Consumer Decision-Making External Factors - McDonalds - Case Study Example

Consumer Decision-Making-External Factors Name Institution Date Introduction Consumer behavior refers to the conduct exemplified by consumers in the process of searching, buying, using, evaluating and disposing off of products. Factors that influence consumer behavior can either be internal or external. Internal factors involve the consumer’s inherent attributes, such as motivation, perception and learning. External factors are those that emanate from outside sources. They include reference groups, the family unit, social class, culture and sub-culture, innovations, policy and consumer protection. The objective of this discussion is to explore the influence of external factors on decisions that consumers make. To this end, this discussion will focus on the fast food industry, with reference to the marketing strategy employed by McDonalds to influence and retain its customers. The emerging trends in globalization have rendered companies striving to remain globally competitive and profitable. This has significantly altered work schedules, with a majority of workers feeling constrained on resources especially time. Time poverty has increasingly become a factor of critical concern for the working majority, and any developments meant to save on time have been received without much consideration, the concept of fast food being the foremost. In an effort to save on time, workers have gradually got accustomed to having quick meals on trains, buses and their workplaces. The popularity of the fast food industry is inevitable, as the majority of the working people that are overwhelmed with hectic work schedules find fast food outlets as a huge relief from the prevailing constraints on time. There are several factors that influence the marketing strategies used by fast food companies. Foremost are concepts that involve culture, social stratification/demographics, reference groups, and families/ households. They are discussed below. Culture In a research undertaken by Hirschman (1985) on modern trends in employment, he indicates that the 21st century has witnessed a drastic rise in the number and concentration of migrant workers, working women, and foreign students in major cities such as New-York and London, a factor that has significantly contributed to the success and expansion of the fast food industry. With the increase in multi-national companies that are establishing their presence across borders, and coupled with the proliferation of immigrant workers and international students in major cities of the world, the concept of cultural diversity has become a key factor of consideration for marketers when developing a market mix for consumers. Culture is a complex whole that comprises the knowledge, beliefs, laws, customs morals and other habits that are acquired by virtue of interacting with the larger society. According to Hirschman (1985), culture influences individual attitudes, personality, religious beliefs, material possessions and other attributes that define individuals. Culture provides a framework for social reference exemplifying what is regarded as acceptable, or norms of a given society. An evaluation of the culture of a given group provides a lens through which marketers can filter the options available to the target market and the product improvements or modifications that are required to effectively meet customer expectations (Hirschman, 1985). Culture is fundamental in shaping behavior as it determines the norms that a society subscribes to. Individuals who violate norms face penalties that could range from social disapproval to complete banishment from the society. Culture is however learned through interaction with other members of the society. Learning by observing the consequences of either adhering to or deviating from social norms is a voluntary activity that is motivated by social needs (Schlosser, 2002). It should, however, be noted that consumers seldom notice the influence of culture on their buying habits. This explains why certain aspects of human behavior may be acceptable within some cultures, yet they are reprimanded in other cultures. The concept of healthy food for instance, has been a major concern of many fast food consumers around the globe. This has not escaped the attention of McDonald’s management. In an attempt address the health concerns that have been a threat to the survival of the fast food industry, McDonalds has responded by incorporating organic food ingredients into their menus in most of the outlets. Culture is inculcated in society by passing down through generations by way of institutions such as religion and family lineage. Macdonald and Sharp (2000) observe that culture is adoptive and evolves, making it possible to attribute a product with new values. When values associated with a product are no longer appreciated by the society, it then compels marketers to modify the product. As noted by Schlosser (2002), the concept of culture in its entirety is very comprehensive, thus encompassing all the influences on an individual’s behavior, thoughts and feelings. A consumer’s culture is therefore composed of numerous interactions to the extent that consumers rarely notice the influence of culture on their consumption habits. Within cultures are subcultures which are essentially segments that share a set of meaning, activities or values that are different from those of the rest of the culture (Bateman & Snell, 2004). Religion as a culture can be subdivided into Christianity and Islam as subcultures, whereas gender as a culture has sub cultural subdivisions of males and females. Cultural and sub cultural categories are, however, not clear-cut, as consumers often exemplify overlapping attributes, such as two distinct racial groups that have a common religion but different lifestyles. Hirschman (1985) notes that all individuals are essentially part of several overlapping subcultures. Schlosser (2002) observes that the market expansion strategy employed by McDonalds seeks to capitalize on the increase in sub- cultural diversity of consumers. McDonalds has come up with menus that directly address the variation in the needs of different cultures. The fast food giant has for instance incorporated local foods in their menus especially in China and India. The company has developed the oriental menu that incorporates the tastes and preferences of the Chinese community, while chicken tikka wrap has been developed to appeal to customers of Indian and Pakistani origin. The diversification strategies employed by McDonalds have largely been based on sub-cultural concepts of its target markets. In \outlets based in London, the company has come up with Haili restaurants which are primarily meant to cater for the food preferences of the Muslim community. According to Hirschman (1985), subcultures have a tendency to transfer values and beliefs from one generation to another. Consumer preference for dress, beverages, food and even transportation are influenced by race, religion, ethnic backgrounds and other sub-cultural attributes. According to Schlosser (2002), cultural values can be classified into three categories: self- oriented values, environment- oriented values and other-oriented values. Other-oriented cultural values refer to behavior that the larger society expects of an individual or a sub-group within a culture. An example of self-oriented values involves the deference in perspective towards work, challenges, gratification, wealth, religion and level of indulgence. Some consumers may regard work as a burden that should be detested, while others may consider it as an essential prerequisite to the eventual fulfillment of their needs. As regards challenges, consumers can either be passive or active when faced with challenges that they ought to respond to. An active approach to challenges requires the use of physical skills to gratify individual needs. Individuals with this perspective are deemed to be active when they employ their own intuition in making purchasing decisions, as opposed to being influenced or coerced by external forces. Environment-oriented values refer to cultural values attributed to the economic, technical and physical aspects of the environment. Examples of such aspects include hygiene standards, natural environment, and traditions. Self- oriented values pertain to what is considered acceptable norms of a society. They refer to aspects such as religious views, sexual values, materialistic expectations and attitudes towards work and leisure. An individual’s level of performance is depended on their opportunities and expected rewards, and in some cases their class and position in society. Power distance index is a dimension that was coined by Greet Hofstede. It is used to determine the degree to which individuals in a society accept inequality in authority, power, wealth and status. Greet established that cultures that have higher scores of power distance index often exemplify distrust of others. The distrust is attributed to the assumption that power rests with a few individuals and tends to be coercive. Members of the society hence embrace the perception that those individuals that hold power are the only ones entitled to certain privileges (Schlosser, 2002). Schlosser (2002) postulated the aspect that society judges people as being either courageous or stupid when it comes to tackling unpredictable ventures. Cultures where uncertainty is often avoided exemplify higher intolerance for ambiguity and tend to distrust new behaviors and ideas. Cultures that have a low score in uncertainty avoidance are more associated with lower levels of stress and anxiety, are more tolerant of dissent and deviance, and are more willing to take risks. Schlosser (2002) delved into the reluctance of some cultural beliefs that traditions are not supposed to be changed regardless of whether new inventions lead to improvements in ways of life. In such cultures, inevitable occurrences that adversely affect society such as war and other natural disasters do not help to improve some traditions. From a marketing point of view, some consumers are very reserved and do not regard culture as being dynamic and able to alter their lifestyles. Hirschman (1985) explores patterns of consumer behavior where some consumers will portray little physical or mental involvement in tackling trials and tribulations, while others will express utmost concern and disappointment. This notion points at influential people having the ability to evoke responses from people who would otherwise do nothing about situations that confront them. Children who go shopping with their parents for instance may find the courage to complain about a purchase they regard to be disappointing. As reiterated by Jim Skinner, McDonalds former Vice-president, McDonalds has managed to secure a competitive edge over its competitors by emphasizing on uncompromised cleanness standards, and high quality products and customer service in all its outlets. Cleanliness as an aspect of culture significantly impacts on consumer decision making. Public and personal hygiene is regarded in some cultures to be something of high value and with immense implications, while in other cultures it does not matter. This aspect is illustrated by Hirschman (1985).who points out that oral healthcare has no significance in some parts of rural Africa and therefore it would be pointless for marketers to identify and target such a population as a potential market for toothpaste. Nature as the most tangible environment-oriented value has been discussed by Hirschman (1985), who noted that nature in some cultures is regarded as something to be conquered or improved upon, while in other cultures it is deemed to be something that has negative attributions. This aspect has had far reaching connotations in marketing with more emphasis being laid on green marketing where marketing activities are supposed to be in consideration of their impact on the environment. Other-oriented values concern aspects such as age, gender, family and cooperation. Values that concern age regard to the extent to which consumer behavior and other activities are determined by whether the individuals in question are old people, youth or children. In some cultures children are held in high regard and daily activities are modeled around the interests and concerns of the youth and children. It has been argued by many social scholars that western societies are largely youth oriented, a factor that is discounted by Schiffman and Kanuk (2000) who argue that indeed the western society is characterized with distinct borders that render children to be unwelcome especially in workplaces. They go further to note that modern society has a tendency to hide children and has very little regard for the parenting role. On the aspect of other-oriented values, Schiffman and Kanuk (2000) note that modern society distinguishes values as being either predominately masculine or feminine. Men in this context are known to have an inclination towards acquisition of material wealth, respect for achievement, and assertiveness, while women are largely identified with nurturing and concern for the environment. Culture in marketing context goes further than values and traditions. It incorporates other aspects of consumer behavior that influence consumption patterns such as symbols, etiquette, language and non-verbal communication. In an increasingly globalized economy that is characterized by significant diversity in culture across the global market, marketers must seek to understand the values, norms, rituals and myths of their target market in order to offer a marketing mix that comprehensively meets the expectations of consumers. Under other-oriented values, Hirschman (1985) postulates the role of individual versus collective thinking when making decisions. Hirschman’s analysis focuses on the probability of consumers making independent decisions, or are coerced into taking up certain options by a group that they belong to. Collectivism refers to coming together of individuals with common interest to form strong cohesive groups to which the individuals have unquestionable loyalty. Cultures that emphasize individualism are found in countries such as the U.S.A and Australia, while collectivism is more common in countries such as India, Japan, and most African countries. Consumer purchasing behavior is depended on whether consumers regard themselves to be in competition with each other, or are cooperative and employ collective decision making processes. Social researchers have however established that people are likely to achieve success if they form conglomerates and alliances. Social stratification and Demographics Social class refers to the homogenous and enduring social divisions that are ordered hierarchically and where members of a class share common interests, behavior and values. Consumer purchasing behavior is to a large extent influenced by social class. The social status of a target market has been considered by some market researchers as a more accurate predictor of consumer behavior than income or occupation. The concept of social class infers that individuals are ranked according to access to or ownership of what society considers being of value, such as the amount of wealth one has accumulated, where one resides, or their level of education. Despite the fact that social classes especially in industrialized countries are not tightly defined, social structuring especially in developing countries represents social expectations of lifestyle and estimation of honor and respect that an individual commands. Factors that determine social structuring can be categorized into three classes: economic variables, interaction variables and political variables. Economic variables include occupation, wealth and income. Interaction variables refer to factors such as personal prestige, socialization and association. Political variables include power, mobility and succession, and class consciousness. The income level of an individual or household is perhaps the most significant determinant of their spending habits. Income level and accumulated wealth determines the purchasing power of consumers. An in-depth evaluation of the income bracket in which the target market falls is essential in determining the appropriate pricing of products. The foremost social class determinant of consumer behavior is occupation. An evaluation of the occupation of target market can enable marketers to identify and distinguish variation in consumption patterns. A good occupation essentially comes with a better salary, which implies more capability to exercise discretion and freedom in consumption. Wealth and income pertain to material possessions which in turn symbolize the class an individual’s belongs to. Schiffman and Kanuk (2000) observe that marketers tend to position product brands as symbols of class or status. As noted by Schiffman and Kanuk (2000) consumers tend to feel more at ease in the midst of other consumers who exemplify similar behavior and values. This demonstrates the link that exists between prestige, socialization and association. Prestige describes the respect that individuals have for each because of shared values and interests, whilst association has more to do with similarity in lifestyles. Socialization involves the practical acquisition of skills, customs and attitudes that enable them effectively participate in matters that pertain to the social groups they belong to. The degree to which members of a social class are aware of the factors that distinguishes them is referred to as class consciousness. Power as a political variable describes the ways in which leadership emerges within n a group. The contemporary family unit for instance, has witnessed a drastic shift in the way parents relate with their children. The authority and controlling nature that parents had on their children is gradually diminishing, as children inevitably seek ways to exercise their freedom of choice. Mobility and succession describes the stability of stratification systems. Succession involves the process of the younger generation inheriting the positions of their predecessors. The single most important determinant of class stratification is values, which refers to shared beliefs on what is considered to be acceptable behavior. The extent to which an individual accurately fits in a given group is determined by the degree to which they hold the values that the group subscribes to. Demographics refer to how populations are distinguished based on population density or size, distribution, individual characteristics and structural formation. Consumer behavior is influenced by factors that are directly or indirectly related to demographics. They include age, occupation, income and level of education. Contemporary studies in consumer buying habits focus on emerging demographic trends such as the increase in the number of women in employment, single-person households, ethnic diversity and the disruption of the social class (Hirschman, 1985). The most significant demographics aspect that marketers consider when formulating marketing strategies is the size and distribution of population. An evaluation of population distribution and density enables marketing managers to make important decisions regarding the location of stores and retail outlets. A study of the occupations of people in a given geographic location can enable marketers customize products to fit the preferences and needs of the population. An important consideration for marketers when segmenting markets and developing a marketing mix is the average age group of the targeted market. Consumer needs and preferences are to a large extent influenced by the age of the consumer. People of the same age group are most likely to portray similar attributes in behavior and expectations. Marketers have a better chance of segmenting the market by evaluating the educational background of the target market. An understanding of the level of education enables marketers to determine the type of promotional activities and content that the target market can discern and relate to. Technological innovation has for instance not only changed how McDonalds does its business; it has also enabled the food giant to effectively segment its target market. McDonalds has effectively employed technological concepts to customize its marketing mix to appeal to youths and children. A significant development in most of McDonald’s outlets is the provision of free internet services and promotion of portable Nintendo DS meant to appeal to teens especially students. Reference groups A reference group refers to a group whose values and perspectives are held in high regard by an individual and which form the basis of the individual’s current predisposition in regard to behavior, feelings and beliefs. Reference groups are a major determinant of consumer behavior especially among young consumers as they can easily be influenced. Reference groups could be a group of friends, co-workers or a category of shoppers who hold certain values that bind them. Reference groups can be categorized into classes that include primary, secondary, dissociative and inspirational groups. Primary groups mainly consist of the family and close friends. They are considered to have the biggest influence on consumers, as they are characterized by more frequent interpersonal contact. Secondary groups in contrast are characterized by minimal face-to face interaction. They are typically less influential and comprehensive because of their sporadic nature. Good examples of secondary groups include community organizations, religious groups and schools. Inspirational groups are those that seek to adopt the behavior, norms and values of others. In marketing context, consumers tend to adapt themselves to positive attractions regardless of whether their abilities and rationalizations are realistic or not. In contrary, groups that portray less desirable tendencies are referred to as dissociative groups. The values and behavior they exemplify evoke indifference and disassociation. Individuals are thus motivated to join groups that are appealing whilst they dissociate themselves from those that have less appeal. According to Bateman and Snell (2004), the influential form of groups can take three dimensions: normative, informational, or identification. Normative or utilitarian influence happens when individuals are obliged to fulfill the expectations of a group so as to gain some form of reward or to avoid sanctions. This can be viewed as trading compliance with a form of reward. The need for approval and other symbols of esteem provide the incentive for individuals to comply with demands of the group they associate with. Non-compliance has its costs that may include restrictions on freedom of choice or banishment. A consumer is thus motivated to act by the perceived profit in interacting with a given group (Hirschman, 1985). Informational influence refers to how individuals accept the opinions and behavior of other people on the premise that they reflect vital and credible reflection of reality. Informational influence becomes quite apparent in the event that a consumer is faced with a difficult choice to make regarding the options they have in the market. Difficulty in assessment of product attributes and benefits may compel a consumer to try a product by virtue of the fact that it is acceptable to a certain individual or group of people. Children for example, may want to have their meals at McDonalds simply because they will get a chance to meet and interact with their peers. Identification or value expressive influence occurs when consumers seek to satisfy needs that pertain to psychological association. This follows an individual’s prior internalization of a group’s norms and values which then evoke the desire of the individual to identify or associate with the members of the group. The underlying motivation in identifying with the group is typically the realization that an individual’s mannerisms and lifestyle are consistent with values exemplified by the group of interest. It is however important to note that the influence that reference groups have on individuals varies depending on the individual and situation. Activities that are considered to be of much essence to a group may evoke more pressure for members to conform to norms of the group. Secondly, individuals that have low self-esteem and confidence are more susceptible to external influence. Thirdly, groups are likely to have more influence on individuals if the product in question attracts so much attention or is considered to be a luxury. Lastly, the degree to which reference groups are likely to influence individuals is subject to the level of their commitment to the group’s norms and values (Hirschman, 1985). Children are most susceptible to external influence by virtue of the fact they are still in the early stages of the learning curve, and more so because of their social nature which makes them come into contact with other individuals that have more influence, commonly referred to as opinion leaders. Opinion leaders exert their influence when individuals seek clarification or information regarding the choices available to them. Younger people when faced with purchasing decisions seek the opinion of family members or friends. This practice is more pronounced when the individual is in need of social approval and has to make consultation before making decisions. Families and households The most tangible external aspects that directly influence consumer behavior are the family unit and friends. Purchase decisions that are made within a household require more consideration and consultation. The family unit has undergone substantive changes in its composition and size, to the extent that it’s more preferable to refer to it as a household. A household may be made up of people who are related or non-related. Marketers are increasingly using the concept of household for analysis because of the rapid increase in the number of non-traditional and non-family households. Consumption patterns change as the family goes through its life cycle. As the family evolves, the priorities, needs and desires also change accordingly, consequently affecting what can be afforded and how purchasing decisions are made. The change in external environment and lifestyles has rendered the concept of family life cycle redundant, and emphasis is now on the household life cycle as a more relevant point of reference and analysis. The family as the foundation of society influences the decisions that individuals make regardless of their background. The family set-up and size however varies depending on the culture of a place. Families can be very large in some cultures, which are often a demonstration of the wealth the family owns, or a way of ensuring the older members of the family are taken care of in later days. The western cultures however believe in having smaller families in order to enhance economic viability and provide the best for all members of the family. According to Schlosser (2002), the increasingly competitive global landscape has resulted in the need for workers to spend more time in the workplace. There has also been a drastic increase in the number of women in employment, inevitably resulting in less time allocated for preparing traditional meals at home. A research undertaken by Glazer (2009) indicates that a foremost concern for the modern working woman is the little time they have for attending to household matters such as preparation of meals for their families. The concept of family has been well considered in McDonalds marketing strategy. The company for instance initiated the ‘the global mom’s panel’ which comprises of a team of concerned mothers that provide the company with critical information and feedback regarding the best way to address family concerns about healthy and balanced food diets, and the most appropriate way to communicate to families the company’s position regarding these concerns. Conclusion The fast paced growth in the global economy has resulted in an increase in jobs that demand more working hours. Poverty of time and the increased popularity in fast food consumption are largely attributed to changes in working schedules, as more people are compelled to spend more time in their working places, with a big percentage of them having to take up multiple jobs. Changes in the nature of work have significantly impacted on lifestyles and the nature of decisions that consumers make. Consumer decision making may be influenced by factors from external sources such as culture, reference groups, the family, social class, technological innovations, opinion leaders, policy and legislation and consumer protection. The most significant of these factors is culture. Culture refers to how people behave by virtue of interacting with the wider society. Much of what people do is shared behavior that passes on from one member to another. Culture is a broader concept that involves the larger society. What may be more relevant to marketers is what happens in sub-cultures, or smaller groups to which individuals belong. Members of a sub-culture share common values in regard to ethnicity, special interests, religious orientation, or geographic location In an effort to influence consumer decisions, marketers often employ cultural representations in their promotional activities. The strategy is normally to evoke attention from consumers by using cultural definitions that can easily be understood and embraced by targeted consumers. In so doing marketers seek to enable the consumer relate better and feel more associated with a particular product because of the correlation between the product and cultural values. A foremost objective in formulating marketing strategy is to identify and build on the differences and similarities between the behaviors of different sub-cultures. Marketers capitalize on trends in sub-cultural behavior to develop more effective tactics and innovations such as new product lines, sales channels and added value. References Bateman, T. S., & Snell, S. A. (2004). Management: The new competitive landscape [2nd Ed.]. McGraw-Hill: New York, NY. Hirschman, E.C. (1985). Cognitive processes in experimental consumer behavior. Research on Consumer Behavior, 1, pp. 67-102. Hamansu, S. M. (2008). Consumer behavior [cit. 05.12.2010] Available at http://knol.google.com/k/consumer-behaviour# Macdonald, E., & Sharp, B. (2000). Brand awareness effects on consumer decision making for a common, repeat purchase product: A replication. Journal of Business Research 48 (1), 5- 15. Schiffman, L. G., & Kanuk, L. L. 2000. Consumer behavior (7th ed.). Upper Saddle River, NJ: Prentice-Hall. Schlosser, E. (2002). Fast food nation. New York, NY: Perennial. Read More