Consumer Behavior in the Sandwich Market - Assignment Example

Objective of the Report Prt New Street Branch is part of a well established and strongly branded group operating in a market which is performing reasonably well. However it is a highly competitive market and sales are showing a continuing decline over the years. In view of the challenges that Pret faces in this scenario, this report attempts to provide an understanding of drivers of consumer behaviour in this market and use it to establish any differentiators that Pret can use to position itself as being unique from its competition and hence increase footfalls at its outlet. Hypotheses The following hypotheses are based on the assumption that since the customers of Pret have very little time on their hands they are do not really have high expectations for the price paid. Hypothesis 1: Pret customers are mainly those who are in the proximity and want a quick bite. Hypothesis 2: Customers do not expect any value addition in the food (e.g. health food) and therefore do not find it any different from food served at other Sandwich stores. The literature review will help us put these hypotheses in context and develop a model for understanding drivers of behaviour for Pret's customers. Through Literature Review we will attempt to answer the following questions: What are the basic motivations of consumers which drive consumption How does a consumer process information related to consumption What role do factors like memory and attitudes have in influencing consumer choice What influence do society, family and culture have in consumer behaviour How does a consumer make decisions What is the Decision making process like Literature Review Understanding Consumers: Internal Factors Consumption behavior is a function of which individuals are. Thoughts, feelings, attitudes, and patterns of behavior determine what we buy, when we buy it, and how we use it. Internal factors have a major impact on consumer behavior. Harris Interactive. (2003) Consumer motivation A marketer's job is to figure out what needs and wants the consumer has, and what motivates the consumer to purchase. Motivation is the drive that initiates all our consumption behaviors, and consumers have multiple motives, or goals. Some of these are overt, like a physiological thirst that motivates a consumer to purchase a soft drink or the need to purchase a new suit for an interview. Bucklin, R.E. and C. Sismeiro (2003). Most consumption activities are the result of several motives operating at the same time. Researchers specially trained in uncovering motives often use qualitative research techniques in which consumers are encouraged to reveal their thoughts (cognitions) and feelings (affect) through probing dialogue. Consumer Information Processing The consumer information-processing approach aids in understanding consumptive behavior by focusing on the sequence of mental activities that people use in interpreting and integrating their environment. Katz, M.L. (1984) The sequence begins with human perception of external stimuli. Perception is the process of sensing, selecting, and interpreting stimuli in one's environment. We begin to perceive an external stimulus as it comes into contact with one of our sensory receptors-eyes, ears, nose, mouth, or skin. Perception of external stimuli influences our behavior even without our conscious knowledge that it is doing so. Bulow, J., J. Geanakoplos and P. Klemperer, (1985) Marketers and retailers understand this, and they create products and stores specifically designed to influence our behavior. For example Fast-food chains in the UK paint their walls in "hot" colors, like red, to speed up customer turnover. Marks and Spencer Plc pioneer of the prepacked sandwich market in the UK, kicking off its offering in 1981 with a range of six simple flavors including egg and cress and prawn mayonnaise. M&S steers entering customers directly into the produce section, where they can smell and touch the food, stimulating hunger. In 2005, the range of sandwiches, wraps and baguettes runs to around 80 varieties including the healthy eating sub-brand Count on Us as well as the mainstream Go range. M&S is recognized as an innovator in the sandwich market and has a reputation for providing high-quality products. Loder, T.C., M.W. Van Alstyne and R. Wash (2006). New product launches for 2005, as detailed in the New Product Briefs section of this report, include Crab Mayonnaise with wild rocket on oatmeal bread and All Day Breakfast, consisting of free-range egg mayonnaise, pork sausage, sweet cure bacon and ketchup on white bread, both in the Go range. M&S has also developed the world's first sandwich packet with a foldout tray designed to catch the crumbs. This process is called selectivity. Selectivity lets us focus our attention on the things that provide meaning for interpreting our environment or on the things that are relevant to us, while not wasting our limited information-processing resources on irrelevant items. There are just as many now as there were before, only now you are selectively attending to them, whereas you previously filtered them out. Marketers continuously struggle to break through the clutter and grab consumers' attention. Advertising and packaging is designed to grab our attention through a host of techniques, like the use of contrast in colors and sound, repetition, and contextual placement. Loder, T.C., M.W. Van Alstyne and R. Wash (2006). It's however evident that many consumer pay so much attention to many of the ads seen during the commercial breaks; some may even have laughed out loud at a few of them. Consumers' ability to store, retain, and retrieve product information is critical to a brand's success. When information is processed, it is held for a very brief time (less than one minute) in working, or short-term, memory. If this information is rehearsed (mentally repeated), it is transferred to long-term memory; if not, the information is lost and forgotten. Once transferred to long-term memory, information is encoded or arranged in a way that provides meaning to the individual. Information in long-term memory is constantly reorganized, updated, and rearranged as new information comes in, or learning takes place. Moe, W.W. and P.S. Fader (2004). Information-processing theorists represent the storage of information in long-term memory as a network consisting of nodes (word, idea, or concept) and links (relationships among them). Nodes are connected to each other depending on whether there is an association between concepts, with the length of the linkages representing the degree of the association. A network model of long-term memory. When Edwin Land invented the first Polaroid instant camera, knowledge structures for cameras changed to reflect the association between photography and instant output. Now, knowledge structures are changing to reflect the new I-Zone camera. Harris Interactive (2001). The complete network brought to mind when a product is activated is called the product schema. Knowing the set of associations that consumers retrieve from long-term memory about a particular product or category is critical to a successful marketing strategy. For new products or services, marketers must first select the set of associations they want consumers to have. This is called positioning the product, or selecting the brand image. Loder, T.C., M.W. Van Alstyne and R. Wash (2006). Peak Freans' unique positioning as an adult cookie was accomplished by establishing a link between the concept "serious" and "cookie." The brand position is then translated into clever ads, reinforced on product packaging, and integrated into all promotion and communication strategies. Over time, a brand's image can fade or become diluted. Sometimes consumers associate concepts that are not favorable to a brand. When this occurs, marketers reposition the brand, using advertising and other marketing tools to help consumers create new links to positive association and discard links to the unfavorable ones. O'Brien's for example is a fast-growing Ireland-based sandwich bar chain that now owns 140 outlets in the UK and the company has a global presence in the US, Singapore, Australia, Asia and Germany. The company spent 350,000 in 2005 to rebrand all its shops in the UK in order to better compete with rivals such as coffee shop chains. It has axed the Irish tagline and repositioned itself as O'Briens Hand Cut Sandwich and Gourmet Coffee. O'Brien's provides prepacked or made-to-order sandwiches, gourmet coffees and soups, but is primarily characterized by its 'Build Your Own' sandwich offering. Generally speaking, a brand extension is more likely to be successful if the set of associations for the extension matches the set of associations of the core product. Laudon, K.C. (1996) Would Lifesavers brand toothpaste sell Probably not, because the associations for Lifesavers (sweet, candy, sugar, fruity) are not the same as those for toothpaste (mint, clean, noncandy). On the other hand, a Lifesavers brand sugared children's cereal with colorful, fruity rings has a much better match of associations. Attitude formation and change. The set of beliefs consumers have stored in long-term memory provides another critical function to marketers: It provides the basis for a consumer's attitude toward a brand or an ad. An attitude is an overall evaluation of an object, idea, or action. Attitudes can be positive or negative, and weakly or strongly held. Lai, Y.L. and K.L. Hui (2005). The statement "I love Ben & Jerry's Vanilla Toffee Crunch" is a strong, positively valenced attitude toward a product. The statement "I dislike the new Toyota ad" is a weak, negatively valenced attitude toward an advertisement. Marketers work hard to continuously monitor consumer attitudes toward their products. Among other things, attitudes can indicate problems with a product or campaign, success with a product or campaign, likelihood of future sales, and overall strength of the brand or brand equity. A popular perspective is that attitude has three components: cognitive, affective, and co native. The cognitive component reflects the knowledge and beliefs one has about the object (e.g., "Digital Club Network is an on-line live music Internet site."), the affective component reflects feelings (e.g., "I like the Digital Club Network site") and the co native component reflects a behavioral tendency toward the object (e.g., "I will become a registered user of digital clubnetwork.com"). Harris Interactive. (2003) Thus, attitudes are predispositions to behave in a certain way. If you have a favorable attitude toward a politician, you will likely vote for him or her in the next election. Because of this, many marketers use attitude measures for forecasting future sales. It is important to note, however, that the link between attitudes and behavior is far from perfect. Consumers can hold positive attitudes toward multiple brands but intend to purchase only one. External economic, social, or personal factors often alter behavioral plans. Understanding Consumers: External Factors In addition to the internal factors, consumer behavior is also shaped to a large extent by social factors, such as culture, family relationships, and other aspects of the external environment. Montgomery, A.L., S. Li, K. Srinivasan & J.C. Liechty (2004). Awareness of these influences can help marketers to identify groups of consumers who tend to think, feel, or act similarly and separate them into unique market segments. Aspects of the marketing program-such as product design, advertising, and pricing-can then be tailored to meet the unique needs, values, and goals of these distinct groups. Group influences on individual consumer behavior. Bulow, J., and P. Klemperer, (2006). While the demographic pattern for purchasing from specialist sandwich shops is broadly similar to that for supermarkets, there is some evidence of a slightly more upmarket bias to the former, reflecting the more exotic varieties and premium offerings that tend to be available from the likes of Prt A Manger. In both cases, however, purchasing is highest among C1s, indicating that low-level office workers are the key targets for these outlets. While convenience is a key issue to the appeal of sandwiches for office workers, the fact that those on lower incomes are more enthusiastic purchasers indicates that their relative cheapness is also an important factor. Twenty two percent of those living in London buy from specialist sandwich bars, compared with only 9% of those living in the South West and 6% of those in Scotland, reflects the high concentration of these types of outlet in the capital, although London is where purchasing of sandwiches is highest, regardless of where from. Katz, M.L. (1984) The up market nature of sandwich bar customers is also suggested by the fact that nearly a fifth of broadsheet readers purchase from such outlets, compared to 14% of popular tabloid readers. Car owners are more likely to buy regularly from supermarkets and sandwich shops, and indeed are generally more likely than non-car owners to purchase sandwiches at all, which reflects the convenience of the sandwich for the on-the-go consumer The influence of groups on consumer behavior tends to vary with a variety of group and product-related factors. For example, the more the group is perceived to be a credible, valued source of approval or disapproval to the consumer, the more likely that consumer is to conform to group values. In addition, the more frequently group members interact, and the more outwardly visible use of the product is to group and non-group members, the greater the group's influence on individual consumption behavior. Family influences on consumer behavior. Families have a particularly significant influence on consumer behavior. For example, consumption behavior often changes substantially as family status changes over time. Thus, young unmarried adults, who are often focused on individual self-definition, tend to purchase products that enhance or define their self-concepts. In contrast, couples with children may be more interested in purchasing items or experiences that can be shared by all family members and, as a result, may spend less on individually oriented products. Moe, W.W. and P.S. Fader (2004). Things like sandwiches are some of the options that are bought on daily basis buy members of almost 90% of families in the UK. Family membership also leads to a greater need for joint rather than individual decision making, further complicating consumer behavior at the household level. For example, the person who buys a product may not be the ultimate consumer of the product. Or perhaps the husband and wife have differing levels of involvement with certain product decisions, leading to different types of separate decision processes that must be integrated before a choice is ultimately made. Moorthy, K.S. (1984). Understanding the dynamics involved in joint decision making and which family members influence which types of decisions has important implications for marketers interested in directing marketing efforts to the right person. Importantly, these family dynamics and lifestyle transitions are complicated by the decline in traditional households and the accompanying rise in nontraditional family structures, such as cohabitating couples or couples integrating families from previous marriages. Mussa, M. and S. Rosen (1978) Cultural and sub-cultural influences on consumer behavior. Culture comprises the common meanings and socially constructed values accepted by the majority of members of a society or social group. It includes such things as shared values, beliefs, norms, and attitudes, as well as affective reactions, cognitive beliefs, and patterns of behavior. Typically, when we think of culture, we tend to think of differences among individuals from different countries or regions of the world. Laudon, K.C. (1996) With the increasing globalization of the world economy, understanding differences and similarities in consumer behavior across cultures becomes increasingly meaningful, with important implications about the degree to which marketing strategies can be standardized across countries and cultures, or localized to reflect country or region-specific cultural distinctions. One important cultural difference is the degree to which the self is defined as independent from others versus interdependent with important others. Odlyzko, A. (2003: The major customers for Subway are of Indian and Pakistan origin as tastes for the sandwiches sold here suit there tastes. The customers also choose the type of fillings for the sandwiches, which make the customer, make an independent choice. However the variety of choice is limited. The food is also relatively cheap as compared with that from other outlets. This target market is obviously outside what Prt should concentrate on. Individualistic cultures, such as the UK, tend to foster an independent sense of self, with the self believed to be a set of internal attributes unique to each person. Collectivist cultures, however, such as China, foster an interdependent sense of self, with the self-believed to be inseparable from others and the social context; person-specific attributes are less important in self-definition than are interpersonal relations. Lai, Y.L. and K.L. Hui (2005). These differences in self-definition affect a variety of consumer behaviors in the UK sandwich market, including emotional reactions to advertisements, the degree to which information from others is valued when making consumption decisions, and gift-giving behavior. Increasingly, Internet marketers have come to realize the value of subculture segments and have tailored Sandwich offerings and/or Web site content to appeal to particular subcultures, most often demographically based, and to foster a greater sense of community and connection among subculture members. For example, Village.com features content of particular interest to women and offers forums for discussion of issues relevant to its users. Harris Interactive (2001) The Consumer Decision-Making Process What consumers think and the social environment they live in determine what they buy and how that purchases decision is made. Typically, the decision process is described as a series of five stages. The first stage, need recognition, occurs when consumers perceive a difference between their ideal and actual states. Hann, I.H., K.L. Hui, T.S. Lee and I.P.L. Png (2005). Persuasive advertising often prompts need recognition. Consumers then begin the information search process by conducting an internal search of their own knowledge structures, followed by an external search for information from friends, family members, salespeople, and advertisements. This step can clarify the problem, providing criteria to use for assessing product alternatives and resulting in a subset, or "consideration set," of potential choices. These options are then assessed more completely in the third stage, alternative evaluation. In this stage, products in the consideration set are compared with one another. Sometimes a simple heuristic rule of thumb, such as "I'm going to buy the cheapest product" is used. At other times a more complex strategy, such as a weighted-average model that compensates for product strengths and weaknesses, is used. After examining each alternative, consumers are ready to purchase, the fourth step in the decision process. Finally, after buying, the consumers enter the post-purchase phase of the process, during which the performance of the chosen alternative is evaluated in light of prior expectations. Anderson, S.P. and A. de Palma, (2005). Consumers will be satisfied with the product if it meets or exceeds expectations; dissatisfaction occurs if the product does not meet expectations. In a nutshell sandwiches are seen largely as a convenience food, the bulk of sales are therefore for takeaway, be it from supermarkets and other retail outlets, or from specialist sandwich bars. There has been a rapid proliferation of such specialist sandwich shops in recent years, some of which also offer eat-in options, while many coffee shops also offer sandwiches to take away or eat in. Despite an increase in the eat-in sandwich options available to consumers, the desire for convenience has kept the takeaway sector growing at a faster rate than eat-in over the last five years. Akura, M. Tolga, and Kannan Srinivasan, (2005). Why consumers behave like that There are two main issues can be thought about. Is that because people are getting busy They have no time to eat or they would like to eat at office satisfies their social need Another key thing is: is that because many shops have different price for 'eat in' and 'take away' and that reflect people's choice And there is really evidence from the later primary research about people buying sandwich influenced by price. Petty, R.D. (2000) This model of consumer behavior, while very useful, is highly simplified and does not always accurately reflect the decision process consumers follow. Acquisti, A. and H.R. Varian, (2005) Consumers may not always proceed linearly through the five steps as described, and sometimes they may skip certain steps entirely. However, the model is a close approximation of the process for most consumers for most purchase occasions. We are all consumers. Understanding why we behave as we do is integral to an efficient transfer of goods and services in a market-driven economy. Model The literature review helps us in establishing a probable model for drivers of consumer behaviour in context of Sandwich shops. The assumption underlying this model is consumers decisions are a combination of immediate needs and past attitudes, choices and values. The model attempts to track back all the decision steps and influencers in the consumer's decision process. For the purpose of this study, we will establish through Primary Research: Who are the main customers of Pret What is main benefit that they look for in the food What prompts their visit to the Shop This information will help us analyse what are drivers a customer to visit a Sandwich shop. And for the Pret customer what are the distinguishing features which can be exploited in order to increase visits to the shop. Research Methodology Methodology The Primary Research was conducted at two levels: 1. Face to Face interviews with current and potential customers of Pret : To identify drivers of consumer behaviour 2. Guided observations at competitor's shops : to find out any differences in marketing mix as compared to Prt Research Instrument Used A Structured questionnaire was used for the purpose of the face to face interviews at Pret. Sample Design 200 Random interviews were conducted with the help of the questionnaire. The reason for keeping the process of respondent selection random was to ensure correct representation of actual Pret customer base. Analysis The analysis section has been divided into two parts : 1. Micro level - where we look at the consumer level data in order to identify the drivers of consumer behaviour at the Pret shop. Here we will look at the findings of the Primary research to recommend potential differentiation options for the shop. 2. Macro level - to understand Pret's current strategy and position in the market. Using this we will attempt to make recommendations at an overall organizational level. Analysis at Micro level - Findings of Primary Research Findings of Face-to-face customer interviews We shall look at the findings of the interviews separately for current and potential customers. 1. Current Customers Profile of Current Customers The above figure shows that majority of Pret's customer's are Office Workers. The next largest group is a medley combination of tourists, retired people and housewives - clubbed as 'others' in the chart. Students also form a good proportion of the customers. Since the needs of these three groups of customers is very varied it is necessary for Pret management to focus on their most important group of customers - that is, office workers. However, there is also an opportunity to increase their customer base among the other groups of customers. Factors Influencing Choice of Shop As apparent from the above figure, Taste is the most important factor which customers consider while choosing a shop. Even though Pret's has positioned itself on the Healthy and Natural Food platform, this factor does not actually influence customer choice of shop to a large extent. In fact the interesting thing to note is that quite a few of the customer's chose to come to the shop because of its location. This means that there is an opportunity for Pret to increase footfalls by exploiting its location. This could be done by localised advertising and innovative shop front merchandising Shop Information Across customers the most important source of information about the shop was seeing it on the street. This fact gives more credence to the above argument that Prets should increase visibility in order to increase footfalls. 2. Potential Customers Profile of Potential Customers Among the potential customers of Pret's also the majority is comprised of those people who come to that side of town for work purposes. Therefore combining this observation with the fact that Pret's current customer's are also predominantly working people, the opportunity that clearly presents itself is that Pret should position itself as an ideal place for working people to lunch. Which Sandwich shops are Working people likely to visit At an overall level, less than half of the potential customer's are aware that Prets sells sandwiches. And among working people most potential customers would prefer buying a sandwich at the Supermarket or at Subway. This finding indicates that most of the potential customers are not coming in to Pret because they are not aware that it sells sandwiches. Some of the customers may be entrenched with other brands like Subway or EAT but most of them who buy from the Supermarket are highly likely to convert to Pret. This is especially so in the case of working people. Therefore the way forward for Pret definitely has to focus more on the working person. Factors Influencing Choice of Shop Most respondents chose taste of food as the main influencing factor in the choice of shop. Location and price are the next most influencing factors. This mirrors the influences noted among current customers. Which indicates that once the potential customer is brought in, he/she is likely to patronise Pret further. However, popularising location stays an important objective for Pret. Shop Information Reiterating the above made observations, it is noticed that most potential customers walk in after seeing the shop on the street. Therefore it is important to increase the visibility of the shop not only on the street, but also have signs etc. which indicate the presence of the shop at its current location. The other thing of course is to increase localised advertising in order to fuel word of mouth publicity. Other Notable Figures Only 37.5% of the respondents, who know Prt sells sandwiches, like to buy sandwich from Prt. Only 8% of the respondents regard Prt as their first choice for buying sandwiches. Findings of Observations done at Competitor Locations In new street, PRET's competitors include supermarket (TESCO), sandwich shop (EAT, SUBWAY, Greggs, Benjys) and coffee shop (Starbucks). The following states the findings of the observations made at each of these shops : STARBUCKS Shop location: 1minute walk from Prt New Street Shop Consumer: most of the shop customers buy coffee; the majority of people all come in with their friend; normally customers sit down and drink coffee having a rest. Product: if customers drink in the shop, the hot drinks would be served in proper glass coffee cup. It may give the customers one kind of warm family's feeling, also could reduce the cost. Process: After the customers have been charged, they will be asked to wait for their drinks at another side of counter. This can reduce the queue time. Promotion: In the shop, there are many small advertisement leaflets, which not only introduce their services but also tell the stories about coffee culture or social responsibilities, such as fare trade. SUBWAY Consumers: Its customers are India & Pakistan people and black people primarily. Product: Compared with sandwich shops, the SUBWAY customers can choose the ingredients they like, five different kinds of baguette bread are available. The flexible ingredient choosing gives customer's more options. Moreover, its food taste suits and approaches the India & Pakistan people and black people's food flavour. TESCO Consumers: I saw many customers in the supermarket, did not only buy the sandwich, they have also bought very many other things. Its means that the customer chooses the supermarket the main reason, is not the product's price, they want when they buy the sandwich, by the way they can buy some other things at the same time, but these things can not buy in the sandwich store. This is the supermarket superiority, its product quantity is more than other stores, and customer can have more choice. Product: Supermarket food is not very delicacy, but very cheap. EAT Promotion: Outside its store has a striking advertisement, above has its product introduction, when the customer passes through its store, they can very clear simple understanding product information. Its also has a good sale promotion: every day after 16:00 pm, when the customers buy a sandwich, they can have a cup of coffee for free. GREGGS Price:Here product price is extremely cheap. BENJYS Promotion: Every day after 17:00 pm, customer can buy product half price in the shop Conclusions from the Primary Research Analysing the information gathered through Primary Research in accordance with the Model of Consumer behaviour proposed earlier, these are the conclusions: 1. The trigger to visit a Sandwich shop is usually the time - lunch time for office workers and other patrons. 2. The options are chosen mostly by virtue of location. Any place which is close by and more visible is chosen. 3. Among those who decide to go in to Prets, most are driven by the taste of food served there. But among the potential customers, the need is higher for taste as well as convenience; hence they prefer to go to Supermarkets. 4. Abetting customer choice of other shops is greater level of promotions done by nearest competitors. 1. Recommendations 1. The Findings of the Primary Research indicate that most of the customers of Pret are working people. Hence it is imperative for Pret management to make Pret a preferred lunch destination for most office workers in the vicinity. This can be done by understanding specifically what are the needs of a working professional who comes in for a quick lunch. 2. As identified by the current Primary Research, most working people choose Pret because of its location. Therefore it is recommended that the shop front itself should be more attractive and also there should be enough directions to the shop in the entire area. 3. In addition to enhanced visibility there is a need for localised advertisements as well, since most customers are not aware that Prets sells Sandwiches. 4. By correlating the findings of the two parts of the primary research we can note that : Main driver influencer of customer choice is taste of food Supermarkets offer greater choice and convenience Most potential customers currents buy their Sandwiches from supermarkets Therefore we can derive that, in order to move the supermarket loyal customer to Prets more choice has to be incorporated. And convenience should be highlighted. Read More