Customer and Market Dynamics in the UK - Essay Example

and Market Dynamics Table of Contents and Market Dynamics Table of Contents 2 Introduction 4 Macro-environmental Factors 4 Political Factors 4 Economic Factors 5 Social Factors 5 Technological Factors 5 Legal Factors 6 Micro-environmental Factors 6 Key stakeholder groups and their impact on marketing decision making 7 Government 8 Suppliers 8 Employees 8 Consumers 9 Shareholders 9 Consumer Behaviour Theory 9 Values, Attitudes and Behaviours of Consumers in the Target Segment 9 Consumer learning Theories 10 Black Box Model of Consumer Buying Behaviour 11 Decision Making and Information Processing 12 Consumer Segmentation 13 Market Research 14 Market Research Objectives 14 Ethical Considerations in Market Research 14 The key sources of secondary data and a critical analysis of their suitability 15 Analysis of Research Techniques 15 Qualitative Research 15 Quantitative Research 16 Mixed Research Method 16 Cost Outline 16 Conclusion 17 References 19 Bibliography 20 Introduction The twenty first century has often been cited by critics as the age of consumers. In this period firms have started giving considerable importance to the demands of the consumers. Firms are launching products that are trying to cater the needs of different sections of the consumer markets that have diverse needs and wants. Aspects like variation of product mix are frequently being used by different organizations to understand the exact demands of the consumers and delivering their demands by producing tailor made products to the consumers. In order to achieve success for their product offering it is important to segment the market on the basis of consumer behaviour of the target market segments. According to Loudon consumer behaviour is defined as “the decision process and physical activity individuals engage in when evaluating, acquiring, using or disposing goods and services” (Loudon, 2001, p.5). Consumer behaviour is an important aspect in the buying behaviour of customers in the market as it determines the purchase decision of the consumer. The present study would concentrate upon the aspect of consumer buying behaviour towards launching a new product in the market. The product selected for study is a moisturiser which would be targeted at females falling in the age group of 18-34 years of age. The UK consumer market has been selected as the consumer market where the product would be launched. The study would cover an extensive analysis of the existing literature so as to prepare a set of plausible recommendations for the firm so as to successfully launch the product in the market. Macro-environmental Factors Political Factors UK or United Kingdom comprises of the Great Britain and Northern Ireland. UK is one of the most developed consumer market of the world. The nation has a constitutional monarchy and is headed by the queen who is closely aided by the Prime Minister and his council of ministers who are elected democratically. The political establishment is one of the most stable political establishments in the nation which ensures development of the nation in all aspects. The administrative wing of the government is divided into the legislative, executive and judiciary wings which control the administration of the nation. The nation firmly believes in the spirit of democracy and provides considerable fundamental rights to its citizens (CIA, 2011). Economic Factors UK is one of the most economically powerful nations of the world with GDP in terms of official exchange rates stand at $ 2.179 trillion as of 2009. The GDP figures in terms of purchasing power parity stand out at $ 34,200 as of 2009. The services sector has the highest contribution towards the GDP followed by industries and agriculture (CIA, 2011). Social Factors UK represents one of the best consumer markets of the world with population figures of 62,348,447 individuals as of July 2010. The median age of the population is 39.8 years which represents a good market for the product (moisturiser). Approximately 90 percent of the total population is urbanised which represents a good market for products like moisturisers (CIA, 2011). Technological Factors UK is the hub of the industrial revolution and has significant contributions towards the area of science and technology. The nation boasts of a large number of quality academic institutions like oxford and Cambridge which churn out numerous talents every year. The nation spends 5.6 percent of its GDP towards education as of 2009 (CIA, 2011). Legal Factors UK has a fairly well organised and impartial judiciary system. The legal framework of the nation is based on the common law tenets which has influences from the Romans and other constitutions of the world (CIA, 2011). Micro-environmental Factors Marketing channels play an important role in the success of any product in the market as it involves the process by which the product ultimately reaches the hands of the end customers. Marketing channels can be of different types. The first form of marketing channel is when the product is directly passed on from the producers to suppliers with no intermediaries. This form of marketing channel is considered suitable only when a firm has a highly developed and penetrative marketing channel in the consumer market. Another form of marketing channel would involve the presence of a retailer who would serve as an intermediary in between the producer and the consumer. This channel enhances the reach of the products particularly with the presence of supermarkets like Wal-Mart and TESCO which have a significant presence in UK. A third form of marketing channel would be characterised by the presence of a C & F agent and a distributor apart from the retailer in between the consumer and the manufacturer. This marketing channel is highly intensive and covers a wide area. The firm can appoint different distributors who have a better understanding of the market so as to ensure greater penetration of the product in the market (Vashisht, 2005, p.195-196). Finally there is also the option of online marketing channel where goods can be sold using the internet to reach out to the customers. This is a new channel for marketing and has registered good success with the consumers. This channel also serves to eliminate intermediaries who do not add value to the product but only reduce the profit margins of the firms. In the context of the product of the study (moisturisers) the firm producing the product must undertake a mix of the above stated distribution channels so as to have a better reach in the consumer market. Figure 1: Major brands in the cosmetic industry in UK (Source: Cosmetics Business, 2010) The figure above shows the major players in the cosmetic industry in UK. In order to make a successful product launch the firm must accordingly modify its product mix so as to grab a share of market from the competitors. An effective positioning strategy should be formulated which must be backed by effective promotions so as to influence the consumer behaviour of the individuals in the target market. Key stakeholder groups and their impact on marketing decision making The key stakeholders group comprises of Government, Suppliers, Employees, Shareholders and Consumers. These groups have a significant effect on the decision making of the organizations. The conceptual model states that there are two extreme ends with regards to the influence of stakeholders in the decision making of organizations. In the first case the stakeholders do not actively participate in the decision making of the consumers. In the second case the stakeholders have active participation in the decision making process of the organization (Spitzeck & Hansen, 2010, p.380). Most of the organizations have adopted a policy where stakeholders have a major influence in the decision making of organizations. The following areas would highlight how the different categories of stakeholders would affect the decision making of business organizations. Government Government policies play a major role in the decision making of business organizations. Government policies like monetary and economic policies have a major impact on the decision making of business organizations. In case of moisturisers this would include the list of permissible chemicals and other such items which are being produced by different agencies of the government. Suppliers Suppliers for moisturisers include vendors who provide goods like cream base, bottles, packaging materials etc. Since there are a large number of suppliers for moisturisers hence the bargaining power of suppliers is comparatively low. Moreover, the company can also resort to backward integration to produce and directly procure the raw materials so as to avoid intermediaries. Employees Employees are among the most important stakeholder groups. The success of a product or service largely depends upon the presence of talented and motivated employees in an organization. Considering the fact that UK has an extremely talented labour force hence by providing a proper working environment the firm an tap the advantages of employees towards the success of the product in the market. Consumers Consumers are perhaps the most import of all stakeholders as they are the ultimate group that determine the policy making of business organizations with regards to the product mix of a product. Consumer behaviour plays a major role in analysing the demands of the customers. The aspect of competition in the FMCG industry has enhanced the importance of consumers in the decision making process of organizations. Shareholders Shareholders are the actual owners of the firm and every firm should have a goal so as to formulate policies that tend to enhance the value proposition of the shareholders of the firm. Consumer Behaviour Theory Consumer behaviour is one of the key areas that are being considered by business organizations while framing the product mix pertaining to a product. Consumer behaviour is the crucial step that determines the acceptance of the product. Moreover in view of the tremendous competition prevailing in the market it has become inevitable for business organizations to effectively understand the consumer behaviour of customers so as to deliver and produce tailor made products for the consumers. Values, Attitudes and Behaviours of Consumers in the Target Segment The target customer segment consists of female consumers in the age group of 18-34 years of age. The buyer’s black box of this customer segment is largely influenced by aspects like product features, promotions, and most importantly influence of peer groups. This age group also has a mature mindset and most of them are financially self sufficient which makes it likely for them to critically analyse the product features before making a purchase decision. The marketers of the product must also pay considerable attention towards positioning and promotions as misinformation would result in confused positioning which may hamper the sales of the product in the market. Promotional tools like free trials and live product demonstrations apart from effective promotions would go about a long way in ensuring the success of the product in the market. Online promotions are another area which can be used by the marketers to tap the potential consumers. This channel covers a wide reach which helps in better penetration of the product in the market. Extreme care must be taken while using this channel because this channel has a very open nature and is quite vulnerable and may have a negative effect on the consumers if not exercised efficiently. The customers in this age group especially those above the age group of 25 have considerable influence with regards to the purchase decision of the entire family which makes them even more important for the marketers. This customer segment is also known to be price conscious and would generally consider the price and product features before making a purchase decision. The firm must also make a clear mindset with regards to the customer segment with regards to the price of the product. The firm should have a clear policy as to whether it would target premium segment customers or value for money segment and prepare strategies accordingly. This is important as the two sets of customers increasingly vary in their consumer mindset and attitudes and consider different aspects while making a purchase decision. Presence of a clear segmentation strategy would help in a better positioning of the product in the minds of the customers. Consumer learning Theories Black Box Model of Consumer Buying Behaviour Figure 2: The Black Box Model of Consumer Buying Behaviour (Source: Iman, 2006, p.137) The figure above shows the Black Box model of consumer buying behaviour. The model states that the purchase decision of the consumer is affected by certain kinds of stimuli. These stimuli consist of the product mix for a product as well as other factors like political, sociological, technological and cultural factors. These aspects affect the consumer’s mindset which has been referred as the Black box of the buyer. This black box ultimately takes the final decision making of the consumer. The response of the consumer’s black box dictates the final purchase decision of the consumer (Armstrong & Gary, 2007, p.167-168). In case of FMCG products like moisturiser the purchase decision of the consumer is largely affected by the influence of peers as well as the elements of product mix which includes aspects like promotions and product features. In order to make the product a success, the firm must frame a product mix that tends to effectively address the demands of the consumer. Decision Making and Information Processing The consumer decision making process is one of the most critically examined processes by marketers while framing the product mix. The decision making process of the consumer is determined by certain number of steps which are shown the figure below. Figure 3: Consumer Decision Making Process (Source: Cox, 2006, p.106) The figure above shows the consumer decision making process. This process begins with the generation of a particular need which is followed by pre purchase activity which is generally affected by various aspects like the product mix, cultural factors and influence of peer groups. The user then analyses these information and finally makes the purchase decision. This can be effectively correlated with the Black Box model of consumer behaviour which also lays states the same aspects with regards to the purchase decision of the consumer. In case of FMCG products like moisturisers, the purchase decision of the consumers is largely dependent upon the influence of peer groups as well the product mix. The information processing stage is also dependent upon the brand name of the product as it determines the image of the company in the minds of the consumer. Furthermore, promotional policy also plays a major role in the decision making process of the consumer. In case of a new product launch this aspect plays a major role in the decision making process of the consumer. Marketers must effectively analyse the possible channels of communication. Local cultures and sentiments also play a major role in the success of a product in the market. Marketers must apply the aspect of ‘thinking globally and acting locally’ (Hamm, 1992, p.49). UK is one of the most developed consumer markets and has a wide range of varied demographics representing a truly cosmopolitan culture. This shows considerable importance for the firm to prepare strategies that tend to take care of the cultural beliefs of the consumers. Consumer Segmentation Segmentation is defined as the “process of segregating the markets into groups of potential customers with similar needs and/or characteristics who are likely to exhibit similar purchase behaviour” (Weinstein, 2004, p.4). Segmentation can be done on the basis of many aspects like age, demographics, price etc. In case of the product under study the target consumer segments consist of female consumers in the age group of 18-34. The firm should also segment the target market on the basis of price i.e., premium and value based consumer segments. This is important because the two sets of consumers have different needs and wants and exhibit distinctly separate consumer behaviour while making a purchase decision. This aspect assumes considerable importance for FMCG products like moisturiser which is a highly price sensitive product. The segmentation on the basis of price would also show light on the competitors who are already present in the market. Formulating an effective segmentation strategy would go about a long way in ensuring sustainable competitive advantage for the organization in the consumer market. Market Research Market Research Objectives The market research objectives for the firm engaged in launching a new product line of moisturisers in the UK market would be to analyse the consumer behaviour of the individuals targeted for the product line in the market. The marketing research objectives for the firm with regards to the launch of moisturiser in the UK market are as follows: To understand the gaps in consumer demands and the product features of same kind of products that are presently available in the market. Formulating a segmentation, targeting and positioning strategy for the brand and product Devising market entry strategies with regards to suppliers, competitors and Government policies Framing an effective product mix to cater to the demands of target consumer segments Ethical Considerations in Market Research Marketing research is essentially being performed by corporate or independent consultancies with an aim of enhancing the profit margins of the organization. Hence sometimes ethical considerations may arise during the course of marketing research. Marketing research process consists of three different categories of stakeholders namely the researcher, the client, respondents and the general public. Ethical issues arise when the interests of the different categories of stakeholders come into conflict with each other. Ethical aspects also arise when the researcher adopts wrong methods to recommend solutions for the organization. Ethical aspects are also involved when the respondents provide deliberately wrong information with regards to the market research being conducted. Certain policies of the clients (organizations for whom the research is conducted) like modifying the results of the primary research may also lead to ethical issues in marketing research. The best solution for addressing ethical issues lies in the hands of the business organizations which by behaving in an ethical manner could prevent issues of ethical problems in marketing research (Malhotra, 2008, p.27-28). The key sources of secondary data and a critical analysis of their suitability The secondary data sources used for the study comprise of research reports, books and other articles of reputed authors. The data sources used in the study have been derived from well acclaimed sources. Efforts have also been made to include latest available research articles and books so as to provide greater effectiveness to the report. Government websites have also been used which have greater authenticity in their content. The articles referred in the study have also been taken from academic and other organizational websites which have considerable reliability with regards to the material. Analysis of Research Techniques Qualitative Research Qualitative market research involves a form of market research in where quantitative data is not used for conducting the research. This research technique is more open in nature and provides greater flexibility to the researcher as well as the respondents with regards to the data for conducting market research. In most of the cases qualitative research is conducted on a small sample size and is generally helpful in gathering data about aspects like customer needs and other such issues. Perception about a particular product or service can also be obtained by the use of this technique. Qualitative research is used in areas where an in depth analysis is required, this techniques is usually used in exploratory studies (Capon, 2008, p.155). Quantitative Research Quantitative research methods largely use numerical and statistical data for analysing a research question. This form of marketing research is concerned with hypothesis testing and also has aspects like internal and external validity and reliability. The questionnaire for this form of research consists of mainly closed ended questions where the respondent is limited with pre decided options (Burns, 2007, p.202). Mixed Research Method Certain gaps in the research aspects of qualitative and quantitative research methods have promulgated the need for a research technique that addresses the issues of the two research techniques stated above. Mixed research techniques generally focus upon use of a combination of qualitative and quantitative research methodologies. This research technique has been proved to be more pragmatic and pluralistic in nature. Both quantitative as well as qualitative research can be simultaneously being carried out in this form of marketing research (Belk, 2006, p.199, 200). Cost Outline The cost for conducting a marketing research should be evaluated on the basis of targeted sales figures as ideally it should be based on a percentage of the total projected sales revenue. Figure 4: Cost for a Market Research (Source: The Centre for Strategy Research, 2011) The cost for the marketing research would include aspects like cost for conducting interviews and other associated costs like preparing report etc. Timings also play a major role in analysing the cost of marketing research. The firm also has to decide as to whether it would conduct the market research using its own resources or hire an external consulting agency for the task. The budget of the research should be framed up on the basis of the targeted sales figures so as to maintain profitability and sustainability. Conclusion The analysis of the topic of study reveals that there is considerable scope for the product (moisturiser) in the UK consumer market. The analysis of the macro and micro environmental aspects also reveal considerable scope for the product in the market. In order to make a successful launch of the product the firm must also have a clear understanding of the consumer behaviour of the target customers. The consumer behaviour of the target market would define the product mix as well as the segmentation, targeting and positioning strategy of the firm. Models like the Black box model could be correlated with the results of the market research to generate strategies that would help in the sustainability of the product in the market. The aspect of consumer behaviour also involves considerable importance as the buying behaviour of FMCG products are considered to be more influenced by consumer behaviour. The firm should also pay considerable importance to the local culture and sentiments of the consumers which would ensure better acceptance of the product in the market. Concepts like ‘thinking globally and acting locally’ must be used by marketers while promoting the product in the market. This would not only provide a better positioning of the firm and the product but would also reap long term sustainable competitive advantage to the organization in the market. References Armstrong & Gary, A. 2007. Marketing. Pearson Education India. Belk, R.W. 2006. Handbook of qualitative research methods in marketing. Edward Elgar Publishing. Burns. 2007. Marketing Research. Pearson Education India. Capon, N. 2008. Managing Marketing in the 21st Century. Wessex Publishing. CIA. 2011. The world Factbook. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html [Accessed on January 11, 2011]. Cosmetics Business. 2010. UK – keep calm and carry on. [Online]. Available at: http://www.cosmeticsbusiness.com/technical/article_page/UK_-_keep_calm_and_carry_on/55852 [Accessed on January 11, 2011]. Cox, R. 2006. 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