Global Value Aspect of Consumer Buying Behaviour - Essay Example

Global Value Aspect of Consumer Buying Behaviour Table of Contents THE GLOBAL VALUE ASPECT OF CONSUMER BUYING BEHAVIOUR THEORY 3 Segmentation of consumers, with regards to risk perception and risk attitude factors 5 THE BASIS FOR USING THE CHANGING CONSUMER BUYING BEHAVIOURS AND ITS STRATEGIC USE IN MARKETING ROLEX WATCHES 7 Market analysis for Rolex watches and the manufacturer 8 The value aspects of consumer buying behavior that Rolex can use to improve the marketing of Rolex watches 9 CONCLUSION 12 REFERENCE LIST 13 INTRODUCTION The buying behaviours of consumers have changed considerably over the past three decades; consumer behaviours have changed in an evolutionary style, and the seeds of the change have been manifest through the patterns of past generations (Kar, 2010). It is possible to take into account that the origin of the changes can be traced to the institution of consumer protections, which offered customers a range of protections, including the right of getting informed, the right of safety, the right to be heard and the right to choose. Behind the consumption choices of consumers, there is the desire to feel satisfied emotionally and physically (Kar, 2010). During the last decade, consumers have witnessed the drastic increment in the choices available to them, which has led to ‘consumer vertigo’. The availability of many choices has made the consumer highly anxious about the different choices, and in some cases, it can stop him from buying, due to the fear of making the wrong choice. The trigger of the emotional satisfaction is changing, and that has pushed consumers to seek more purposeful pleasures, which offer long-lasting, deeper satisfaction (Posthuma and Dworkin, 2000). Additionally, impulse buying has been eliminated by a more conscientious buying behaviour (Voinea and Filip, 2011). All of these changes evidence the era of a new consumer who is mindful in their consumption. This paper will explore the global value aspect of consumer buying behaviour theory, and an exploration of the ways it can be used advantageously in the marketing of Rolex watches. THE GLOBAL VALUE ASPECT OF CONSUMER BUYING BEHAVIOUR THEORY Mansoor and Jalal (2011) support the changes discussed by Voinea and Filip (2011), emphasizing the standpoint that the behaviour of consumers have changed during the recent years. In particular, they point out that the change of consumer buying behaviour and consumer culture has been triggered by the uncontrolled access to product information and also the financial arousal triggered by the financial crisis, among other similar events. Some of the events cited to have triggered the shift from the culture of consumerism among modern-day customers include the collapse of major financial institutions and the crisis of the US mortgage market (Mansoor and Jalal, 2011). These adverse events took place after the financial crisis of 2007, but their ripple effects have continued to shape the behaviour of consumers globally. The psychological implications of the crash included the reduction in the job security of workers; consumer earning capacity became questionable and consumption levels reduced (Mansoor and Jalal, 2011). The social impacts of the financial crisis are more evident in developing countries like the UK. The effects are more evident among the poor, noting that the demand for their labour has been adversely affected by the reduction in enterprise expansion; the increment of the prices of basic products and the scaling-down of social services (Mansoor and Jalal, 2011). In worst cases, some consumer groups are losing the ability to pay for the schooling of their children and also taking care of basis needs. The changes, as well as the reaction in the consumer’s predictability about employment security has forced buyers to refrain from buying, especially the spending channelled towards leisure products or services. Some of the behaviours adopted by the changed customer include the consumption of less quantities and avoiding repeat purchases, by buying large size products (Voinea and Filip, 2011). The switching of product brands has also become an increasingly common phenomenon and the consideration of prices over quality, as the primary determinant of purchasing decisions has become more common. The buying behaviour of the modern consumer has deeply incorporated an intensive search for better bargains over the web, particularly due to the increasing functional role of the internet and other media (Nistorescu and Puiu, 2009). The oversight role of the government has also become increasingly important, as the protection of consumers against the adverse effects of inflation is a major check for national economic stability. Through the protection of consumers against the adverse effects of inflation, which is perpetuated through the control of product prices, governments also protect national economies from the uncontrollable levels of poverty and unemployment (Mansoor and Jalal, 2011). The changes in the market, due to recent events, also blend in with the different consumer orientation identified by Amalia and Ionut (2009); the emphasis made was that people are different and their perception about similar events is very different. Amalia and Ionut (2009) pointed out that the spending culture and behaviors of different individual influence their perception about different situations, particular negative ones like the recent financial crisis and its ripple effects (Amalia and Ionut, 2009). The critical factors that shape the behavior of consumers about the financial crisis, among other adverse events include risk perception and risk attitude. A consumer’s risk attitude shows their interpretation about the risk of the event, and the extent to which they dislike the implications of the given risk. On the other hand, risk perception shows the consumer’s interpretation of their vulnerability to the implications of the risk (Amalia and Ionut, 2009). Segmentation of consumers, with regards to risk perception and risk attitude factors 1. The panicked consumer. This consumer class is characterized by a high risk perception and high risk attitude. This customer is identified from the stressfulness of their buying time, which compels them to adopt a high level of risk averseness. The stressfulness of buying makes them avoid the risks of buying the wrong product at all cost (Amalia and Ionut, 2009). Their reactions are, in many cases, overreactions during crisis contexts, which make them to reduce their spending, consumption levels, and switching product categories and brands. These customers will avoid high-value purchases, and are constantly looking for best prices, which limits brand loyalty in favor of price loyalty. 2. The prudent consumer. This is the consumer characterized by a high risk attitude but a low perception of risk. This group is risk averse, irrespective of the fact that they don’t consider that they are in a stressful situation at the time of buying, due to their limited exposure to risk. Their characteristics make them to adopt a very careful and prudent outlook in their spending; they delay purchases and in some cases switch brands (Amalia and Ionut, 2009). This group is usually highly informed during the process of buying. 3. The concerned consumer. This type of consumer is characterized by a low risk attitude but a high perception of risk. Despite the fact that the members feel highly vulnerable to the implications of risk; they are less averse to risk, and are more likely to overlook risks. For that reason, their buying behavior is determined by their perception of risk, which compels them to plan their spending, especially where there is an increase in the perception of risk. This group is likely to engage in high-value purchases, but only during the cases that they can secure a good deal. In the case that they perceive an increment in risk levels, they are more likely to postpone spending, irrespective of the fact that they remain loyal to brands in many cases (Amalia and Ionut, 2009). This group is less likely to switch to other brands due to better price offers, and in many cases, they are catered for, by the companies that introduce less costly versions of premium product or middle brands in their product range, so as to retain them. One distinctive characteristic of these consumers is that they are usually willing to test new, innovative offers, even during difficult times. 4. The rational consumer. This group is characterized by low perception of risk and a low risk attitude. These characteristics make this group immune to risk and they consider themselves safe from the implications of risk. This group will avoid any information about the effects of crisis events and will ordinarily maintain their usual behavior (Amalia and Ionut, 2009). Due to their characteristics, this group does not cut its spending and will keep purchasing their favorite brands and trying new ones (Ang, 2001). Ang (2001) pointed out that the behavioral changes triggered by adverse events like an economic crisis are moderated by personality traits. The traits that are most influential to the consumer’s change of behavior include their risk adversity, a materialistic attitude and their value consciousness. Risk aversion refers to the level, to which an individual feels comfortable to take chances, especially during an encounter with circumstances that are not familiar. Value consciousness is an indicator of the importance that a person assigns to securing the best quality or best deal at a specified price. Materialism entails the level of importance that a person assigns to physical possessions as the indicator of their placement in society and the life of others. THE BASIS FOR USING THE CHANGING CONSUMER BUYING BEHAVIOURS AND ITS STRATEGIC USE IN MARKETING ROLEX WATCHES Flatters and Willmott (2009), following a study examining new trends in consumer behavior found that the economic recession led to the emergence of new buying behaviors. The consumer behavior trends that resulted from the adverse effects of the financial crisis will be critical to the formulation of a successful marketing strategy for Rolex watches. However, in order to blend the new trends with the marketing strategy of Rolex, it is important to do a market analysis of the company and the product. Market analysis for Rolex watches and the manufacturer Rolex was founded in 1908 in Switzerland and positioned as a luxury watches brand. The brand has benefited from major innovations and the strong reputation for quality, which has made it the top seller of luxury watches, despite facing competition for the segment. Despite the strong history of dominance and quality in the luxury watch industry, the company has been facing a downward looking trend in its sales and revenues (Doole and Lowe, 2008). The recession is not the only factor behind the reduction in the company’s sales and revenues, but also the inability of the company to align their strategies with the changing patterns of consumer behavior. The situation is worsened by the rapid change in market conditions. In the past, it was universally accepted that owning a Rolex watch by the age of 50 was a symbol of success, but the trend has been changing, and the changes have come with shifts in the buying behavior patterns (Dowling and Hess, 2006). The price inflation that took place, during and after 2006 affected the revenues of the company adversely, due to the fact that the disposable income and the buying power of consumers reduced after the recession. Starting from 2007, the company increased the prices of its watches by about 13-20 percent, and that locked out the upper-middle and the middle class customers, as they were already experiencing the financial impacts of the recession (Burnett, 2007, pp. 56). The effects of the financial recession have compounded with the increasing threat of market takeover by illegal replicas of Rolex watches, as well as the sales of second-hand watches. The sale of second-hand watches has offered a new and lucrative revenue source for Rolex retailers. The combined effects of the different factors undermining the dominance of the company have triggered drastic changes in the buying habits of customers. For example, the youth are willing to buy new Rolex luxury watches, but due to the adversity of the current economic environment, the prices are too high, and that has shifted their spending towards other areas to satisfy their prestige needs (Doole and Lowe, 2008). The difficulties facing Rolex have advantaged another company, which is evident from the possible takeover by Omega, which is a competitor in the luxury watch market. Omega sales its luxury watches at 60 percent less than the price of Rolex (Mulier, 2010). Omega is also favored by the changing consumer preferences; consumers have noted that Omega watches are trendier and newer-looking, unlike Rolex watches which are traditional and old-looking (Mulier, 2010). Towards overcoming the hurdles arising from illegal copies, market competition, and the reducing consumer demand, the company will need to remap its marketing strategy and plans, paying attention to the changing buying behaviors and the changing consumer tastes. The value aspects of consumer buying behavior that Rolex can use to improve the marketing of Rolex watches The first value area that the company can exploit, towards improving the market position of Rolex watches and also improve the marketing of the watches is market segmentation. Through the process of market segmentation, the company will divide its target market into consumer subgroups, where the boundaries of the groups are distinguished by shared characteristics and group characteristics. In segmenting the luxury watches market, the company should take into account that the behavior of customers is largely shaped by the personal and the external characteristics of consumers (Burnett, 2007). The buying behaviors of customers have been changing considerably and in some cases rapidly, over the past 15 to 20 years. For example, in catering to the differences in the needs of customers arising from their distinctive personal characteristics, the company should take into account the four types of customer segments (Dowling and Hess, 2006). In targeting the panicked consumer group, the company should take into account their high risk perception and high risk attitude into account, and respond by reducing the stressfulness of the buying environment. In catering for this segment, the company should reduce the price of one line in the traditional Rolex watches product range, which will cater for their need to reduce spending (Doole and Lowe, 2008). The strategy will also stop this segment from switching to cheaper luxury watch brands like Omega, which are 60 percent cheaper than Rolex watches (Mulier, 2010). In catering for the needs of this segment, the company should also review the product categories that are likely to replace the demand for luxury watches, and then cater to the needs underlying the change. By offering this group better price offering, their search for better deals will turn into price loyalty for Rolex. In segmenting for the prudent consumer group, the company should increase the efforts channeled towards increasing consumer information, which will partly address the needs of this group. Due to the low risk averseness of this segment, catering to their demand for information will quicken their buying decision-making, which will break their inclination to delay spending or switching to other watch brands. In segmenting for the concerned consumer, the company should take advantage of their low averseness to risk, by reassuring them about the quality, reputation and the value of Rolex watches, while at the same time adjusting designs and product characteristics. Implementing the changes mentioned before will guarantee that Rolex watches are aesthetically and functionally as modern as those of their competitors. In addressing their hunger for getting good deals, the company should offer more utility to the buyers of Rolex watches, possibly, through incorporating the newer features offered by competitors, as this groups is less vulnerable to price competition. In taking advantage of the brand loyalty of this segment, the company can introduce less costly versions and middle brand versions of the traditional premium watches. The introduction of new watch models will attract this group, as it is more likely to test new, innovative offers. In segmenting for the rational consumer class, the company should maintain a premium offering of its watches, despite the fact that it may need to offer trendier watch models at the premium price, as this group rarely reduces spending on their favorite brands. Another factor to take into account is culture. In the past, Rolex positioned its watches as symbols of distinction and class; superiority and prestige. However, there is a culture shift, towards enjoying luxury at younger ages, where the youth should be offered more product choices than in the past. Luxury spending remains lucrative despite the effects of downturns, and this has been the strategy of Omega, which offers the same products at lower prices. Towards catering for the youthful group better, Rolex can reduce its prices to a level that compares to that of Omega, so as to widen its market (Mulier, 2010). In planning the expansion strategies, it is important for the company to note that the reputation of Rolex watches is hinged on the reputation of watch-making in the Swiss market, therefore the company should not compromise the reputation of the brand by off-shoring production to china or other developing countries (Dowling and Hess, 2006). In the past, Rolex was a product reserved for the rich and the classy in society, but the boundaries of the top class are fading rapidly, due to changes in economic trends and socio-cultural values (Burnett, 2007, pp. 56). These changes have influenced buying behavior, therefore the company should position the watches in a more affordable way, so as to sell to the middle and the middle high class in society; this group offers a vast market for luxury products (Doole and Lowe, 2008). Since its history, some consumers have worn Rolex watches as showoff for their wealth and others for the uniqueness of the product. For this reason, the company should be keen to address these different needs, which could be done through segmenting and targeting different lifestyle groups. CONCLUSION The buying behaviour of consumers has changed considerably over the past few decades, and the factors behind the changes include the replacement of consumerism with planned consumption and the financial implications of recent financial crises. From a study of the buying behaviours of consumers, different scholars discussed the changing trends in consumer behaviour, including that consumers are increasingly making decisions following a careful review of product information and market outlook. There are different segments of customer, where differences are evident from their levels of risk tolerance. The different customer segments include the panicked consumer, the prudent consumer, the concerned consumer and the rational consumer. The buying behaviours of individuals are shaped by personal and external traits, and this is one aspect that Rolex has not incorporated into its marketing strategy. Through the change of strategy, where segmentation can be done in favour of the different customer segments, the marketing effectiveness of the company will improve. Over the past few years, the market dominance of Rolex has been threatened by competitors like Omega, and through changing the strategy of the company, the threat can be reduced. The changes of strategy that can help the company to counter the pressure from its competition include repositioning its products for different customer segments, introducing new brand versions that are trendier and adjusting to the changing needs of customers. REFERENCE LIST Amalia, P. and Ionut, P., 2009. Consumers’ reaction and organizational response in crisis context, Uni. Of Oradea. The Journal of the Faculty of Economics, 1(5), pp. 779-782. Burnett, J., 2007. Nonprofit Marketing Best Practices. Hoboken, NJ: John Wiley & Sons, Inc. Doole, I. and Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. 5th Edition. Nashville, Tennessee: South Western Educational Publishing. Dowling, J. and Hess, J., 2006. The Best of Time, Rolex Wristwatches: An Unauthorized History. Atglen, Pennsylvania: Schiffer Publishing. Flatters, P., and Willmott, M., 2009. Understanding the post-recession consumer. Harvard Business Review, 7(8), pp. 106-112. Kar, M., 2010. Consumer behavior over the last 25 years, Oxirm Research Themes, Oxford Institute of Retail Management. The Retail Digest, pp. 46-53. Mansoor, D. and Jalal, A., 2011. The Global Business Crisis and Consumer Behavior: Kingdom of Bahrain as a Case Study. International Journal of Business and Management, 6(1), pp. 104-123. Mulier, T., 2010. Rolex’s Swiss Watch Hegemony Threatened by Omega (Update1). [Online] Bloomberg. Accessed from: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aG8H3YKlGUsU [Retrieved on 17 April 2014] Nistorescu, T., and Puiu, S., 2009. 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