Analysis of consequences for the consumer choice - Essay Example

? Analysis of Consequences for the Consumer Choice (Insulation System Manufacturing Company) Contents Contents 2 Introduction Consumer buying behaviour has always been an important consideration for the business analysis. The consumer preferences and tastes define the structure of the consumer based business. The key to success in any business is defining the consumer buying behaviours so the product can be designed accordingly. The consumers can be rational or biased. The biased consumers are those, who make their decisions on the basis of their influenced directions. The influenced directions means the product that influences their decision making more without considering the key factors of usage may lead to biased decision. On the other hand, rational consumers are those who take decision after complete analysis of the situation and their decisions are logical and justified. Therefore, all of their decisions are also considered to be the best of their wisdom within provided options. Consumers are usually thought to be free of any undue pressure and all kinds of confusions. Therefore, their decisions are analyzed in the given circumstances. For this purpose, many theories and notions have been developed. The famous demand and supply curves are, probably, the best illustrations of these concepts. On the other hand, there are few other things as well, that cause the buyers to make a decision of consuming a certain product or service. These factors affect the purchase decisions of the buyers as well as the production decision of suppliers of the same product simultaneously because more sales mean high production and supply of goods in markets. Therefore, it can be said that these are the theories of both, demand and supply. Also, these provide about the decision making choices of both, the buyers and the producers as well. 2. Classical Consumer Theory Classical consumer theory revolves around the interrelationship between consumers’ choice based upon their desires and consumption expenditures. It means that a consumer, prior to making a decision about buying a certain product or service, is rationally concerned with the preference of his choice and the potential expenditure that is likely to be incurred through that decision (Hoyer and Maclnnis, 2008, pp. 32). This is because of the fact that, a rational decision making is based upon all the factors to be kept under consideration. This includes liking, disliking, utility, preferences and expenditures of that choice. However, this relationship is very important to illustrate the patterns of personal preferences, demand and supply curves as well as consumption. This kind of theories is best to ascertain the equilibrium between the likely expenses and preferences as far as the utility of the goods and service are concerned within specific budget limits. These budget constraints are those that drive their personal preferences in order to make a purchase or not. That is why it is said that these budget limits have a lot of weightage. There is another factor that is involved in this buying decision that is utility of a product of service. Greater the utility, more preferable it is. Therefore, as described above, the equilibrium between affordability, available funds for that product of service, preferences and desires are those things which make a decision possible on consumer’s part. On the other hand, greater the demand, more supply is likely to be made by the suppliers and manufacturers of the goods in order to earn maximum out of this situation. It is assumed, in this situation, whatever quantity a consumer wishes to buy is available in market. There is no shortage of goods or services that a consumer prefers and there is no shortfall at all (Jehle & Reny, 2009). 3. Framing Effect- Behavioural Economics Framing effect refers to the way a particular product or service is presented to the potential consumers. This is all about the perception how people get it. These are usually the sales and marketing campaigns of the businesses that create the image of good (Diamon &Vartianen, 2012). Therefore, due to that image, a decision is made by the potential buyers. However, there are some other factors as well, that pertains to the buyers and is much important for the buying decisions. This may include the allocated budget, utility of the product and personal preferences of the people. On the other hand, framing creates image building for the brand publicity. If the same products are presented in two different markets, their presentation in respective markets can make the difference. Compatibility of the product with given conditions are everything to make it a bug success. Marketing gurus are experts in playing with the emotions of people. They simply portray a product in front of its customers in a way that it impacts very positively. As a result they are sold on desired prices. Its all about creation of an impact (Diamon, Vartianen, 2012). This day almost all businesses are using this very concept of framing their products and services. This way, they can easily address the needs of their customers by supplying their tailored products for them. These customized products are specifically designed for specific markets by targeting a specific segment of the market. Therefore, when presented to these markets, this is accepted warmly by the consumers. 4. Decision Making by the Consumers Consumers are independent in making their decisions. Their decisions are about buying a certain product or service in a given market. This product or service is usually bought to satisfy a personal need. These personal needs are those which create preferences that ultimately become a desire of the people. These desires are addressed by the buying decisions (Reynold and Olson, 2001). Most of the products and services are offered in markets by their suppliers by keeping in view the needs and objectives of the buyers for those products and services. This means these are targeted directly. Suppliers and manufacturers of the goods and services tailor their products, target the desired market segment and directly make them available to the customers in order to earn maximum profits. This decision making involved many factors. Some of these factors involve the preferences, needs, and allocated funds for this need, utility of this product and the presentation or framing of the items in market (Kittitanarux, 2010). On the other hand, overall it is thought that the whole decision making process is a cognitive process in which a decision of choosing one among several is to be carried out. This decision can never be seen with eye, but it’s a process of observing things that indicates that the decision has been made. Another important thing in this regard is the presence of alternatives in market (Lantos, 2010, p. 66). These alternatives, not necessarily physical options, but these could also be features available for certain goods or services that would be considered by consumers while making a product buying decision. Another difference making point is the difference of prices in available options here. The price difference in the available alternative products can also formulate decisions of the consumers. The cheaper the product may have more attraction in terms of purchasing power of the consumer. On the other hand, brand loyal consumers have more money to spend and they prefer quality instead of price. The presence of more than one competitor is also interesting in market. This, not only improves the price stability but also provide a good competition for quality game. It also goes in the favour of customers that more than one market player is striving to achieve more and more market share out of the available market size (Schiffman, 2009, p. 35). Hence, all these factors are important and make a buying decision possible among available options for a certain products or services in a given market. In other words, the above mentioned factors play pivotal role in helping the consumers to make their product buying decisions. 5. Decision 1: If Consumer Chooses Insulation System Being the producers of an insulation system, the company usually focuses on the marketing campaigns that could urge the consumers to make buying decision about their product. That is why the marketing campaign was started to save their 200 pounds. It is a psychology of a common consumer that he always has a strong tendency towards saving his money. Therefore, most of the companies use this kind of tactic in their pricing and marketing campaigns in order to enhance their sales and profitability. Moreover, this kind of behaviour also creates culture of healthy competition within the market among all the competitors. The same has been done by the insulation system manufacturing firm in this case. They have raised their prices, and now in order to attract customers towards their product, they started the campaign of saving 200 pounds per year by getting their insulation systems installed. On the other hand, this is not only the matter of attracting new customers towards their insulation system, but it is also for retaining the current customers because due to high prices, there is a chance that they could also switch towards other low price insulation systems. Here, the concept of consumer theory is very important to understand. If everything remains constant, other than the price change (which has just been increased by the insulation system manufacturing company), the decision made by the customer could change towards other competitive options. A potential customer might think that, if the quality and other features why to pay higher for these insulation systems? Therefore the concept of consumer choice theory is very important and needs to be accounted for. On other hand, the concept of framing is also important here. As far as the prices of these insulation systems are concerned, they can be covered up with the help of these sales and marketing tactics. Presentation of a product is very important for convincing the potential customers to make a buying decision about a product. If even an expensive product is shown to the customers with such customized features and a little bit briefing, this can be sold easily. The discount markets can be used for this purpose. People are usually convinced very easily to buy an expensive product from a discount market just realizing them that it’s quite cheaper from here. This is why these kinds of situations are handled by the marketing gurus. They don’t find it difficult to sell expensive products because they know how to sell them. Similarly, these insulation systems can be sold even at this higher price by adding some features or making them available to the people in way that they give them more value. Some cheap value added features can also serve the purpose in order to enhance the acceptability of these insulation systems regardless of their higher prices. 6. Decision 2: If Consumer Chooses Heating: As part of other marketing campaign, it is being spread by the insulation system manufacturing company that, if the consumers don’t buy their systems, they might lose 200 pounds due to this wrong decision. To them, this could be due to the fact that, by doing so, they might be in a position of feeling heat in their houses. Not only this, due to severe heat, they might be exposed to many health and stability issues in unpleasant weather. There could be many reasons for this, may be in the form of health problem or any other reason, the loss of 200 pounds may occur. Due to this campaign, the company is trying to convince their potential customers that their decision of not buying this insulation system may cause them severe losses in the form of financials as well as health losses. Therefore, they are urged for using their products. Not only this, such situation also prevails in order to retain the existing customers because there is a probability that they also leave them. In this kind of situation, it becomes very important for the business to start such campaigns that could not only retain the current customer base but also could attract those who wish to buy insulation system for their houses, offices and other premises. According to the consumer theory, these customers are now in a position of making their decisions by their own. In this case here, the driving force being the decision would be the price factor. As the price has been raised by the company, therefore, the decisions would be adverse for the company. Keeping all other factors constant, if price is the only factor that has been changed, there is a strong likelihood that the consumers may change their decision towards not using the insulation system. On the other hand, if these products are also presented by some value additions, the acceptability of them may be raised to a greater extent. Loss of 200 pounds should be highlighted at all points. This loss can be the driving force in this case as a consumer gets afraid of losing money. Therefore, a correctly driven marketing and sales campaign can make it possible that people would attract towards using this product. Retention of existing customers can also be made possible through these campaigns. Making the product available market where cheap products are sold, say at any discount shop can also is more satisfying for the customers buying them. 7. Conclusion The company is using the marketing tools quite well that their marketing campaign seems to be proved a success. This is why; they are playing with the mindset of their customers. They know this fact very well that a common customer is always sensitive about his spending. The customers always prefer the value for the price they spend. In other words, the consumer prefers to take the most advantage of the limited amount of money he has. Therefore, they have rightly started both of the marketing campaigns to address this very weakness of their customers. In both cases, either to save 200 pounds or to lose, the customers would become more interested to save their money. In addition to the intrinsic benefits that are enjoyed by the customers, this monetary benefit is becoming a preference. However if the company starts some value added services, it could also help them keeping their market share intact. The value added services refers to the additional services along with providing the primary business operations or services. 8. Reference List Hoyer,W.D. and Maclnnis, D.J.,2008.Consumer Behaviour: 5thed.Cenage Learning. Jehle, G.A. and Reny, P.J., 2009. Advanced Macroeconomic Theory: 2nd ed. Dorling Kindersey. Diamon, P and Vartianen, H., 2012. Behavioural Economics & its Applications: Princeton Universtiy Press. Reynold, T.J. and Olson, J.C., 2001. Understanding Consumer Making Decision: The Mean End Approach to Marketing and Advertising.Psychology Press: pp. 1-20 Kittitanarux, T., 2010. Factors Influencing Consumer Decision-Making: in Dietary Supplement Consumption. Edition. LAP Lambert Academic Publishing. Lantos, G.P., 2010. Consumer Behaviour in Action- Real Life Application for Marketing Managers: M.E. Shape Inc.pp-66-67 Schiffman, G.L, 2009. Consumer Behaviour. 9th ed: Pearson.pp-35 Read More