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

External Factors Influencing Consumer Decision-Making process for Coke Consumers Name: Learning Institution: Abstract Marketing is the aspect of identifying consumer needs and satisfying them while making a profit. Marketing involves a series of activities like promotion, advertising, market research, market analysis, product development and customer service. Product success in the market is dependent on marketing strategy used. According to Kotler & Keller (2011), understanding the market well gives the business the opportunity to tackle competitors and transform consumer needs to demand (Kotler & Keller, 2011). The Coca-Cola Company has been one of the most performing companies in the market. The Coca Cola Company is a multinational company that produces one of the most preferred soft drinks in the world. Among the most common brands include the coke, Fanta, Sprite, Schweppes, Lilt, among others. Factors that have contributed to Coca Cola’s success include; external forces, effective market segmentation, good leadership, export entry strategies, marketing mix among others (John, 2002). This paper examines 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 1 TABLE OF CONTENTS 2 Introduction 3 Reference Groups 5 Family 7 Culture 8 Sub-culture 10 Conclusion 13 References 14 Introduction Consumer behavior is a concept that has become essential in the market over the recent years due to the ability of marketers to analyze buying behavior. Different scholars argue about the contribution of consumer behavior analysis in the process of marketing. The purpose of marketing in commercial organizations is to maximize profits. Understanding the motives behind the behaviors of buyers of products aids producers in making their products, market oriented to maximize profits. In addition, if businesses fail to understand the buying behavior of consumers, then they face a difficult time and potential losses. Studies indicate that consumer purchasing behaviour is influenced by factors emanating from the external environment, which may be outside of their control. These factors are extremely vital for marketers because they have an indirect impact on the consumption choices made by consumers. There are numerous external that influences buyers purchasing behavior, including an individual household structure, reference groups, culture and subculture (Kumar, 2012). In the face of globalization, consumers are being faced with an array of product selection. It has, therefore, become imperative for organizations and marketers understand the internal and external factors that influence purchasing decisions made by consumers. These factors work together to influence buyer buying-behaviour and are key to success of any organization (Kumar, 2012). Today’s organizations operate in a complex environment which is characterized by high uncertainty and dynamism. Organizational leaders should therefore make strategic decisions which achieve the advantages for the organization through its configuration of resources within a changing environment to fulfill stakeholder’s expectations. Thus, the role of buyer behaviour analysis cannot be downplayed, given the need to align the organization with the changing environment. The Coca Cola Company has continued to perform uniquely over its competitors. The company has achieved its marketing objectives, namely; profit maximization, market share leadership and product quality leadership in the face of heavy competition. To keep its plan going in this case, the company has differentiated itself in the market. The Coca Cola Company has also invested heavily in research and development in search of new competitive advantages. This paper seeks to examine the external factors influencing the purchasing behaviours displayed by coke consumers. The Coca-Cola Company is a multinational enterprise based in America. The Coca Cola Company keeps on monitoring any changes in consumer behaviors 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 (Kardes, Cronley & Cline, 2010). 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 the consumer, such as water, coffee 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 (Kardes, Cronley & Cline, 2010). 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 group can be defined as a small collection of people who have a shared goal or interest (Matejun, 2010). In addition to this, group members perceive themselves as belonging to the group and interact with other members to achieve certain objectives. Groups are often formed on the basis of best available people for the task to be performed. The dynamic interactions made possible by groups allow for the development of a deeper understanding of a problem or situation through the sharing of ideas. Normally, consumers are influenced by various direct and indirect reference groups (Matejun, 2010). In the purchasing process, the consumer will think of a given brand before making a purchasing decision. In spontaneous purchasing processes, the consumer will select a given brand unconsciously, without a clear reason for the selection. However, this may not be the case when purchasing a soft drink like Coke given the wide range of soft drinks in the market. Considering this, the consumer will first gather information in relation to different brands available in the market either through reference groups such as family members, friends, colleagues, media or any other available source. 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 on 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 the 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 the 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 a 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 the appearance of James would encourage the younger market to drink coke in order to identify with him (Lamb et al, 2008). Family A family is a unit of social interaction whereby individuals grow and develop a sense of who they are in the world and supports individual function in that world. It is in our families that we build our characters; therefore, families ground the whole process of an individual’s growth and self realization. Thus, families influence the purchasing behaviours of the members through the socialization process (Lamb et al, 2008). What a young person sees from older relatives becomes his or her culture or lifestyle. Experiences may be reinforced or modified as the 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 (Huddleston, 2011). 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. Married couples form a consumption unit in which each member influences consumption behaviours of the other (Huddleston, 2011). According to Sokolowski (2011), kids 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 global socialization. Children, on the other hand, may have an effect on the consumption patterns of older people in society. As Sokolowski (2011), explains, different family members contribute differently to the decision-making process. Family income is also a major determinant in the purchasing power of a given market. According to Mesbahi (2012), when family income high, people will buy more “need goods” such as Coke. However, when family income low, people will opt to buy basic goods such as food and clothing. A soft drink such as Coke is usually not a necessity implying that people can do without it. It is thus an inferior product, meaning that the individual demand for the Coke goes down once the earnings increases as people tend to consume other products which they think to be more superior. 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 happiness, 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 could be defined as a way of getting used or adapting to one’s own traditional practices (Schein, 2010). People come from a rich mixture of cultural origins and ancestors. Individuals thus identify themselves with the characteristics of people and groups they are comprised of and interact with. These characteristics include: gender, racial, disability, ethnic, religious affiliation, social class among others. Culture, therefore, refers to the deeper level of basic assumptions and beliefs shared by members and that which operate unconsciously to define a group’s view of itself and its environment. Culture in a group is made up of the organization and the assumptions they adhere to. The shared beliefs and assumptions 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 the 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 society such as families, religions and reference groups (Lamb and Hair, 2010). 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 the 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 the nation’s culture in order to succeed. For instance, this company withdrew a two-liter bottle from Spain because it did not fit into 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). A country’s culture and general way of doing things affect by a greater magnitude success of international business, like Coca Cola Company. The purchase behaviours differ from one age group to the other. For instance, generation Z (which comprises of people born between 1990 and 2010) has a general purchase behavior (Pride & Ferrell, 2011). Generation Z comprises people who are dependent and more comfortable with technology having been brought up in a globe with ever present technology. In addition, they are ever connected through social networking channels such as Facebook and Twitter. Moreover, they are able to multi task on quite a number of online products through the use of sophisticated devices. In an effort to enhance close contacts with customers, companies are adopting technology- based sales and marketing approaches like mobile internet, text messages, social networking among many others. Further, they have enhanced their virtual presence by developing high value products bearing basic interactive designs and that can multifunction. Interestingly, the Z generation is more conscious about the environment, forcing companies to produce green products and services that have reduced environmental effects if not harmless to the environment. On its part, the Coca Cola Company has put in place strategic procedures and policies to compete effectively with its major competitors. Coca Cola continues to invest in ICT in order to enhance its marketing strategies, customer service and also costs control. The company seeks to develop its marketing initiatives through extensive electronic media advertising, new branding scheme, in store advertising and more importantly via internet advertising. The company increasingly continues to utilize the internet in all its processes. For instance, it is presently advertising its products and services through the internet besides selling its products and services virtually. This has enabled the company to reach many potential customers, particularly, generation Z which is technology savvy having been born when globe turned digital. 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, and being cool. 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). Over the years, Coca Cola Company has highly invested in advertising and commercials across the world to boost its sales (Smith, 2011). One of the outstanding Coke TV advert was the 2007 Grand Theft Auto Concept introduced during the Superbowl. The marketers based this advert on The Grand Theft, a popular and divisive videogame, which most of the young and mid-aged generation could easily recognize and participate. The markers used the lifestyle and cognitive age trait to woo the target audience, especially the young and middle-aged persons. In addition, the markets introduced the advert during the Super Bowl, which was a popular game in the mid and late 2000’s. In so doing, the target audience could easily associate itself with the product and the context of the advert. This created a notion of self-identity of the audience and product, resulting in more sales of coca cola drinks. The marketers of this product created a sense of heroism to the consumers of coca cola drinks. In addition, they incorporated entertainment and fun in the commercial, so that the target audience could enjoy watching and listening to the advert. This approach created a sense of self-identity with the product to anybody who sought success and heroism in his endeavors. The protagonist in the advert was selfless and aided different classes of people in their difficulties; a trait that everybody could easily emulate. This utilitarian approach gave a competitive advantage of coke to the other drinking product, since the audience easily identifies with philanthropy portrayed by the adverts’ hero. In addition, this approach portrayed his personality and character and everybody could identify and join. Conclusion In conclusion, consumers get to know the best options in markets by analyzing existing trends at a particular time. The tastes and preferences of consumers are ever changing; however, there are some constant external factors which marketers should find out through research. These external factors should be considered in the development of production and marketing policy to ensure success. Therefore, it is vital for marketers to understand the external factors that affect consumer’s 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. The 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 the success of this company. Coca-cola tries to recognize unsatisfied consumer needs and developing new brands to satisfy these needs. In general, it is essential for marketers and organizations to understand the external factors influencing consumer behaviour in order to develop effective marketing strategies and to satisfy the needs of consumers. Studying external factors that influence consumer behaviors contributes to effective designing of optimal products and services which generally improves performance. References Huddleston, P (2011). Consumer Behavior: Women and Shopping. 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