Consumer Behaviour and the Beer Industry - Research Paper Example

Consumer Behaviour and the Beer Industry Introduction Having an in-depth understanding of how and why consumers behave in a particular way is the keyto marketing success and solid bottom line on the P&L. The marketer who knows his customer the best will be most able to provide to him what he needs and will likely buy. To explain some key concepts of consumer behaviour, along with practical application of these, I will focus this paper on the beer industry in general. The beer industry reached a pinnacle in the 90’s, saw the influx of microbreweries and then the introduction of lighter beer with the turn of the 21st century. One fact has remained steady and that is the beer consumer. In recent years, however, there has been a decline in beer consumption due to a variety of reasons, most obvious of which is the evolving consumer behaviour. This essay will identify some important and noteworthy behaviours of beer consumers that have been observed or found through literature reviews. The second section of the paper will attempt to interpret the behaviours into known consumer behaviour concepts for better understanding. The final part will convert the interpretations for the use of marketers in the development and planning of campaigns to satisfy these needs of the customers. Section One Picture a roomful of men, sitting in front of the Sony Bravia TV to watch the latest English Premier League game, after a long, tiring day. Their wives and children are supping or sleeping peacefully at home but tonight is the boys’ night out. Somebody has just ordered Dominos pizza and the men are all sitting with camaraderie, joking and laughing loudly together. To complete this scene there is only one thing needed: beer. If we take the definition of Consumer Behaviour to be, “the decision process and physical activity individuals engage in when evaluating, acquiring, using or disposing of goods and services” (Loudon, p5), then the above, a typical scenario involving loyal beer consumers, can be broken down into distinct steps, each signifying one aspect of the consumer’s behaviour with regards to beer usage and consumption: 1. Evaluating: As the boys will get together and there will be carefree banter and fun, there has to be an activity (watching sports on a big screen TV like the Bravia), a venue (the living room), participants (all the five or six men), food (pizza by Dominos as all the ‘boys’ like it) and drink (which has to be beer). What can be derived from this is that when adults are relaxing and in the mood to have fun, they will likely want beer. 2. Acquiring: Getting all the things/products that the consumer thinks he might need together. This includes his friends, the TV show, food and drink. Perhaps, one of them bought the packs of beer from a grocery shop on the way. Research shows beer is most often bought by consumers from grocery shops (Beer Shopper Consumer Insights, 2006; Convenience Store Shopping Behavior, 2001). 3. Using: As the evening progresses, the men will consume all the products (e.g. TV) and services (pizza delivery service) that are available to them. The number of beer packs bought will be determined by the historical data of past similar events. 4. Disposing: By the time the evening concludes, everyone would be tired and perhaps a bit drunk. They would put the pizza boxes and the beer away. Perhaps it is easier to dispose off beer cans, rather than bottles so for nights in, consumers might prefer to get beer bottles. Some stereotypes have become connected with the consumers of the beer industry: beer is normally associated with men, big and burly, carefree-type, as opposed to a drink like Sherry (normally associated with women) or Champagne (associated with an elegant, formal setting between a man and a woman). That is not to say that women would not drink beer, just that the normal consumer would be assumed to be male. The age bracket for such a customer would likely be between 25 to 40 years and would likely be more blue-collar, upper middle class rather than high class or white-collar. Beer is also presumably cheaper for consumption, compared to other drinks. Customers are also able to find beer more easily as it is one of the most common alcoholic drinks. These stereotypes can be detected through observation or conversation with general public (small survey of random people). These also drive the way consumers and non-consumers react to beer. Seeking answers to the question as to why people like to drink beer, I gathered some information from the website Yahoo! Answers (Why do people drink beer?, 2009). The common themes found were: it is easily accessible to younger people, it is the ‘cheapest buzz’, despite the fact that it doesn’t have a great taste you acquire it, goes well with food, it has a relaxing and calming effect. Now all these answers represent the ‘perceptions’ of individuals, of how they interpret things based on their knowledge and experience (Hawkins, p327) and these vary from people to people. This is what makes consumer behaviour so interesting and scientific: the determination of cohorts which display some common themes then group them together to form specific market segments. With market segmentation in place, marketers target attributes of the product or service to specific needs of the customer identified. Psychographic research has proven that the greatest determinant in a consumers selection of his beer is the brands image. (Pope, Creet and Anderson, 1993). General observation is enough to tell us that people like to associate with certain brands which have particular characteristics assuming those to be reflective of their own Self: for example, a woman would portray being familiar with Louis Vuitton and would like to carry the LV bag just to be associated with the brand image that bag portrays. This is simple social psychology. People use particular brands or products to convey to others a certain impression (Wanke, 2008), a lifestyle selection. With experience, people come to realise that in a social setting, associating oneself with particular brands will let other people think of you in a certain light, so ‘whether your choice of drink is wine or beer, cappuccino or herbal tea, your order expresses more than merely your taste in beverages’ (Wanke, p8). Some breweries have made the fatal mistake of ignoring this insight into the customer behaviour (Chura, 1999): upset with the way consumers choose drinks based on the image they portray rather than the drink itself, one manufacturer said that he would get a campaign ready which would serve ‘drinkers who are drinking the beer and not the image’. It is sweet to know that manufacturers would like to focus on the finest beer formula or the most perfect product but they should understand what the customer, who will spend his hard earned money to buy the product, wants. Responding to the brewery’s stand, an admaker said that ‘you have to define what your brand is and what it stands for”. It all comes down to how the customer will react to the manufacturer’s presentation and would it propel him to buy – to answer these questions, consumer behaviour needs to be taken into account. The ongoing fad – or perhaps reality – of healthier eating has affected the beer industry as well. By the beginning of the 21st century, light-beer (Burton, 2004) had created a massive market for itself, - attaining 43% of the market in 2000 – reaching a record 87 million barrels (Chura, 2001). The driving factor behind this new phenomenon is the customer category of 21-27 year olds. Interesting finding about this is that they are less concerned with the excess calories and more with the fact that lighter beer is less ‘filling’ (Chura). This probably allows them to drink up more. Beer is also facing intense competition from wine and premixed cocktail drinks, like Bacardi Breezers, which are lighter and taken in small doses; according to Weller, ‘heavy drinking loses its social appeal’ (2005). That is probably due to all the publicity received by the negative effects of heavy drinking e.g. drunk driving, bad liver, etc. In a recent experiment conducted for a the campaign of Miller Lite beer, young men in bars having ‘a night out’ were filmed and recorded, to identify consumer patterns and behaviours in Philadelphia and San Diego (Smallbridge, 2003). The researchers learnt that most of the conversation shared between the men was ‘made up of bizarre stories, anecdotes with punch lines’, describing the event when typical beer consumer boys reacted when consuming beer: get together, loosen up and have fun. Alcohol usage has since ages gone been associated with people fighting despair and tragedy. Whether it’s Hollywood or general people observation, we have come to believe that any person who wants to feel lighter from the worries of the world will turn to alcohol or beer for salvation or, more realistically, oblivion. To that effect, it is safe to assume that the level of drinking would go up if the economy is not too good or people in general are feeling low and pessimistic. The prediction would be that they would turn to beer. However, recent studies showed that the recent economic crunch not only affected consumer spending and buying behaviours, it also decreased the overall sales of spirits and beer (Fewer people crying in their beer, 2007). The exact reason for this phenomenon could not be determined but based on my own understanding, I would believe this has to do with the prioritization that consumers practice of the things they need to buy with their money and perhaps, with the tighter purchasing power, beer has slid off the list of priorities to a lower spot. Bombardment of choice confuses the customer and instead of going through the hassle of gaining information and deciding what to do, the average customer steps back and opts for the simpler alternatives. The advent of microbrews in the early 90’s gave the consumer something new to taste and enjoy; Boston Beer Co.’s Adams Boston Lager led the growth of this market with phenomenal sales, year after year (Chura, 1999). But this product was so done to death by marketers that consumers felt an overload, a massive abundance of choice that instead of diving into the mess, they jumped back and out of it. According to experts, the same thing happened to the wine industry when brands were popping up left, right and centre and confused the poor consumer thoroughly (Chura). Therefore, appropriate and organized dissemination of information is important to attract the customer to a brand. Section Two This section will focus on three core aspects of consumer behaviour, relating them to the topics covered in the previous section: 1. The internal concept of self which drives behaviour 2. The Customer Buying decision process 3. Market Segmentation 1. Self-Concept Self concept is the term which describes the ‘beliefs a person holds about his or her attributes, and how he or she evaluates these qualities’ (Solomon & Rabolt, p158). Self concept is important in consumer behaviour because it determines how consumers perceive brands and understand them. When an advertisement for a can of beer is shown on TV, the customer will interpret that ad as it relates to his own understanding of himself. Thoughts like if I purchase this product, ‘it must be like me’ (Loudon, p313), representative of me or complimentary to me are going through the customer’s head, rather than thoughts like how the product is reflective of the model in the ad. There are also instances where consumers want to use a certain product because it enhances their sense of self. For example, if the head of my department is drinking a particular brand of beer, I would want to drink it too and that would make me feel more self-confident. Furthermore, customers are able to classify themselves based on their self-concepts and then attach themselves to products which display that classification. For instance, if I am an adventurous person, then I would likely choose a beer brand that is thought to be associated with adventure. This is what makes the idea of promoting images extremely important in advertising and marketing campaigns. These images fuel the self concepts of customers and will allow them to relate better than any serenades about the product’s quality or taste. Therefore, the individual creates an image of the brand in his mind and when there is congruence of that brand with his own self-concept, he would want to use it. 2. The Customer Buying Decision process The scenario of beer purchase described in the beginning of the paper can be explained with the customer decision making processes model (Hawkins, p528): Problem (or Need) Recognition Sam and his buddies had decided to watch the Friday game together. They had had a long day at the work site and wanted to unwind and have fun. They were all getting together at Dan’s place and were going to order pizza. To go along with the food and the fun, the guys needed beer. The job to get the beer was Sam’s so he understood there was a problem for him. He could either ignore the problem and save him the worry and hassle of all that would follow. Or he could choose to solve it. As buying the beer represented something he had done before, this problem did not occur to him as being extremely complicated or tiresome. He also realised that the solution would require a certain level of involvement on his part, which he would willingly give as the outcome or the solution was to his liking. Having made the decision, Sam is off to step number two. Information Search This is when Sam would want information about how to solve his problem. He can look at two sources: a) internal such as past experiences, preferences and memory or b) external which includes speaking to friends, family and advertising. In our scenario, Sam has the option of using both. On the way to his friend’s, Sam picks up Joe on the way. Joe is a connoisseur himself of spirits and has ready information about what kind of brand to buy where from. Speaking to Joe, Sam was able to decide that he was also a fan of the particular brand Joe suggested: this he was able to do after going through his memory of past experiences. Pre-Purchase Alternative Evaluation When enough information has been garnered, Sam will consider which stores he can go to, if at all he must go to a store. He will also consider how he is going to pay for the purchase. As he is normally not too keen on carrying cash, he realises he will have to use his credit card for the purchase. He is yet unsure of the actual price of the beer so he makes mental estimate of the budget for the beer, based on the amount he will need as determined in the previous step. Purchase Now Sam and his friend have pretty much decided that they want to purchase Heineken because they want to buy a lot of packs and Heineken will fit their budget. They step into the big JC Mart store because they know it is spacious and is always well stocked with beer. Furthermore, it has good parking space which will allow them to easily park, make a swift purchase and leave just as swiftly. Appreciating the decor of the store and the well lit hall, Sam and his friend proceed. Now the actual transaction is made to fulfil the need. There are multiple influencers here as well – in-store advertising or sales persons, pricing, availability of product and other alternative brands which were not considered before can change the decision. When Sam approaches the Heineken shelf, where he is directed to by the sales staff, he sees a new brand called Buzz which has great promotional offer and is placed on the shelf right in front of his eyes. Comparatively the brand that he wanted first is placed all the way down, knee-level. Instead of bending down, he and his friend decide to give this new beer a shot, especially because the promotional offer allows them to take an extra pack for free. Taking the cans, they move to the counter and make the purchase. Post-Purchase Having bought the beer and stepping out of the store, Sam feels a pang of uncertainty. He is going to present to his friends a product that he knows nothing about, perhaps which is bad in taste or worse, is drunk by losers. Shrugging, he thinks what’s done is done and if anything, this will prove to be a valuable experience for him which he will remember the next time he tries to be impulsive when buying. This step is also where the final satisfaction with the purchased product will be determined, along with the fact whether he will become a repeat customer or not. After bringing the beer to the friend’s house, he tells his friends about the new brand he has bought. He musters up a lot of excitement, trying to hide his consciousness and secretly hoping his insecurity does not show. He knows his talk is going to further raise the level of expectation the guys will have from the product but he is unsure as to what else to do. When the guys try it, the beer is fantastic with just the right amount of alcohol that they did feel the buzz but not extremely lightheaded that they wouldn’t be able to enjoy the game. Satisfied, Sam thinks he might give the brand another shot soon. Product disposition is also a factor that comes into play, and matters a lot more for fast moving consumer goods or perishables that need immediate disposing off. The disposition issue is important here whereby the customer would want to be able to easily dispose off the beer. For example, the packaging of the carton or pack is such that the empty cans can easily be filled in, pack zipped up and thrown in the trash. Ideally, at the time of purchase, the retailer would have advised the customer who is buying the beer that if he wants to be able to conveniently dispose off the empty bottles/cans, he should purchase XYZ brand. 3. Market Segmentation Market segmentation is a very important concept that came into being distinctly in the 1980’s (Loudon, p30). It basically means that the market is not a uniform whole but is made up of umpteen fragments, based on various variables. It’s up to the marketer to define the variable relevant to his product, to dig out the market segment for it and determine how to connect the needs and wants to behaviour and satisfy them. Figure 1: Beer is Enjoyed by All Types of Customers. Source: Anheuser-Busch Inc. The above figure shows the demographical segmentation of beer consumers. It is interesting to note that as far as age is concerned, consumers are relatively evenly divided with the higher percentage in the 35-49 age bracket. Another study conducted by Convenience Store News pointed to the finding that people in the 30-39 years age bracket are the most likely to go and make a beer purchase and that too most likely at a convenience store. In Fig 1, the Occupation head also has a relatively even distribution. The striking demographics are the White beer drinkers being predominantly male. The most surprising however is the percentage of high earners who are also beer drinkers: almost 60% of the beer drinkers earn over USD 50,000, in complete negation to the stereotype. According to an expert at a beverage marketing company in New York, beer companies are focusing efforts too much on young adults who are just entering the legal drinking age, and ignoring the more mature market of older drinkers. (Beirne, 2007). The older audience, comprising the Gen Xers and Baby Boomers, represent a seasoned group of beer drinkers whose loyalties also remain with beer, not with other alcohol beverages. Furthermore, the above graph shows a whopping 64% of beer drinkers to be in the ‘older’ category. The younger lot, the expert claims, is likely to aspire towards this mature slot and become beer drinkers as secondary audience. This idea worked with the drink called Pabst (Beirne) and is based on the specific behaviour of the younger audience to emulate certain ‘reference groups’ of more mature and financially sound individuals who are more capable of solid decision-making than they are themselves. The consumer in his or her ‘tweens’ is just done completing education and is starting out to work. His manager is more likely going to be a person who is well into his thirties and is, as the expert says, a seasoned beer drinker. To get ‘in’ with the office crowd, the younger adult is more likely to emulate rather than decide on his own preference at this point in his life. Also, according to research (In The US, 49% of Beer Sold Is Consumed By 25-44 Year Olds, 2007), people between the ages of 25-44 make up almost half the entire beer market. In America, 41% alcohol drinkers claim beer to be their ‘drink of choice’. These market segments must be taken into account by marketers. Implications for Marketers The entire purpose of studying consumer behaviour and having its application is the value it adds to marketing. The above discussion has many implications for marketers, which will be discussed in this section: Going back to our example of buying beer, the ‘purchase situation’ comes into play. A very common occurrence is that guys come in together, or a guy/girl comes in to buy beer with one or two friends waiting in the car; then there is the ‘usage situation’ where the group will likely drink together after purchasing the beer. These situations can be touch points for companies and retail where they are able to interact directly with customers and must approach them in a more personal manner. These situations can also be inspiration for advertisers, working on the self-concept of consumers. In industries where there is abundance of choice which makes the customer ‘fickle’, like in the Beer industry, it is advisable to give him purchase incentive in the shape of promotional offers, freebies, etc. These can help the customer make the final decision. For the beer industry in particular, marketers must acknowledge the fact that traditional consumers of beer are turning away from it for a variety of reasons such as health issues, more alternatives available, need for experimentation, etc. In countries like France, Germany, Spain and Japan, consumption is expected to further decline in the coming years. (Hein, 2009; Examine Future Trends in Beer, 2008). Marketers and strategists need to be prepared for these trends and must address the reasons why people are doing switching and offering them valuable alternatives In industries which are more sensitive to legal suits and negative publicity, advertise must be done carefully and must be very focused. Also, alternative mediums for advertising must be sought. Never let the customer get confused, feel overwhelmed or intimidated and that will likely scare him off for good. Gaining a new customer is always tougher and more expensive than retaining current ones. So keep your current customer happy. Stay away from saturated markets which do not offer much variety and room to newer products and ideas. All markets live through lifecycles so enter them when they are open and ripe, not saturated and declining. Build market niches by identifying unique segments and capture them through effective positioning Build the brand and its image, rather than trying to sell the product solely on its product qualities. The customer is not buying the product itself, but the brand and the values associated with it too. Build a strong brand name and then seek a higher price from the customer. It is shocking how much the customer will pay for his favoured brand. Offer promotions wherever applicable. Study shows that promotional offers of free t-shirts and mugs are able to get people to switch brands (Scholz & Léger, 2004) in perishable items of FMCGs where brand loyalty and stickiness is considerably low When the customer is making an actually purchase, that is the most important time for marketing as it is just one step away from being successful. Use all the 4Ps of marketing effectively. Having the best product is not sufficient – the price has to be great, the placement of the product and availability are important and lastly, any added sales promotion will make the difference between a purchase and purchase lost. Conclusion With this paper, I have attempted to explain the usefulness and utility of consumer behaviour knowledge. Taking the beer industry as a case, different applications and issues of the subject have been discussed. The beer industry has seen many changes and innovations over the years with the supplier base increasing along with the customer base. The beer industry is facing stiff challenges as the consumer is becoming more and more demanding and aware. With the issues of health hazards associated with heavy drinking becoming increasingly pronounced, it is not surprising that consumers are drinking beer less and switching to lighter alternatives. The traditional developed-country target market of beer is losing interest in the current product offering and must be presented with new and innovative forms to retain it. The lighter beer at the advent of the 21st century was able to bring life to the dwindling sales in the industry because became the answer to the new concerns being raised by the health-conscious customer. At this point in time, something like that is needed by the industry drivers to revitalise it and keep the consumer interested. To sum it up, the beer industry, just like any other industry, would fare a lot better if it accustoms itself to the changing trends and lifestyles of their consumers, detecting and serving their needs before even they are aware of them so that the customers do not end up going to competition, seeking solutions. This is how consumer behaviour fits into the field of marketing. References “Beer Shopper Consumer Insights” (2006). Anheuser-Busch, Inc. Retrieved 17 Oct 2009 from http://www.slideshare.net/tomsuharto/beer-shopper-consumer-insights Beirne, Mike (2007). “Premium Beer No Longer Such a Premium Business”. Brandweek, 48(20). Retrieved 17 October 2009 from Academic Search Elite Boston Beer crafts strategy. By: Chura, Hillary, Advertising Age, 00018899, 11/08/99, Vol. 70, Issue 46 Retrieved 17 October 2009 from Academic Search Elite Burton, Stephanie (2004). “Great Taste, More Filling”. Brandweek, 45(26). Retrieved 17 October 2009 from Academic Search Elite Convenience Store Shopping Behavior: Beer. Convenience Store News, 01948733, 05/07/2001, Vol. 37, Issue 6 Retrieved 17 October 2009 from Business Source Premier “Examine Future Trends in Beer and Wine: With a Focus on Emerging Markets, Private Labels and Innovation” (2008) M2PressWIRE. Retrieved 17 October 2009 from Newspaper Source “Fewer people crying in their beer” (2007). Advertising Age, 78(37) Academic Search Elite Hawkins. Consumer Behavior. New Delhi: Tata McGraw-Hill “In The US, 49% of Beer Sold Is Consumed By 25-44 Year Olds: This Is the Lowest Percentage Share for This Combined Age Group across Europe and the US” (2007) M2PressWIRE. Retrieved 17 October 2009 from Newspaper Source Loudon. Consumer Behavior: Concepts And Applications. New Delhi: Tata McGraw-Hill Pope, S., Creet, S., Anderson, J. (1993). What Beers all about: Molson Canadian Campaign. Canadian Congress of Advertising. Retrieved 17 Oct 2009 from http://www.cassies.ca/caselibrary/winners/Molson-whatbeersabout.pdf Scholz, Dave and Léger, Jean-marc (2004). “The fickle beer consumer”. Marketing Magazine, 109(17). Retrieved 17 October 2009 from Business Source Premier Solomon, Michael R. and Rabolt, Nancy J. (2004). Consumer Behavior in Fashion. Pearson Education Inc. The human ZOO. By: Smallbridge, Justin, Canadian Business, 00083100, 5/26/2003, Vol. 76, Issue 10 Retrieved 17 October 2009 from Academic Search Elite Wänke, Michaela (2008). “Social Psychology of Consumer Behavior.” New York, NY: CRC Press Weller, Christian E. (2005). “Sobering Economics”. Foreign Policy, (146). Retrieved 17 October 2009 from Academic Search Elite Why do people drink beer? (2009). Yahoo! Answers. Retrieved 17 October 2009 from http://answers.yahoo.com/question/index?qid=20090417233251AAubEzc Read More