Influence of Brands and Prices on Consumers' Purchase Decisions - Coursework Example

Influence of Brands and Prices on Consumers Purchase Decisions INFLUENCE OF BRANDS AND PRICES ON CONSUMERS PURCHASE DECISIONS Introduction Brands have a key role to play in the process of consumer decision-making, which makes it essential for firms to understand this process, as well as identify other variables that interact with brand in decision making. The reason why a consumer will buy a specific brand is informative on how their purchase decisions are made. Consumers follow a particular set of steps during their purchase process, including realization of need, acquiring information, identification and evaluation of different products, and decision on brand (Rosa, 2013). After frequent purchases of a specific brand, consumers begin to use past experience concerning the brand product with regards to quality, performance, and aesthetic appeal. In addition, consumer purchase decisions are also affected by price, particularly because of relationships made by consumers between price and brand quality. In the past thirty years, researchers have attempted to investigate the relationship between purchasing decisions and price, as well as between brand information and consumer purchasing decisions (Rosa, 2013). This paper will conduct a study on the influence of brand information and price on consumer purchasing behavior, particularly regarding the subjective evaluation of products. A review of literature that is relevant to the topic will be conducted, while specific hypotheses are also to be presented, as well as research methodology, results, and a discussion. Literature This review of literature sets out to provide a foundation that will allow the researcher to understand several widely utilized models of consumer behavior, which is crucial to investigating current processes of consumer decision making and purchasing decisions. Consumer behaviour accounts for every decision and action taken by individuals during the purchase of services and goods. According to Barden (2013), investigating consumer-purchasing behavior is essential for the success of firms, particularly since they can understand the various forces that impact on the consumer and drives them to make decisions concerning the purchase of a specific product. In addition, it also helps in the determination of why a consumer would choose a specific brand over another, the various reasons why they make these decisions, and how the firm can use such information to add value to their products. Consumer behavior is defined consumer behaviour as studying the processes that influence individuals and groups to select, purchase, dispose, or utilize ideas, services, products, and experiences to satisfy their needs and desires (Barden, 2013). According to Rondán et al (2006), consumers making their purchasing decisions normally go through five stages, all of which have a relationship to human psychology. Stage one of the purchasing decisions involves the recognition of problems and needs, whereby the consumer comes to the recognition that they have a need and, thus, has to identify the various types of products that they require to solve their problems. Stage 2 can be defined as the information search stage, during which consumers start to search for the product that will solve their problem or satisfy needs as already recognized in the first phase. Stage 3, according to Rondán et al (2006), can be defined as the phase during which consumers evaluate the possible alternatives that, during stage two, have already been identified as being able to solve their problems and satisfy their needs. Typically, during stage three, the consumer will be confronted by various products, which they have to evaluate and understand to decide on the product that best solves their problem or suits their needs. The fourth phase is what Rosa (2013) refers to as the purchase phase. Here, the consumer, after making an evaluation of the choices present before them and having the intention to purchase one of the products, can only undergo a change in decision by unforeseen circumstances and what, their peers think concerning the product. In this case, the foreseen circumstances could include financial losses or lack of credit due to banks becoming more vigilant, leading the consumer to stop any purchase of the product. The final phase is referred to as post-purchase behaviour. Following a successful purchase where none of the factors identified in the previous phase dissuade the consumer from buying, the consumer could undergo a post-purchase dissonance. In this condition, the consumer feels that purchasing another alternative would have been the best idea. Firms should be careful about this stage because, not only does it ensure that the consumer will spread god words about the product, but that it will also improve the potential of the consumer making a repeat purchase of the product (Rosa, 2013). Previous research studies into the inherent relationship between price levels and consumer purchasing decisions can be investigated in two ways. To begin with, generally, single-cue studies have found that a statistically substantial price-perceived consumer purchasing behavior relationship exists. Boone (2012), however, documents that these single-cue studies have limitations because they are over-simplified, while the results related to effects of price effects have limited internal validity and doubtful external validity. Multi-cue studies, on the other hand, have manipulated various cues, including store image, brand image, and other information on top of price levels. Multiple-cue studies, trying to adjust for the limitations presented by single-cue studies, have generally found that there is a positive relationship between price level perception and consumer purchase decisions (Boone, 2012). However, these studies do not always meet statistical significance standards. With regards to the multi-cue studies, potential confounding variables that have resulted to the guarded conclusions reached by researchers could be similar to the role that is played by brand in the price-perception consumer purchasing decisions studies. According to Boone (2012), one major concern revolves around whether differences in price, as a result, of price manipulation would result in perceptual discriminations by consumers when making purchasing decisions. Powers and Jack (2013) contend that failure to find a relationship between price perception and brand quality that is statistically significant is not conclusive, especially if this was as a result of discernible differences in price. Rather than using statistical significance in investigating this relationship, the study examines effect sizes, going on to conclude that, while a positive relationship between price perception and brand quality could be supported, there was more need for intensive research. Rondán et al (2006), in a review of price-cue literature, notes that brand name effects are generally strong, appearing as a main effect, as well as an interaction effect. In a similar review of six research studies seeking to investigate the brand and price effects, however, it is revealed that there is no clear or consistent relationship. It is also observed that earlier conclusions seem to indicate that information on brand name dominated information about price levels, especially in consumer purchase decisions. However, during assessment of literature, Rondán et al (2006) finds that price level perceptions have an increased positive effect on consumer purchasing behavior when information on the brand is present, compared to when it is not. From this conclusion, it is possible to suggest that interaction on brand information and price levels is not only strong, but that impact of price on consumer purchase decision increases when there is information about the brand than in the sole presence of price information. Therefore, because prior studies have not clearly conceptualized this relationship in this manner, the impact and extent of the interaction between brand name and price has yet to be investigated. Methodology This research study will seek to test the hypothesis based on price-perceived consumer decision, relationship conceptualization as posited by Daryanto and Wetzels (2010), as well as on the literature review. The hypothesis for this study is that the interaction between price and brand name will result in consumers perceiving a product as being higher in value and in quality, while they will also be more willing to purchase the product, compared to consumers without information, on the brand at any price. This hypothesis makes that argument that brand is not dominant over price through its strong main effect, instead enhancing the effect of price. The brand and price of a product act as extrinsic cues, interactively and individually enhancing the consumer’s product quality perception and, subsequently, purchasing decision. For this research study, the survey method will be utilized. The study will divide the entire work into two main parts, including primary research and secondary research. For the secondary research, the study will make use of relevant and available publications and literature in order to come up with a theoretical framework, as well as to ascertain what prior research has to say about the topic under investigation. The survey result has been considered for primary research using the personal contact approach. A survey methodology will be best for this study because it will allow the researcher to collect as much data as possible in a short period of time, while it is also less expensive than most of the other techniques of data collection. In addition, surveys can be constructed quickly and easily administered. Finally, the method can be used to collect information about a wide range of issues, including personal opinions, attitudes, facts, and past behaviors. The procedure for sampling participants was simple random sampling, in which subjects were chosen from the larger population purely by chance, which meant that all in the population had an equal chance of being chosen for the sample. Simple random sampling will carry the advantage of reducing potential human bias making it highly representative, while it will also allow the researcher to make generalizations about the population sample. The exact sampling method under simple random sampling was convenience sampling, in which the participants that are easiest to recruit will be selected for the study. While it is ideal to test for the whole population, the population is too large for this study to include all the individuals. Convenience sampling was chosen because it is inexpensive, fast, and easy, while all the participants are readily available. Two separate groups of participants of 30 each were sampled without restrictions on location, sex, background, or age because they were all students. Each of the participants was presented with three different smoothie brands: True Fruits, Innocent and Rewe-Smoothie, and asked them to evaluate the smoothies via different parameters. The first group was presented with the smoothies in glasses, so they did not know which brand of smoothie they were consuming. Those surveyed were asked to evaluate the experience through different parameters such as smell, color, taste, texture etc. Our second study group of 30 people was presented with the same three smoothies, but this time they were provided with the brand name and the price tag for each of the smoothies – True Fruits being the most expensive at €2.39, Innocent the second most expensive at €1.69 and Rewe-Smoothie the cheapest of the three at €0.99. They were asked to evaluate the products under the same categories as first study group. True fruits is definitely one of the most popular smoothies in Germany – it is heavily advertised as the healthiest local (its a German company) option for the consumer, and there is an established brand awareness around the name. Innocenet is a British company that makes smoothie/juice products, while Rewe-Smoothie is a generic smoothie made for the REWE supermarket. Results of the first survey showed that Rewe-Smoothie was by far the most favorite smoothie, with ~60% of those surveyed ranking it as their first choice, while True Fruits was ranked the least favorite. For the second group, the results were very different – almost 70% of people chose True Fruits as being their favorite, while Rewe-Smoothie was ranked the last. There were some limitations for this study, including the fact that only one location was considered, despite the fact that findings may vary with location, living standards, and income levels, which were not considered separately. Discussion This research study was conducted in order to investigate the effect that information on product brand and price have on the subjective evaluation and purchasing decisions of the consumer. In this case, the sampled consumers were investigated for their purchasing decision of three different brands of smoothies with variations in information about brand and price. With regards to price, it has been found that the participant’s perception of brand quality increases as the price increases. This relationship can be considered to be strong when the price is low to medium, as compared to prices that are medium to high (Netemeyer & Haws, 2011). While a positive relationship is found between the consumer’s willingness to make the purchase and the price-threshold level, marketers embarking on promotions based on price should be aware of the magnitude and thresholds of differential price. Awareness of price seems to portend a moderating effect on the sensitivity to price (Netemeyer & Haws, 2011). The hypothesis indicated that high pricing will act to enhance the brand image and positively impact on the consumer’s purchasing decision, which has been supported by the results of this study. However, according to Netemeyer and Haws (2011), what the brand sells is not the price but, rather, the product’s value. The consumer will evaluate the smoothies by the value that the brands offer, rather than only by the price, the brands sell at. Thus, the purpose of the brand is to create value that is unique and that the consumer will be willing to consider in their purchasing decision. It is, however, crucial to note that brands able to offer consumers this value at the least possible price is going to be considered the most preferred brand. For the different smoothie brands, consumers will expect that they will get more value from the brand with a higher price, while also getting less value from that sold at a lower price. The brand, which aids the consumer in; articulating, rationalization, and experiencing the value can, thus, be defined as a value for money brand (Netemeyer & Haws, 2011). Price, in this case, does not denote value and brands not offering value would be taken as expensive, even when they are not, ensuring that even a drop in price would not result in an increase in sales. Because of this relation of price to value, it is essential to promote a product’s price alongside the product’s value since brand image would decline if the brand were unable to communicate the value offered for the set price (Laforet, 2011). When making a decision on pricing, brand image should be given the least consideration and the price must be a function of the product’s context, audience, desired margin, and costs. For the smoothies, interaction between price and brand name led to the participants perceiving “True Fruits” to be of higher value and quality, as well as the participants being more willing to purchase the smoothie brand than when they were not aware of the brand. It can also be claimed that the effect of the brand, rather than having a strong effect and dominating price, enhanced the effect of price (Laforet, 2011). Overall, the results of this study show that the participants were influenced by the brand name almost more than they were influenced by the product being tested. For instance, they viewed all the smoothie brands as being basically the same. It was only when the brand name was presented that their purchasing decisions were influenced. According to Kwun and Oh (2004), this might be indicative of quality perceptions being independent of the product’s actual quality. It is important to note that the brand equity effect of product brand on the consumer’s perception of quality differed across the three brands of products when they were aware of the price. One pattern that was consistent for the second group as their bias against what they considered a generic brand in Rewe-Smoothie, as it yielded the lowest rating amongst the participants. However, where only the product was presented, the generic Rewe-Smoothie was rated above the more “valuable”, “True Fruits”. This shows that, although consumers would consider the generic smoothie to be of a similar quality to the other two brands, they were not likely to buy them. With regards to the effects of brand equity, generic brands are not as well known and, thus, possess a negative equity effect (Kwun & Oh, 2004). Conclusion To conclude, the use of brand names has a significant effect on the perceived quality and value of a product, as well as willingness to purchase the product in comparison to not using the brand name. This study has indicated that brand name effects and price have a positive correlation effect on consumer’s quality perceptions and their purchasing decisions. While the study did not measure quality directly, the purchasing decisions of the participants were made based on how they perceived the smoothie’s quality. When brand names are not available, the students were willing to purchase the cheapest product, which changed when brand names were availed. References Barden, P. (2013). Decoded: The Science Behind Why We Buy. New York: Wiley. Boone, D. S. (2012). Consumer Purchase Decisions Under Asymmetrical Rates of Technological Advance and Price Decline. International Journal of Strategic Decision Sciences (ijsds), 3, 2, 20-30. Daryanto, A., de, R. K., & Wetzels, M. (2010). Getting a Discount or Sharing the Cost: The Influence of Regulatory Fit on Consumer Response to Service Pricing Schemes. Journal of Service Research, 13, 2, 153-167. Keller, K. L., & Lehmann, D. R. (November 01, 2006). Brands and Branding: Research Findings and Future Priorities. Marketing Science, 25, 6, 740-759. Kwun, J.-W., & Oh, H. (2004). Effects of Brand, Price, and Risk on Customers Value Perceptions and Behavioral Intentions in the Restaurant Industry. Journal of Hospitality & Leisure Marketing, 11, 1, 31-49. Laforet, S. (2011). Brand names on packaging and their impact on purchase preference. Journal of Consumer Behaviour, 10, 1, 18-30. Netemeyer, R. G., & Haws, K. L. (2011). Handbook of marketing scales: Multi-item measures for marketing and consumer behavior research. Thousand Oaks, Calif: SAGE. Powers, T. L., & Jack, E. P. (2013). The Influence of Cognitive Dissonance on Retail Product Returns. Psychology & Marketing, 30, 8, 724-735. Rondán, C. F. J., García, A. N., & Phau, I. (2006). The influence of price and brand loyalty on store brands versus national brands. The International Review of Retail, Distribution and Consumer Research, 16, 4, 433-452. Rosa, D. I. M. (2013). Price assessments by consumers: influence of purchase context and price structure. International Journal of Consumer Studies, 37, 1, 13-20. Read More