Analysis of Consumer Behavior - Case Study Example

Consumer Behavior Case The case is all about being able to design and come up with effective marketing strategy for the vacation package needs of people from the upper class, middle class, and working class society. In the process of discussing the marketing strategies used to target specific market segment, marketing theories such as the marketing mix (4P’s), consumer segmentation, consumer behavior, the micro- and macro-marketing environment, the Maslow’s hierarchy of needs among many others will be considered and applied in this essay. Before creating a marketing strategy for the vacation package needs of people in Germany, it is best to examine first the micro- and macro-marketing environment of tourism industry. Often times, the macro environment is composed of societal factors that can affect the micro- or organizational environment of the travel business1. For instance, the population rate of Germany has reached 80.82 million and that its economic growth is expected to increase by up to 1.5% in 20152. Since Germany’s unemployment rate has significantly decreased from 5% in October 2014 down to 4.7% in January 20153, it is expected that more people in Germany would have more excess cash to spend on vacation. This could mean more business opportunity for businesses in tourism sector. (See Figure I – Unemployment Rate in Germany below) Figure I – Unemployment Rate in Germany Source: Trading Economics It is given that people in Germany are willing to spend large sum of money on foreign travel4. This explains why there is a tight market competition within the German tourism sector. For this reason, vacation packages that will be designed for the per class, middle class, and working class society should be one that is attractive and can meet their personal preferences in terms of pricing, destination, quality of accommodations, etc. Based on the Maslow’s hierarchy of needs, vacation packages falls under self-actualization needs5. It means that each family or person in Germany should be able to satisfy first their physiological needs such as food and shelter before investing on their safety needs, love and belonging needs, and esteem needs6. (See Figure II – Maslow’s Hierarchy of Needs below) Figure II – Maslow’s Hierarchy of Needs Source: Pinola Given the tight competition within the tourism industry and the fact that vacation lies on the topmost part of the Maslow’s Hierarchy of Needs, designing the vacation packages for the target consumers should be one that is unique and of reasonable price. Basically, offering attractive or reasonable prices is important especially when it comes to capturing the attention of the working class people. As such, the pricing of vacation packages should always be in accordance to the social class status of the target market (i.e. upper class, middle class, and working class society). Based on the social hierarchy of Germany, the upper class society is composed of the royal families, the scholars, administrators, and the wealthy people whereas the working and under class people are generally those from the lower class society7. (See Figure III – Social Hierarchy of Germany below) Figure III – Social Hierarchy of Germany Source: Hierarchy Structure Consumer behavior is all about being able to gather and organize information that could somehow tell us something about the purchasing decisions of the target consumers8. Applicable to the nature of tourism, consumer behavior is often based on the “stimulus-response model”9. It means that factors such as the marketing mix or 4P’s (i.e. product, price, place, and promotion) plus other external environmental stimulus such as economic, political, social, and technological situation in Germany could affect the target buyers’ decision in purchasing or choosing vacation packages from a specific travel agency10. (See Figure IV – Stimulus-Response Model below) Figure IV – Stimulus-Response Model Source: Riley Based on the “attitude, beliefs, and motives” of each target consumer11, consumer segmentation should be considered when designing marketing strategies for the proposed vacation packages. Criteria for consumer segmentation can be classified as either “consumer-rooted” (i.e. geographic location, age, gender, marital status, family life cycle, education, occupation, social class, or income) or “consumption specific” (i.e. brand loyalty or psychographics)12. In this particular case study, criteria for consumer segmentation include not only social class but also geographic location, time availability, and income. It means that when designing vacation packages that could easily attract people from the upper class, middle class, and working class society, one should consider not only the target consumers’ budget but also their preferred destination and time availability to have a long vacation. The marketing mix (4P’s) is referring to product, price, place, and promotion13. When designing a vacation package for the royal families, the scholars, administrators, and the wealthy people in Germany, the marketing manager should create a differentiation focus as a niche strategy for this particular type of market segment. Often times, this particular competitive advantage strategy is highly dependent on the marketing manager’s ability to differentiate the service based on its objective and subjective attributes14. When serving the vacation needs of the upper class population, the marketing manager should not focus more on pricing since this particular group of consumers is unlikely to be price sensitive consumers. In general, tourism is service-oriented type of business15. Therefore, instead of paying more important to pricing, the marketing manager should focus more on the quality of services being offered to them. For instance, when it comes to destination, this group of target consumers is more likely to appreciate visiting developed countries such as the United Kingdom or Italy more than underdeveloped countries such as Africa. With regards to accommodation, this group of consumers is most likely to appreciate living in a five-star hotel such as Shangri-la. The same is true when it comes to airline services. Instead of offering budget airline options, it is best to offer the airline services of highly reputation airline companies (i.e. Delta Airlines, Singapore Airlines, etc.). When designing a vacation package for the middle class society, the marketing manager should be able to integrate the use of differentiation strategy and cost leadership strategy16. It means that the marketing manager should be aware that some of this group of consumers can be price-sensitive yet are looking for destinations that are well differentiated. Therefore, when designing vacation packages or offering tourism services to this particular social class, the marketing manager should be able to balance their ability to offer the best price possible for each potential destination without sacrificing the quality services they are offering to their target consumers. For example, to benefit from economies-of-scale, the marketing manager should be able to offer vacation packages that would appeal a lot to the middle class population (i.e. 4 days and 3 nights stay in Boracay Island in the Philippines on a three-star hotel with free breakfast and dinner, etc.). To satisfy the overall expectations and preferences of price-sensitive customers, the marketing manager should perhaps offer budget airlines such as Easy Jet or Ryan Air. When designing a vacation package for the working class society, the marketing manager should make use of cost focus strategy. Often times, the use of cost focus strategy is all about being able to adopt the use of cost leadership strategy plus the need to satisfy the specific needs of the working class society17. It means that the marketing manager should be aware that all consumers under this particular social class are price-sensitive. Therefore, when designing vacation packages to the working class, the marketing manager should offer destinations that are generally low cost (i.e. third world countries such as India, Thailand, etc.). It is also possible to offer 4 days and 3 nights stay in Boracay Island in the Philippines on a cheap hotel without free meals. It could also help reduce the cost by offering budget airline services such as Easy Jet. (See Figure V – Porter’s Generic Strategies below; Table I – Summary of Complete Vacation Package below) Figure V – Porter’s Generic Strategies Table I – Summary of Complete Vacation Package Strategy/Services/Price Upper Class Middle Class Working Class Strategy Differentiation Focus Strategy Integration of Cost Leadership & Differentiation Strategy Cost Focus Strategy Destination Boracay Island in the Philippines or in developed countries such as the United Kingdom or Italy Boracay Island in the Philippines Accommodation Five-star hotel such as Shangri-la Three-star hotel with free breakfast and dinner Cheap hotel without free meals Airline Service Airline services of highly reputation airline companies (i.e. Delta Airlines, Singapore Airlines, etc.) Budget airlines such as Easy Jet or Ryan Air Budget airline services such as Easy Jet No. of Days/Nights 4 days & 3 nights Pricing Not Price Sensitive Reasonable Price Price Sensitive When it comes to promotion and advertisement, it is best to make use of web-based media such as the social networking sites as a tool for advertising and sales promotion18. Basically, one of the main reasons behind the need to explore the use of online platform is to encourage people to talk about specific vacation packages which could somehow draw a bigger audience over time. Furthermore, the use of social networking sites can create long-term business benefit for the travel agency because it can provide them the option to link their official website to the social media networks. With regards to the advertising message, it would be wise on the part of the marketing manager to convey messages that would highlight why the target audiences should consider a particular vacation package. For instance, when targeting the working class population, the advertising should focus more on the best price offer in each of the proposed destination. Through the use of attractive images of the proposed destination, the advertising campaign for the working class population can be more effective. On the other hand, when targeting for the upper class population, the advertising message should focus more on what the target consumers would expect from the vacation package and how it is differed from a typical vacation package offered by other travel agencies. To increase the effectiveness of online advertising, the marketing manager should be able to benefit from the use of media targeting. Since vacation packages falls under self-actualization needs of the Maslow’s hierarchy of needs, it is best to target social media users that are currently employed or someone who belong to the upper class society. Total Number of Words: 2,134 Bibliography Belk, Russell W. Research in Consumer Behavior. 1st Edition. Bingley: Emerald Group Publishing Ltd., 2010. Print. p. 10 Bloomberg News. "German Economy Starts 2015 With Pick-Up Exceeding Forecasts." 23 January 2015. Web. 2 March 2015 . GNTB. "German Travel Association (DRV)." 2015. Web. 2 March 2015 . Hierarchy Structure. 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