sources from where the United Kingdom based hotel chains import carpet. The carpet market of Denmark has been analysed in this regard. During the course of study, various models would be applied so as to have a better understanding of the topic. Market environment analysis takes into account the political, economic, social, technological and legal factors. This would help to generate a better understanding of the markets in United Kingdom. A marketing plan has also been developed for the Danish carpet manufacturers to help them capture a good share of the attractive flooring market in the United Kingdom. The marketing plan would contain strategies that would help the Denmark based manufacturers to attain sustainable competitive advantage. Introduction: Flooring Market in UK Flooring market is one of the most attractive businesses across the world. United Kingdom is one of the major markets of the flooring industry. A recent research conducted by AMA reveals that the flooring industry market in United Kingdom was valued at approximately 2.1 billion dollars. The report also says that the market is expected to grow at a stupendous rate in near future. Major chunk of the flooring business in United Kingdom is concentrated around the carpet industry which comprises about 60% of the total carpet industry market. The report also says that the two major importing nations are Holland and Belgium. Independent stores constitute the market leaders for the carpet industry with their percentage of the market share being pegged at 32 percent (Goliath, 2007). The global carpet market is mainly spread across five nations of the globe. These nations are USA, United Kingdom, Germany, Italy and the United Arab Emirates. The total sale in the global carpet industry is pegged at an approximate 1.4 billion US Dollars (Source: Asian Development Bank, 2008, p.9). PESTL Analysis Political Factors United Kingdom includes Great Britain which is composed of England, Wales, Scotland and Northern Ireland. The nation has a constitutional monarchical style of governance which falls under the reign of the commonwealth. The queen is the ultimate leader of the nation. The monarchy of the nation is hereditary in nature. The nation follows a democratic form of electing the government. The administrative machinery of the nation is divided into executive, legislative and judicial branches. The nation has a multi-party system. United Kingdom has an unwritten constitution which is partly based on the common laws derived from the Romans as well as the common law practices (CIA, 2010). Economic Factors United Kingdom is one of the leading economies of the world enjoying an economy of over a trillion dollars. The GDP of the nation in terms of the purchasing power parity is about 2.128 trillion US Dollars, the per-capita GDP of the nation was about 34800 US Dollars till the year 2009. The services sector contributes a major part to the nation’s economy with a percentage contribution of seventy five percent. The agriculture and industry sectors contribute about 1.2% and 23.8% respectively. The nation has a talented labour pool comprising of an approximate 31.37 million in the year 2009. The unemployment rate of the country is about 7.6 % in the year 2009. The main industries of the country are power, railroads, ship building, food processing, chemicals, coal petroleum and other consumer goods (CIA, 2010). Social Factors United Kingdom has a population of approximately 61,113,205 people on July 2009. The median age of the nation’s population is about 39.8 years. The nation has a population growth rate of approximately 0.279 percent which is one of the lowest in the world. The nation is highly urbanised comprising of around ninety percent of the total population in the year 2008. The rate of urbanization has been pegged at 0.5 percent (2005-2010). English is the main language of the country which is spoken by a majority of its population (CIA, 2010). Technological Factors United Kingdom is considered to be one of the most advanced nations in terms of technology. The industrial revolution began in this nation. The nation also houses famous academic institutions like Oxford and Cambridge Universities. The nation has been the pioneer of many important scientific discoveries. The nation is known to spend about 5.6 percent of its total GDP on education (CIA, 2010). The presence of a talented pool of resources assumes significance for any firm because human resources constitute the most important resources of the company or organization. United Kingdom has a vast pool of technologically talented workforce produced by its leading universities. The nation also attracts considerable pool of talent from many other nations. Legal Factors The legal system of the nation is based on the traditions of the common law. These laws are influenced by ancient Roman and other continental laws. The Supreme Court has the appellate jurisdiction over the nation. This court was established in the year 2009. The other courts of the nation are “court of appeal”, “High Court of Justice”, “Crown Courts” (CIA, 2010). The Carpet Industry The carpet industry is mostly export oriented, with majority of the carpet manufacturing units located in India and Pakistan. Carpets used to be an important item in palaces, and were considered to be a symbol of wealth. However, now-a-days the use of carpet has been narrowed down to hotels, office spaces etc. The advent of machine made carpets has further intensified the competition. Organizations like offices and hotels are increasingly using machine made carpets as they are more cost effective. This has posed a greater challenge for the traditional carpet manufacturers which are mostly concentrated in the unorganised sector. Most of the reputed hotels purchase carpets from Pakistan and Iran who dominate the global carpet industry. Some other nations which also import carpets are Denmark, China Afghanistan and India. The carpet industry in Pakistan and Iran is mostly concentrated in the unorganised sector. Despite the unorganised nature of the industry, the products of these nations are in high demand and are known all over the world for their aesthetic value. Figure 1: Top six carpet manufacturing nations (Source: Asian Development Bank, 2008, p.11) The figure above shows the top six carpet producing and exporting nations of the world. The global market is led by Iran which exports about 391 million dollars worth of carpet. The nation is closely followed by Pakistan which exports carpets worth about 246 million Dollars (Source: Asian Development Bank, 2008, p.11). The mechanization of the carpet industry has led to the decline of the traditional industry which is finding it difficult to compete with the mechanised variety of carpets. These carpets are cost effective which makes them highly competitive in the market. In order to compete with the mechanised variety of carpets, the traditional industries must focus on their quality aspect which forms their Unique Selling Proposition (Ali, n.d.). Efforts must be made to bring in professionalism in the industry. Cost effective measures must be adopted. This must be combined with the quality aspect of their product offering to gain sustainable competitive advantage in the market. Carpet Industry in Denmark Denmark is one of the major producers of machine made carpets in Europe. The carpet production industry in Denmark started in the year 1960. The country mainly produces carpets using mechanized tufting. The growth of this industry in Denmark was primarily based on the housing boom that occurred during that period. The industry soon developed into a major source of export revenue for the nation which started exporting machine made carpets to various countries. The use of highly mechanised methods of production gave it an edge over its competitors who were basically the traditional carpet weavers based in India and Pakistan. Denmark’s mechanised carpets started competing with the traditional carpet makers by the virtue of their cost effectiveness as compared to their peers who made hand weaved carpets that were more expensive. The machine made carpets gained popularity worldwide as they offered highly competitive prices (Christensen, 2004, p.8-9). The main reason for the success of this industry in Denmark could be attributed to the weak organizational structure of the industry in Pakistan and India which are the market leaders in the industry. In these nations the industries producing carpets are mostly concentrated around villages and are primarily incorporated as cottage industry which is mostly operated by family members. They still produce their products based on the traditional handmade technology which makes them expensive and inefficient. The carpet industry in Denmark on the other hand is a professionally run business which uses highly efficient technologies in production. This gives them an edge over their traditional rivals who are not advanced technologically. The carpets made in Denmark are highly cost efficient which give them a sustainable competitive advantage in the global market. Carpet Suppliers around the world The two major sources or suppliers of carpets are the traditional carpet manufacturers who sell handmade products and the companies that produce and sell mechanised or machine made carpets. The major difference between the two sets of suppliers lies in the cost of their products. The machine made goods have the competitive advantage of low cost as compared to the traditional handmade carpets which are available at a premium in the market. The traditional handmade carpets however have an edge over their machine made rivals in terms of the quality of their products. The traditional carpets are known for their aesthetic appeal which have been unmatched by the machine made carpets. The cost effective nature of the machine made goods have resulted in a downward growth rate of the traditional carpet makers across the globe. According to a study conducted by the Asian Development Bank, the global demand for the traditional carpet industry has declined by about 25 percent (Source: Asian Development Bank, 2008, p.12). The Buying Process Generally the purchasing process passes through five different stages in decision making to purchase a particular commodity. These include stages like need arousal, information search, evaluation behaviour, purchase decision, and post purchase feelings. The whole process of buying starts with ‘Need arousal’. First of all, the Danish manufacturer must identify the drive which can create a potential connection between the product, i.e. the carpets of the Danish manufacturer and the potential requirements of the UK hotels. The requirement level can fluctuate with time and is prompted by different cues. According to the ‘The stages of Buying’, the marketer can arrange the signals for the potential buyers so that the corporate buyers get attracted to the respective product. The Danish manufacturer can create certain enticement for the UK hotels or other industries that are looking for carpets for their flooring. This can be done by using proper advertisement and promotion tools. In this advertisement, the Danish manufacturer can highlight some of the unique properties of its carpets to lure the UK consumers. After the requirement arousal, the consumer becomes busy in gathering the required sources and information about the carpets. Two events can arise from such a situation. If the requirement is more intense, the customer will try to fetch more information about the product. This means that the buying organisations will be in the look out of key attributes of the carpet and will be checking out the outlets for the same. In the ‘heightened attention state’, the UK hotels can look more towards the TV ads and will look for the remarks made by the friends and associates. The Danish manufacturer must look at certain sources of information while doing marketing for the carpet industry. As in this stage the UK companies would be seeking information from the personal (family, friends etc), commercial sources (advertisements, salesman and dealers), public sources (consumer rating organisations, mass media) and through experiential sources through handling and examining the carpets (Tyagi & Kumar, 2004, p.55-60). The Danish manufacturer must look at each of these sources. In this case, they must focus on the commercial sources. Advertising on the print and digital media would be of great help. However, as the company is outside UK, it must pay extra attention to make the required information available. Direct sales would be the most effective way in this case. The salesmen can offer some free samples to the companies; so that the companies can experience the unique, differentiating and attractive attributes of the carpets. After gathering the information the corporate buyers will evaluate the alternatives available. This is the time, when the Danish manufacturer should flaunt the differentiating factors in the carpets. After the evaluation of product attributes, brand image, quality, price, the buyers will take the decisions of buying. While making the purchase decision, the consumer attaches certain values to the specific products. After purchasing the products, the buyer will feel some level of satisfaction of dissatisfaction regarding the product (Wilson et. al, 2002, p.211). Further on, this satisfaction level will lead to the re-purchase of the specific brand of products. So, at the end of the buying stage, it is the quality of the carpets and the relationship with the buying centre, which matters the most. These two factors will push the corporate buyers to opt for the same products in future. The number of organisational buying models, which claim to describe the process through which an organisation acquires products and services, is quite large. Businesses to business marketers have recognised that at each step of buying process, the business buyers have different requirements and different groups can be involved within the organisation. Business marketers try to foresee which step organisational buyers are in and offer them the required information and support for the specific stage of decisions making. According to a ‘Buy Grid model’, rational organisational decision making process has two parts: the buy phase model and buy class. The stages in the buy phase model are quite similar to that in the buying stages, discussed above. Starting off with an identification of the need, the industrial buyer goes through many processes, such as determination of requirement, specific description of requirement, search for potential sources, examination of sources, selection of source, order routine established and evaluation of the performance feedback (Baker, 2003, p.153-154). Figure 2: Buy Grid Model (Source: Baker, 2003, p.153) A second element, the buy-class component was added to the buy-phase which resulted in the creation of grid. Buy-class refers to the type of buying decision, which is based on the buyers’ experience with a specific product or service. Whatever steps have been mentioned above are used in the case of ‘new buying’ decisions of the products or services that have never been acquired before. The ‘straight re-buying’ process is an automated one with three steps in it: identification of requirement, selection of source and feedback on the same. If an organisation is considering a re-buy and wants to shop around, the organisation would take most of the steps into consideration (Dwyer & Fanner, 2008,p.71). This is called ‘modified re-buying’. As the Danish company is totally new to the UK market, ‘new buy’ and ‘modified re-buy’ are the two classes where they must exhibit its products’ positive sides to attract the UK hotels and other corporate carpet purchasers. These are the two classes where the company has the opportunity to get its place in the UK markets. In the year 1973, Sheth has proposed another complex model, which is specifically about the industrial buyers’ behaviour. Quite a large number of variable are integrated in this model. The following figure is an outline of Sheth’s model of ‘Industrial Buyer Behaviour’. Figure 3: An Integrated Model of Industrial Buying Behaviour (Source: Sheth, 1973, p.51) The above model takes into account a number of variables. However, the entire variable holds relevance while making any purchase-decision. There are certain conditions in the model, which can be simplified depending upon the situation. If all these models are critically examined, one will notice that most of them have taken into consideration certain broad factors which are comprehended as per the model specifications. The model starts with the emergence of expectations in the users. Now there can be certain other factors which are influencing these expectations. As the Danish company is quite new in the UK market and they are mainly eying for the UK hotels, some relevant factors, may be the lifestyle of the users, the status of the hotel, information sources such as exhibition and shows, advertisements, word- of –mouth etc seem to be quite relevant. The buying process will then start rolling on. Product specific factors like time pressure, inherent risk and company specific factors like the size of the company, orientation and centralisation within the company can affect the industrial buying process. For instance, if the UK hotels are contemplating a buying decision, the preferred price and quality of the required carpets would vary depending on the size and status of the hotel. The decision is supposed to be joint decision in an organisation environment; so there is a possibility of conflicts which will lead to persuasion, bargaining and problem solving. The industrial buyer will then choose the supplier or the brand of choice. There can be certain situational factors affecting the choice of suppliers (Sheth, 1973, p.50-55). If the Danish carpet manufacturer is able to convince the UK industrial buyers, they would buy the carpets from them. However, satisfaction of the same would trigger the re-buying of the products. The Buying Centre: Involved People in the process The buying centre is comprised of people who are directly or indirectly involved in the purchasing process. The initiator, user, buyer, influencer, decider and gatekeeper have also been added in the process. The initiator is a person who first suggests the idea of buying the particular product. In the UK hotels, the initiator can be somebody from the purchase department. The deciders are the people who would be taking the final decision. The influencers are the people who would put their inputs into the purchase decision. People who control the flow of information and access to individuals within an organisation are the ‘gatekeepers’ in the process. The purchasing agent is the person, who actually places the purchase order. The controller oversees the budget for the respective purchase; and finally ‘users’ are the ones who actually use the product or service (Folsom & Boulware, 2004, p.52). The Danish carpet manufacturer must try to maintain a strong relationship with the buying centre. In this case, the company must consider each of the people involved in the process. However, in this case, the gatekeepers are of great significance as they control the information flow within the organisation. Apart from that, the ‘gatekeepers’ are the people with whom a new company like the caper manufacturer can get access to the individuals in it. Getting access to concerned individuals within a company is of great significance for the suppliers. So, the Danish carpet manufacturers must strive to create a good relationship with the buying centre. The Initial and Final Decision Makers The major decisions regarding the purchase and choice of product and supplier is made by the purchase department in majority of the hotels based in the United Kingdom. This department is composed of an entire team which is headed by the purchase manager. Quality and price are perhaps the most important criteria that are taken into consideration before making a purchase decision. Word of mouth communication is very important in this type of process. Moreover the relationship with the suppliers also plays a key role in the decision. The main choice of carpets occurs between the traditional carpet weavers and the mechanised carpet manufacturers. Traditional carpets are considered to be superior in quality but high in prices. The reverse is the case with the machine made carpets. The use of environment friendly materials also plays a key role in the purchase decision of carpets. The final purchase decision is mostly taken up by the purchase manager who evaluates all the possible options available to him. References are Important In each of the above mentioned models, there are stages when the Danish company can create sales opportunities. In each of the cases, reference can be very influential. At the stage of ‘need arousal’ a reference can create the requirement. The fact is very much visible in the Sheth’s model of ‘Industrial Buying Behaviour’. There are different information sources which can trigger the emergence of the requirements within the users. Reference is one significant source of information for the buyers. UK hotels can get the references from any of their employees who were working in Danish hotels earlier or from dealers. Word of mouth is one communication tool which is very popular in marketing. This is also a kind of offering reference to other individuals. Talking about the next stage, when the corporate would be moving for the information gathering, the industrial buyer would surely look for references. After in each of the stages of evaluating the alternatives and deciding on a particular supplier, the reference can create advantages for the Danish company. Reference attaches considerable value to the product. So while evaluation process is going on, the Danish company can fetch advantage over its competitors by having more referrals. Getting recommended by individuals involved in the buying centre will surely bring in success for the carpet manufacturer. Marketing Plan From the above discussion, an effort has been made to put forward a marketing plan for the Danish carpet manufacturer. In this case, two comprehensive models have been considered to develop the plan. However, the plan will take each of the stages into consideration. According to the Buy Grid model, as the Danish company is new to the UK market, the consideration will include the case of ‘new buy’ and ‘modified re-buy’. The first stage is the identification of requirement, which can arise from the need of the users. However, the need arousal can be triggered by many ways. In this case, references, attractive promotional and advertisement activities can trigger the requirement process. In this stage, aesthetic appeal and positive attributes of the carpets can create requirements in the hotels with higher life style. Offering a discounted price for a limited period can also instigate the requirements within the carpet users. So, the Danish manufacturer can offer its carpets at a discounted price to the UK hotels and hotel chains. While the UK hotels would be searching for the brands and evaluating them on different attributes, it is very much important that the hotels are aware of the Danish brand as well as about the positive and differentiating attributes of the carpets over their competitors. Intense promotion and advertising would be required to attract the potential consumers. Direct selling, word of mouth, digital and print media can be used for the same. The company must try to gather as much recommendations as possible for its products. Even after sales, the Danish manufacturer must give the UK hotels a great experience regarding the product and service, so that while re-buying they can only think of the Danish brand. While looking at the buying centre concept, it has been noticed that there can be certain people involved in the process. The Danish carpet manufacturer must take into consideration each of these participants. In this case, the house keeping department can be the initiator of the purchase process. So, it is very important to influence and convince them to purchase the products of the Danish manufacturer. Apart from that, the company must attract the influencer, final decision makers towards their products. However, the purchase agent and the controller would be looking at the costs incurred in the purchase. So, it would not be wrong to say that they would be looking forward to get a great value at affordable price. If the Danish manufacturer wants to achieve a position in the UK market, they must offer quality carpets at affordable prices. It is very much significant to maintain a good relationship with the buying centre, so that the sales and re-sales can be made. The company must keep the product attributes and prices as per the requirements of the hotels. Some hotels may look for products with low prices, while some other may look for stylish products and not bother about the price. In each of the cases, the manufacturer must market their products by showing off the required attributes. Apart from that, the company must have a strong distribution channel to sell off the products. Summarising the above discussion, the Danish manufacturer must take all the above mentioned models and marketing mix components while trying to achieve a strong ground in the UK market. Conclusion Floor designing is a very important area for hotels and other related business houses. Carpets constitute the bulk of this industry. Carpets are largely available in two formats. The first category consists of producers who produce handmade carpets which are mainly based in Iran, Afghanistan and Pakistan. The second category consists of carpet manufacturers who produce machine made carpets. Denmark is one of the major exporting nations in this category. The study shows that in order to gain competitive advantage, the Danish carpet industry must capitalise on their strengths which lie in their cost effectiveness and environment friendly measures of production. Carpet purchase is one area which is heavily dependent on word of mouth communication. Hence efforts must be made by the Danish manufacturers to ensure that the customers are highly satisfied. They should try to maintain a good relationship with the purchase department of hotels which are the ultimate decision making body with regards to the purchase of carpets. Efforts must be made to ensure that all grievances are fully settled so that the customer is always satisfied with the products and services of the firm. Effective after sales service is another area that helps in the generation of sustainable competitive advantage for the Danish carpet manufacturers and importers. It has also been found during the course of the study that the choice of a vendor depends on the rapport that it shares with the purchase manager. Hence efforts must be made to ensure a good relationship with the hotel management. This would help them gain sustainable competitive advantage in the global market. Reference Ali, I. No Date. Carpet Industry- An overview. [Online]. Available at: http://ezinearticles.com/?Carpet-Industry---An-Overview&id=3862133 [Accessed on October 05, 2010]. Asian Development Bank. 2008. ADB Rural Business Support Program (RBSP) Afghanistan Prefeasibility Study of Balkh Carpet Value Chain. [Pdf]. Available at: http://www.rootsofpeace.org/documents/Prefeasibility_Study_on_Balkh_Carpet_Value_Chain-Jan_2008.pdf. Baker, J., M. 2003. The Marketing Book. Butterworth-Heineman. Christensen, L,K. 2004. 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