The Importance of Maximizing Consumer Satisfaction - Case Study Example

Consumer Choice Consumer choice is an important factor in determining the well-being of an individual in the modern society. It is still not clear if increasing consumer choice is actually creating the desired affects of improving the utility of individuals. A variety of options to choose from has always been intuitively beneficial to an individual. Studies have shown that consumers prefer to have options, which make their consumption decisions (Foxall, Goldsmith & Brown, pp. 123-128, 1998). However, recently there have been questions about how much choice is optimal. Study of consumer behavior helps businesses understand the effectiveness of their marketing efforts and to improve their effectiveness. With research regarding the psychological factors that influence the consumer decisions, that businesses intend to communicate with their market in the most effective manner. At the same time, the study of consumer behavior exposes the limitation of the process and helps businesses understand that consumers can only process limited information effectively. These studies help to enhance effective communication with consumers. However, at times businesses use them for manipulation of the consumer itself. Theory of consumer choice stresses on the importance of maximizing consumer satisfaction. Each consumer has a limited budget, and has to use the available resources in the best possible way. Since, choices are numerous the decision allocation of budget between different products involves a trade-off (Solomon, Bamossy, Askegard & Hogg, pp.13-19, 2009). A consumer optimizes his utility at a point where the budget constraint line of the consumer is tangent to his indifference curve. An indifference curve on the other hand is any combination of goods that will give the consumer an equal level of satisfaction making an individual indifferent about any combination on an indifference curve. Economic theory regarding consumer choice predicts that the utility of an individual increases at a decreasing rate. This marginal decrease in utility enhancement of an individual implies that there must be a point where the costs of additional consumer choice will exceed the benefits of the incentives provided by the additional choice. A limitation faced by the consumer choice theory is that the model only predicts indifferent between two particular goods and it is not so useful in helping us find out an optimal balance when numerous good and choices are involved. However, the theory makes us understand that a rational consumer always aims to maximize his satisfaction given a particular budget constraint. It is possible that there is a point when consumer choice can become a nuisance. Just imagine if an individual has to choose between twenty different cars to buy, it might provide utility to the individual to have this much choice. However, if he had to choose between a thousand different models and variety of cars, he might have too much choice to cause him confusion. Firstly, he might not have enough time to gather enough information regarding each choice presented, secondly the information can be too much to process for an individual. Therefore, research concludes that there are limits to the level of choice desirable for the society. In addition, through the understanding of the free market economic theories, if markets operate freely than the invisible hand of the free markets will itself determine the optimal level of consumer choice for an economy. When available choices are less than optimal consumers will encourage the introduction of new products in the market through their purchases and vice versa, when consumer choices are more than desirable than consumers will tend to eliminate inefficient or undesirable choices through rejecting those product choices. It is important to understand that most product markets do not operate in a perfectly competitive environment. Consumers do not have all the market information available to them when choices are more than optimal. Therefore, consumers tend to make their decisions with the information available to them regarding the product choices. This implies that quality products, which might be optimal for the society, do not get consumer votes, if adequate product information is not available to the market or the consumer. Marketing therefore plays an important role in the communication of information to the mass market through various media. Understanding that the availability of perfect information to the market can lead to optimal level of consumer choice promotes the idea of marketing information to the consumer. However, as companies know that consumer choices are based on the information available there is a direct tendency of businesses to provide positive information to the market and to conceal negative information. As companies only convey positive product information to the market the consumer choice decision remains less than perfect. In general, companies will tend to provide false information to their target audience but that problem resolved by government intervention through its various regulatory bodies. However, regulation cannot enforce a company to provide incomplete information. This results in creation of choices by the consumers after analysing pros of a product and neglecting its cons. Various methods of marketing affect consumer behavior in completely different ways. A consumer’s perception of a product is different depending on the marketing process chosen to inform the consumer about a particular product. This was revealed in an extensive survey conducted to find the differences in consumer choices when exposed to online market conditions as opposed to supermarkets. Distortion of information using online marketing is a common practice of many businesses selling their products online. Consumer choices change based on the available information, a consumer prefers to purchase products that appear to be larger through online marketing. In a supermarket environment, a consumer chooses products based on the direct information available. However, purchase decisions of certain products alter by the use of certain fragrances that could appeal to the consumer. Creating a suitable ambience has a significant impact on consumer choice. Therefore, the decision to purchase a product depends on the available information. Every business today has its focus on consumer needs. It aims to gather sufficient information regarding the requirement of the consumers, in its target market, and intends to satisfy their needs profitably. The goal of modern businesses is customer and consumer satisfaction and the intention is to profit from the business (Desmond, pp. 83-91, 2003). In other words, businesses are targeting on increasing consumer satisfaction through their products and services. Therefore, businesses that result in a satisfied consumer will be successful and profit during the process. We still need to address the question if consumer satisfaction is quantifiable in an economy where availability of information is less than perfect. Studies suggest that too much choice can lead to excessive confusion for a consumer and the individual is often not capable to make the optimal or best choices. This means that the consumer makes the best choice based on the information available to him. If our goal is to maximize the well-being of the consumers in an economy, we need more than a market mechanism to create a balance in the array of consumer choices available and the information conveyed to the consumer. However, once again intervention has its own limitations in the form of the costs attached to them. Regulation is only encouraged to an extent that the consumers receive accurate information regarding their purchases. Excessive intervention has costs attached in the form of reducing the incentive to innovate, thus a society is better off with little or no barriers to innovation. Consumer choices change with the availability of nutrition related information on the products (Chisnall, pp. 123-126, 1994). In the recent years a large number of consumers have become diet conscious and they prefer low calorie diet. Therefore, most brands have produced products that can cater to this increasing segment of health conscious consumers. In a typical grocery store, almost every product claims to be good for health. Therefore, the consumer is at the mercy of several choices regarding his diet. This overflow of information and variety of products confuses the consumer and does not facilitate the decision making process in an optimal manner. A variety of products so wide that the consumer cannot make an informed choice is the market a consumer enters today. As the consumer is unable to make a fully informed choice, he is to some extent controlled by the market. It is still possible to believe that the consumer has a certain degree of control over the market through his power of repeat purchase. Businesses that rely on the repeat purchase of the product due to its fast moving nature are automatically obligated to inform the consumer properly regarding the product (Engel, Blackwell & Miniard, pp. 172-181, 2001). However, this only works when the properties of the product become visible by its use. In circumstances where it is not possible to analyze the true value of the product, businesses can still benefit from providing inadequate knowledge of the product. Marketing efforts and advertising costs associated with informing the consumer are in effect to be borne by the consumer (Assael, pp. 43-45, 1998). This is because the business goal is to profit from a satisfied consumer. To be profitable, all the marketing related expenses of the business result in an increase in the product prices. This means a consumer is worse off in case the marketing efforts are not focusing on informing the consumer about the true product characteristics. The consumer ends up buying a product that was not suitable to him and at the same time, he is the one who pays for the marketing campaigns that induced him to make the wrong purchase decision. Therefore, it is important to provide accurate information to the consumers and help them make informed decisions for their purchase,s if the intention is to result in the highest possible levels of consumer satisfaction. “Recent research finds that features shared by alternatives are cancelled and greater weight is placed on the unique features in choosing among the alternatives provided” (Sherman & Dhar, pp. 23, 1996). Consumer choice is beneficial if it adds to the features of the products available. Differentiation is an important element for consumer choice to be valid. However, there is a point at which consumers will not have any additional satisfaction from increased variety of options if product differentiation is on branding and marketing techniques. Therefore, for effectively increasing consumer satisfaction products and services need to have certain physical features or functions that differentiated them from other options. This gives the consumer not only added choice of similar value by the new choice also provides him with additional satisfaction through it new features. In many instances, consumer choice can create significant level of confusion. It is understandable to have enough choice to accommodate various different elements in a specific product. However, replication of one product into many different names and brands can cause confusion (Schiffman & Kanuk, pp. 43-56, 1999). One such example of chaos experienced due to excessive levels of choice was the choice for a hedge fund or an investment fund. The growth of the financial industry resulted in the emergence of numerous investment funds. In this case, it became very difficult for clients or investors of these funds to choose the right fund for their investments. Many invested in funds that were more risky compared to their preferences, but excessive information led to confusion and wrong choices made. The time element involved in consumer choice becomes all the more important in certain situations. A person going through an emergency surgery might not have enough time to be able to choose between many alternatives. In this case, the choices involved could include the doctor who undertakes the surgery and/or the medical treatment that he chooses (Dhar & Stephen, pp. 369-378, 1999). However, when choices are on urgent matters they need to be simple and straightforward. This implies a situation where too many choices can rather confuse an individual and lead to a decision that might not make the consumer feel good at a later stage in his life. Therefore, the extent of consumer choice should depend on the level of urgency of the situation and the ability of the consumer to choose between different alternatives at a particular point in time. A study of various literatures available on consumer behavior and consumer choice makes me believe that consumers require adequate choice in order to choose what is most suited to them. Increased choice adds to a variety and more exciting world and is hence welcomed. An effort to increase the number of choices should focus more on improving the features of the products or services currently available to a consumer. This leads to encouragement of innovative ideas and techniques. Moreover, this leads to healthy competition. However, focus should not be on increasing the number of products available to a consumer. Unless improved quality is available and the consumer is better satisfied with the introduction of a new product, increase in consumer choice might just add up to increased marketing costs (Terui, pp. 45-63, 2004). Therefore, it is only justified to increase consumer choice to an extent where the benefits achieved from consumer choice exceed the associated costs attached to providing them. References Assael, H., (1998). Consumer Behavior and Marketing Action, 6th edition. PWS-Kent Publishing. Desmond, J. (2003) Consumer Behavior, Palgrave. Dhar, Ravi & Nowlis Stephen. (1999). “The effect of time pressure on consumer choice deferral.” Journal of Consumer Research. Volume 25, pp. 369-378. Engel, J.F., R.D. Blackwell, and P.W. Miniard. (2001) Consumer Behavior The Dryden Press. Foxall, G.R., Goldsmith, R.E. and Brown, S. (1998) Consumer Psychology for Marketing, Thomson Business Press. Schiffman, L. G. and L. L. Kanuk (1999) Consumer Behavior, Prentice-Hall Chisnall, P.M. (1994) Consumer Behavior, 3rd edition, McGraw-Hill Sharman, Steven & Dhar, Ravi. (1996). “The effect of common and unique features in consumer choice.” Journal of Consumer Research. Volume 12, pp. 23-32. Solomon, M., Bamossy, G., Askegaard, S. and M.K. Hogg (2009) Consumer Behavior A European Perspective, Prentice-Hall. Terui, Dahana. (2004). “Loss aversion for quality in consumer choice.” Australian Journal of Management. Volume 29, pp. 45-63. Read More