CONSUMER BEHAVIOR & DEMAND.   Term Paper ID:26873 Click to get this paper

Essay Subject: Analyzes consumer-business relationship in theory & practice, with examples. Impact of economy, savings, debt, marketing, product differentiation, brand names, changes in demand, more.... More...

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Paper Abstract: Analyzes consumer-business relationship in theory & practice, with examples. Impact of economy, savings, debt, marketing, product differentiation, brand names, changes in demand, more. Paper Introduction: Introduction Companies seek to understand consumer behavior in order to determine the best way to shift demand in favor of their products. When companies are able to ascertain why consumers purchase particular goods and services, they can tailor their marketing efforts to address the needs of consumers. This increases sales, and (if the company is run effectively) improves the profit performance of the organization. Consumer behavior can also help companies increase demand by helping consumers accept new uses for existing goods and services. There is thus a close relationship between consumer behavior, demand, and marketing. This research examines consumer behavior and demand, and considers the ways in which companies can use consumer behavior theory to increase demand and quantity demanded for particular goods and servic Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. 261). (1995). To some degree, Ford has used its website as a powerful categorymanagement tool. In order for consumers to take on debt, credit must be available. By bringing to market a product(Lycra) which lacked a ready market, DuPont risked losing money on theproduct introduction (Young, 1997, p. Dairy Foods, pp. E-I. 385). This website does notpromote any one brand, but instead offers recipes, health facts, and evenphotographs of dairy farms. Where these companies focus on promoting a particularcategory of good or a specific brand, DuPont uses part of its website topromote a single component of finished goods, Lycra. A. (1998, March). Consumer behavior can also helpcompanies increase demand by helping consumers accept new uses for existinggoods and services. Companies create marketing campaigns with thegoal of promoting their products or services, and advertising is generallyconsidered to have a substantial impact on demand. In this way, the company can reach out to consumers who may beconsidering a car, truck or van but who do not fall into a more specializedtarget market through the generic pages on the site detailing thoseproducts. In 1998, consumers' net worth(the difference between assets and liabilities), increased 1 percent.During the previous two years, the ratio of consumer net worth to consumerincome increased a strong 25 percent (Bredahl, Klaus, & Frewer, 1998,p. Consumerattitudes and decision-making. In this way, a consumer whose investments are performing wellwill participate in greater consumption because he or she feels "wealthy"as a result of the investments' performance. Marketing success throughdifferentiation--of anything. Product Management Product management is a critical part of the marketing process, andcompanies that engage in product management are introducing new productsand evaluating the progress of their existing products on a regular basis(Evans & Berman, 1995, p. On its website, Ford does not compete with any other automanufacturers, but instead controls all of the "shelf space" on thewebsite. Powerful cheese. (1996, December). 251-257. Thiscauses some economists to be concerned about the possible ramifications ofa downturn in the economy. It hasused the "4 Cs" and "Two Months' Salary" television campaigns as well asits currently running "shadow" campaign on both television and in print topromote larger and high-quality diamonds. This is in comparison to television or printadvertising where consumers "happen upon" Ford advertisements regardless ofwhether they are in the market for automobiles or not. Schupak, H. Jewelers Circular Keystone, pp. Increasing Demand for All Brands for One Product The Dairy Farmers of Ontario have an extensive website which promotesthe consumption and use of milk and dairy products. The decision as to which type of wholesaler is appropriate for agiven company is largely dependent on the industry and the type of goodsthe company is selling. However, the issue of the savings rate is more problematic than itmight first appear. Instead, it has focused oncreating demand at the manufacturer level as well as at the consumer leveland so has created demand for Lycra (and spandex) which formerly did notexist. International marketing brings withit a number of different problems regarding promotion, including changingthe communication channel and determining an appropriate promotional mix ofadvertising and public relations in order to support products that are soldin the international arena. Traditionalmarketing lifecycle analysis holds that products which enter the maturephase of the lifecycle are often perceived as being commodities, meaningthat consumers perceive little difference from one brand to the next.Other products are, by their nature, considered commodities offering theirsuppliers little or no control over marketing except to compete on price.Theodore Levitt suggests that this interpretation is incorrect and that allproducts, including fruits and vegetables (products traditionally viewed ascommodities) can benefit from product differentiation. De Beers: Focuses on SolitaireNecklace. Instead ofputting their money in bank accounts with low rates of return, consumersare increasingly turning to equity markets and real estate as better waysto invest their money. Lycra is a brand ofspandex, a component of many sport clothes. (1997, March 17). In addition tohaving low-paying jobs which cannot sustain high levels of debt, theseindividuals often lose their jobs or see a decrease in their income duringeconomic downturns. Nonetheless, there are certain to be consumers who interpret thePenn study as an implied promise of performance improvement, or who areotherwise convinced that Lycra is the material that they want in theirsportswear products. Sportswear is a niche market which has expanded in recent yearsto include many consumers who do not actively compete in athletics but whowant to wear the clothing of athletes. 46). Product Differentiation At the heart of consumer behavior is the belief that any product canbe differentiated from any other product even when there do not appear tobe significant differences during the initial analysis. When advertising and marketingfocuses on promoting a specific brand of a specific product type, theemphasis on product differentiation means that the company is trying toexpand its market share from the existing market. 25-26. The result is that theyare able to modify consumer behavior and shift the demand curve outward sothat consumers are willing to pay higher prices for the same quantity ofgoods as when they were undifferentiated. Trend or fad, it's not always clear.Food Processing, pp. The goalinstead is for consumers to purchase products containing Lycra which willresult in additional demand for the product. The website illustrates thecompany's belief that there is more than one demand curve not only for Fordproducts in general, but for individual Ford products. Walden, M. In this way, a company whichmight have a good on-time delivery record can use that in its advertisingto gain additional market share. Net worth provides a better way to calculate how well consumers aredoing relative to the economy as a whole. In those cases whereconsumers are comparison shopping and looking at the websites for severaldifferent manufacturers, Ford's website design might indeed pull inadditional consumers. At the same time, consumers are taking on additional debt, also forpurchases. This brings the company into the realm of distribution planning, whichis systematic decision making concerned with the physical movement of goodsand services from the manufacturer to the consumer. Inventory management is also part ofthis process since the inventory carrying costs of a company can be asignificant expense. 252). Equities(in particular) have performed well in recent years and helps explain whyAmerican consumers are willing to put less of their money in traditionalsavings plans: the equities markets are currently offering better returnsthan traditional savings. As with Ford, consumers do not comeacross this website randomly; they must seek it out either from finding theaddress elsewhere or through a search engine. As withFord, the overall increase may not be significant because of the website,but there is likely to be some small increase in demand, and a shift of thedemand curve for all milk and dairy products outward, as a result of thewebsite advertising. In this way, consumer behavior continues to berational as consumers seek out the greatest rate of return for theirsavings. There is thus a close relationship between consumerbehavior, demand, and marketing. R., & Berman, B. 42). The concern is that consumers lackingsufficient savings to withstand a downturn will slow or even halt spending,and some consumers may be forced into bankruptcy in this situation becausethey lack appropriate financial resources. The reason thatthe change will not be greater than that is that consumers must activelyseek out the website. Levitt, T. Technologicaladvances, including computerized checkout systems and the use of debitcards, have greatly changed the face of retailing in recent years. This poses aparticularly difficult situation for low-income consumers as theseconsumers are especially vulnerable to economic downturns. Harvard Business Review, n.p. But those consumers who have particular needs or limitationswill find that there are pages on the website which may well help shifttheir demand from either another manufacturer to Ford, or from one vehicle(such as a truck) to another (such as a van). Pricing Pricing is another critical part of the marketing mix which has adirect impact on demand. Importance of Understanding Consumer Behavior According to some analysts, American consumers are spending a higherpercentage of their incomes than most other industrial nations, and evenhigher percentages than they have in the past. The goal is to increase demand for the productcategory as a whole with the understanding that companies within thatcategory as a whole will benefit. Communication channels are critical to this process, andinclude the source, encoding, message, decoding, audience, feedback andnoise (Evans & Berman, 1995, p. If a product is priced lower than the marketwould support, the company is losing revenue and may be putting its long-term viability into jeopardy. Just as products which are typically considered commodities can bedifferentiated from one another through "intangibles," products which havea particular image can be separated from that image through carefulpromotional activities. De Beers, one of the world's largest suppliersof diamonds, has long promoted diamonds as a whole to consumers. Instead of relying on savings plans, consumers are committinggreater amounts of their resources to different types of programs. Through promotional activitieswhich emphasize the quality of the lines but also the more casual look, thecompany is seeking to create new demand for traditional products. First to market and all alone.Electronic Business Today, p. References Boyer, M. According toLevitt, any product can have its demand boosted, or at least separated,from other brands. Trendy items and fad items (such as Beanie Babies and Pokemonitems) are typically pull items while everyday so-called commodity items(such as soap) are push items (Neff, 1996, p. 4 3). The199 s in particular has seen a broad expansion in the availability ofconsumer credit, particularly in the form of credit cards. The goal of promotion isto increase the quantity demand (and in some cases the demand itself) forthe good or service in question. As American dining tastes have changed in recentdecades toward a more informal experience, china and linen manufacturershave struggled to maintain market share in a shrinking market. It is in the distribution planning process that manufacturers mustdetermine the role that wholesalers will play in bringing the goods tomarket. For example, all automobiles are not priced similarly: aYugo and a Cadillac both provide transportation, but the images associatedwith both justify different prices (along with the target markets involvedand the brands associated with the two products). Distribution planningincludes identifying the distribution channels which will be used and alsodetermining what types of transportation (and their costs) will be involvedin bringing the product to market. 98). 124. There are five aspects to retail planning:store location, atmosphere, scrambled merchandising, wheel of retailing andtechnological advances (Evans & Berman, 1995, p. The goal of marketing (including advertising and other promotionalactivities) is to increase the quantity demanded for the goods or servicesin question by affecting consumer behavior. 34 ). (1998, September). If this were not thecase, it is unlikely that companies would commit the resources that they doto the process. In this way, wholesalersare concerned with selling to other intermediary companies who add value tothe product in some way. (1998, January). Real estate is also notincluded in the national savings rate, and investments in real estate havealso produced greater returns than traditional savings plans in recentyears (Walden, 1999, p. Conclusion Marketing activities, including the use of the Web, are designed toeither shift the demand curve, shift the supply curve, or change thequantities demanded or supplied. The average family today has financial assets equal toapproximately twice their annual income, a more than adequate savings levelas required by most financial analysts (Walden, 1999, p. This type of promotion is likely to help shift the supply curve forLycra outward with companies willing to produce greater quantities of Lycra-based products even if they are not able to charge more in the market.This is because they will be able to capture a greater market share sinceconsumers will have a greater awareness of the benefits of the productthrough promotions such as this. This research examines consumer behaviorand demand, and considers the ways in which companies can use consumerbehavior theory to increase demand and quantity demanded for particulargoods and services. 46). Different marketsegments have different demand curves for the same product, and Ford'swebsite addresses many different segments as well as the overall autoconsumer. DuPont is trying to create demand for a product which did not exist 5 years ago. 98. (1997, April). Generally, formal retirementsavings are not included in the savings rate; in this way, individualretirement accounts (IRAs) and deferred compensation programs (such as4 1(k) plans) are not included in the savings rate. Journal of Consumer Policy, pp. Consumer behavior can change can act on demand by increasing thedemand for a particular brand but not changing the demand for a good ingeneral, it can increase demand for a good in general without focusing on aparticular brand, and it can work on a "pull" or "push" level. 42-43. 46. New products are key to a company'sbusiness because they offer the path to long-term growth and viability;however, new products often fail despite high levels of market research andproduct planning. Onemanufacturer, Lenox, has created crystal and stemware product lines whichembrace the new casual approach to dining. By some estimates, consumersdecrease their spending by seven percent (or seven dollars for every $1 decrease in their wealth) (). H. Because websites are not passive forms of advertising (consumersgenerally must actively seek out websites although there is technologyavailable to change this), and since Ford is promoting its own automobilesrather than promoting the automobile as an excellent source oftransportation, it is unlikely that the website will have a significantimpact on demand for automobiles as a whole. Analysts are still typically confident aboutthe economy since loan delinquency and other measures of consumer failurehave not been rising, but the concern exists that the bullish investmentmarket may either be tempered or even be over as stocks enjoy a mixedperformance and consumers adjust their behavior accordingly. (198 , January-February). This gives the company complete control over how consumers viewinformation about the products and the impression they are likely to carrywith them after visiting the website (Boyer, 1998, p. Introduction Companies seek to understand consumer behavior in order to determinethe best way to shift demand in favor of their products. Consumers are expected to respond to a sustained decline in equitymarkets by decreasing their spending. American consumers spend an average of 18 percent of income onnon-home loans, a record level of indebtedness (Walden, 1999, p. For savings, we're our own worstenemies. In the United States, the savings rate does notinclude all types of savings, including some savings plans which havebecome remarkably popular in recent years. The "wealth effect," for example, is based on theconcept of net worth and can encourage people to take on additional debt orat least make additional purchases based on the performance of theirinvestments. Items whichare marketed directly to consumers and which encourage them to seek outspecific products or brands are "pulled" through the distribution channelby demand at the next level. The goalhere is not for DuPont to sell Lycra, or even spandex, to consumers; Lycrais purchased by clothing manufacturers who use it in their goods. Kehone, A. This isdue in part to the fact that retailing is highly dependent on consumerdemographics and lifestyles, and those retailers who succeed areparticularly sensitive to changes in these factors and respond byincorporating these changes into their stores and their operatingphilosophies. Under this scenario, consumers have a financial cushion if there is aneconomic downturn. 25). In 1998, consumer incomeincreased by five percent, but consumer spending increased six percent.Consumer saving was approximately one-half of one percent of income(Walden, 1999, p. The milk industry is not the only industry where trade groups take onthis type of advertising. Pricing decisions are concerned with covering the company'scosts, but they are also dependent on the entire marketing program andpromotional mix. Distribution planningis also concerned with who owns the goods at the various stages of thedistribution process (Evans & Berman, 1995, p. When the stock market turnsdownward, or sees a correction, consumption is curtailed as consumers nolonger are comfortable with the high levels of debt they are taking on (). A new product that is successful must be carefullymonitored and given appropriate product support in order to help itprogress through the product lifecycle, and to gain as much market share asquickly as possible. 73-75. This is particularly true in light ofderegulation in the financial services industry. By recognizing what the company istruly selling (focusing on product benefits rather than product features,for example), and by recognizing factors which may be significant in theminds of the consumers, companies can create a marketing strategy whichenables them to compete on more than just price. On its website, DuPont goes sofar as to cite a study from Penn State that shows a 12 percent increase inperformance for those athletes who wear apparel containing Lycra. As with the DairyFarmers of Ontario, De Beers is focused on expanding the demand for theproduct as a whole (Schupak, 1998, p. This is a classic example ofa "pull" campaign. J. The Web offers some companies and industry organizations theability to shift quantity demanded, but it is not clear whether the Web caneffectively shift the aggregate demand curve. Items which are marketed to channelparticipants farther up the distribution chain are "pushed" through thesystem. 46). This does not change theaggregate quantity demanded for the good (which would shift the demandcurve outward), but simply shifts demand from one supplier to another.When marketing associations promote a specific good (such as milk orcheese) without mentioning any brand names, the goal is to shift the demandcurve so that there is greater demand throughout the market as a whole;this, in turn, translates to increased demand for companies within thatmarket (Gorski, 1998, p. Increasing Demand for One Component of a Product DuPont has taken a different approach from either Ford or the DairyFarmers of Ontario. Instead, it is likely thatFord may see some increased sales as a result of its website, but thatthese sales will come from consumers who were ready to purchase a carregardless of the influence of Ford. HFN TheWeekly Newspaper for the Home Furnishing Network, pp. Young, L. Wholesaling has its balance in retailing, which is the sale of goodsto the ultimate consumer. The savings rate is also based on actual dollars placed into savingsprograms and does not include the so-called "wealth effect" which consumersreceive from upturns in the stock market and other investments. E). These programs arecritical savings vehicles for many Americans and boost the savings ratesignificantly. This is based on various factors which influenceconsumer behavior, including branding produce and highlighting thedifferences among various products in the same category (Levitt, 198 ,n.p.). Principles of Marketing.Englewood Cliffs, NJ: Prentice Hall. Consumer behavior at this level focuses on theintermediate company as the consumer. Bredahl, L., Klaus G., & Frewer, L. However they come to thewebsite, some are likely to increase the consumption of milk as a result.Individuals who might be worried about their weight might try skim milk,for example, or consumers may find recipes which they want to try. Clearing up a misplaced notion.Supermarket Business, p. Lenox setting a new table. Increasing Demand for a Branded Product Line Ford uses its website to promote its entire product line as well asvarious services targeting different customers (business customers, recentcollege graduates and handicapped consumers). Again, as with other promotionalactivities which take place on the web, it is not clear that demand (orsupply) will shift significantly since consumers must actively seek out thewebsite. Gorski, D. 46). In thisway, the company is differentiating its products from those of thecompetition, and even from other products in its own line, throughadvertising and marketing (Kehone, 1997, p. There are still concerns which should be examined regarding spendingand debt by consumers. In the case of theFord website, those who visit are already interested in Ford vehicles, sothey are likely to be predisposed to purchase a Ford. Wholesalers may be full-service merchantwholesalers, who gather various products and provide credit, limitedmerchant wholesalers, who do not offer the full range of wholesalingservices, or agents and brokers, who do not ever take title of the goods inquestion. In some cases, thegovernment has stepped in to control prices; this is particularly common inagriculture, but results in a situation where market conditions can nolonger be depended upon to assist producers in setting their prices ordetermining their revenues. Neff, J. 73). As a result, pricing strategy is a key part of a company'ssuccess. Distribution Once a company has identified the various products or services it isgoing to produce, and has developed the branding and packaging for thoseproducts, it must determine the best way to distribute those products.Availability can be a key factor in consumer demand for a particular goodor service, and influences the long-term success of a good based onconsumer behavior. Wholesalers are companies who buy and handle reselling goods, butwho are not engaged in selling to the end user. De Beers does not promote anyone jeweler or retail store (although co-operative advertising does existin some areas), but focuses on educating consumers in order to have them"pull" the product through the distribution channel. (1999, April 3 ). Triangle Business Journal, p. In its broadest definition, promotion isany communication which brings information about the product or service tothe customer. 124). Evans, J. Promotion Another key component of the marketing mix is promotion, which is notlimited to advertising, but which includes advertising as well as publicrelations, personal selling and sales promotion. If a product is priced too high, the companyis losing market share and may, again, be putting its long-term success inquestion. Individual companies arelikely to rely on traditional marketing techniques in addition to the Webto promote their products and services, but product differentiation islikely to remain an important factor in marketing regardless of thetechnology which is used to support it. Issuessuch as packaging, distribution, delivery, accounting practices and similar"intangibles" can be used by marketers to differentiate themselves from thecompetition even when the product's characteristics are not sufficient todifferentiate it from the competition. Because of the way that Ford is able to manage the category on itswebsite, and because the company has targeted specific consumer segments inaddition to car buyers as an entire group, it is likely that the websitewill have a small increase on demand for Ford products. When companiesare able to ascertain why consumers purchase particular goods and services,they can tailor their marketing efforts to address the needs of consumers.This increases sales, and (if the company is run effectively) improves theprofit performance of the organization. (1998, April). Nearly any product can be differentiatedto some degree, which means that its demand can be manipulated throughmarketing. This means that consumers are contributing to savings plans, just notin the way that traditional measures are able to capture. Levitt suggests that even dealers who sell such undifferentiatedproducts as pork bellies are in fact selling their own services. Shaping Consumer Behavior The marketing efforts to which Americans (and consumers throughout theworld) are subjected to on a daily basis represents a substantialinvestment by companies. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.