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STUDY OF THE FACTORS, WHICH DETERMINE THE CONSUMER PREFERENCE FOR A RETAIL STORE: A CASE STUDY OF MARKS & SPENCER
A retail store has become an important part for our daily shopping and merchandise. A large part of consumer goods are being marketed through these supermarket and stores. Thus retail stores are now an important segment of market economy. We define ourselves by looking at others. The self is defined through clothes, makeup, hairstyles and so on. In addition, the car we drive, our jobs, the house we live in, recreational activities – all these play a crucial role in creating the persona that we show to the world. When we define ourselves in relation to the world, shopping plays an important part, because most of the items that define us involve shopping. An interesting question to ask is why we prefer some stores to others. Every one of us has favorite stores, where we shop regularly. What drives the consumer to go back repeatedly to the same store? What are the shapers of the store when it comes to shopping?
It’s been centuries now since the retailers are trying to understand and satisfy customer needs and wants, thus generating profit. Seeing successful centers implies that others may not have followed the best practice in research, design and marketing. Since early history, retailers sought to make shopping a pleasurable experience, and for this we can consider the Sumerian and Mesopotamian caravanners, 4000 years ago, who knew how important it was to create the proper atmosphere for selling, and when departing from Damascus, they were accompanied by snake charmers, magicians, story tellers and so on.
For the 21st century person is only natural to buy different products under a different roof, but such a thing was unthinkable some time ago. Medieval Europe was dominated by guilds who used to control whom and what was to be sold, and most stores were kept small and specialized. The mercers’ place where retailers sold food products and textiles, came as close as possible to the idea of variety. But not only the guilds were in the way of retailers opening large and varied stores, but also the fact that only a small group of rich people afforded to buy manufactures. Moreover, in payment money was rarely used, most often merchandise being acquired through credit, thus the prices were high and the business was small. In addition, there were no fixed prices, bargaining being the order of the day (Seth and Geoffrey,1999).
When the middle class rose, people started wanting products that will give them the aura of stability and class, thus a foundation for stores. Apart from this, the public transportation contributed to the phenomenon, allowing clients spread all over the city to gather, leading to the development of universal stores. The railroads connected cities and towns, which helped manufacturers to ship large quantities of merchandise, and also facilitating access to the residents who were living on the outskirts.
A retail store has become an important part for our daily shopping and merchandise. Large parts of consumer goods are being marketed through these supermarkets and stores, making retail stores an important segment of market economy. With increasing importance, recently this industry has also become very competitive. Since this industry is importantly associated with sale to consumer, it is mandatory to have a better impression in customers’ mind about the brand value of a particular store.
Like any other business entities, these stores too have brand-value, multinational operations and huge investments and other related different strategies. These strategies often focused to understand the decision making process of consumer. On the basis of certain preferences, a consumer choose a particular supermarket, understanding of these strategies are important for formulating new marketing plans and assessment of existing marketing policy (Taylor and Houthakker, 2009, p. 8).
For the purpose of management and marketing studies, much attention was given on these strategies. There have been several researches to identify important aspects which affect the consumer decision-making process while selection of a particular supermarket or retail store. The research problem of consumer decisions in special reference to retail store is more complex as it is based on different factors including comparison shopping, branding, types of goods and services, location and modern service like order on call or internet purchasing. The factors like age and gender, price, marketing, convenience etc. also affect the consumer decisions. These factors are very complex when it comes to the analysis of the shoppers of supermarket and retail stores. With the growing diversification of retail stores and their expanding domain, many other factors are also involved like specialized services, mode of payment etc. While pricing remain the major factor for the formulation of retail marketing strategy and it largely affects the consumer decision. The individual outlet plays important role in this respect. As consumer choose for the least cost store, the store-level shopping decisions regarding a product depend on the relative price of entire market at different stores (e.g., Bell, Ho and Tang, 1998; Bell, Bucklin, and Sismiero, 2000).
This study is focused on the question of how consumers will make choices relative to available retail alternatives; which are the key variables for the making of related decision; what are the factors for choosing Marks and Spencer. The objective of the identification of main factors in consumer preference will be based on the theoretical background and will also be supported by primary survey of such consumer and empirical analysis of collected data.
1.1 The consumer preference
A consumer’s decision for purchasing is based on several factors. Most of the time, it is cumulative of various factors including branding, price, accessibility etc. The availability of food items, grocery and daily use cosmetics make it a convenience for consumer to buy it from a supermarket. With the larger value and scale of economy, even the retail shop gets advantage of this consumer behavior.
To understand this, there have been several research and theories on consumer choice. According to the conventional theory, consumer is considered as an economic agent and the consumer choice is considered as a function of demand and utility (Taylor and Houthakker, 2009, p. 9-10).
The Neo-classical Demand theory of consumer choice is largely based in accordance with real-world behavior. This theory explains the consumer’s real world experience with price vector and sequence of periods. However, the decision making process of an individual is a dynamic process. The consumer’s preferences based on certain decisions are outcome of various dynamic factors including economic and non economic ones. The technological changes and loyalty to particular bands are among non-economic factors. With the wide application of internet, the pricing and comparison is available to household, some commodities are also merchandised through e-purchasing, this all must be consider while researching on new consumer decision-making process. There is a close relationship in consumption and income, which ultimately motivate the buyers. Motivation of a person as a consumer is primarily to maintain an acceptable level of physiological and psychological well-being through time via consumption activities that use time and market goods as inputs. Same time the other perspective perceive it as purchasing agent whose motivation is primarily to obtain the market goods required in the most efficient way possible given the resources that are available. (Taylor and Houthakker, 2009, p. 40).
The factors for selection of a particular retail store using the theoretical backgrounds and real time consumer behavior will be useful find out which of the attributes are crucial in determining consumer preference. The concept of value to the customer is central to an effective positioning. It is very important for the selection of retail brand by a customer. Aaker (1998) states, “A differentiation strategy must add value for the customer, and the added value must be perceived by the customer (Aaker, 1998, pp. 164-165).”
The present study is based on theoretical study of consumer preferences and its empirical implementation through a primary survey conducted for this purpose. Based on the responses of customers, the key factors will be identified. For this case study, Marks and Spencer is selected. It is one of the pioneering and oldest retail chains in world and still a leading retail business entity in many country including UK and Middle East. As a popular and accessible retail store, it is very popular among super markets. The availability of these stores and accessibility are also the factors for selection of case study. The particular survey on these stores will be helpful in determining the consumer preferences for Marks and Spencer.
1.2 About Marks and Spencer
The concept of supermarket might be a new for many part of world, but Marks & Spencer is into this for more than one hundred years. This British origin brand has established itself as a reliable retail market across the world.
During year 1884 that Michael Marks opened his first stall at a market in Leeds. It was a good initiative and it earned him well. After ten years he started expanding his stores across Manchester. In Manchester, Tom Spencer joined him as partner. Within next few years, this brand established itself as a prestigious British institution. Today M&S has over 895 stores, of which 295 are international ones, in over 40 countries.
The global integration of economies provided an opportunity to M&S like institution to grow across the globe. This process has also brought various functional changes in M&S. The M&S has expanded very well with the demand and vision of international expansion. The brand’s retail concept has enjoyed successes in Ireland, Eastern Europe, the Middle East, and other parts of Asia including Hong Kong (Brand channel). The M&S is not much successful in US and Canada. Since, there are other retail chain serving the users well in these two countries, M&S has less share in super market business. Beside, the difference in services, it is also an issue of customer choice (Christopher & Peck, 2001).
Between 1973 and the year 2000, the chain registered a down turn, because of its policies regarding the products, the refusal to use other credit cards except its own (until 2001), and its image associated with mid-life/old people and so on. The situation changed after due to a shift of perspective. The further integration of global markets compelled retail sector to adopt new innovation. The specialization in food items was one of those innovation which kept M&S into business. As per the companies official website, they are still number one retail of United Kingdom. Article wise, M&S’s clothing and homeware sales account for 49% of total business. The other 51% of the business is in food, as they sell everything from fresh produce and groceries, to partly-prepared meals and ready meals. (www.marksandspencer.com)
1.3 Aims and objectives:
i. To understand the importance of consumer choice in marketing strategies of retail stores.
ii. To conceptualize the theoretical background for the determination of consumer preferences.
iii. To find out the consumer’s decision making process in case of M&S
iv. Determine the major factors controlling Consumer Preferences for selection of M&S
v. To analyze the marketing strategy of M&S for a particular kind of consumer base
1.4 Statement of the Problem statement:
The consumer’s preference for a particular retail shop is result of complex decision making process of consumer. The consumer preferences are outcome of certain rationales based on the factors like pricing, quality, schemes, loyalty and so on. The non-related issues like parking facilities, online ordering, payment options are also important for a consumer to decide the retail shop. For the consumer preferences, the understanding of choices is vital.
1.5 Research Questions:
In order to understand the consumer preferences, these research questions have been tried to answer:
1. What are the factors affecting consumer’s preferences?
2. How expenditure and frequency of visit helps in understanding of consumer’s choice.
3. How much the price factor influences the consumer’s decision?
4. What are the other factors, which help consumer in making choices?
5. How M&S is preferable for the consumer?
6. What are the factors which make M&S better for consumers?
1.6 Significance of the study:
The consumer preference is one of the most important marketing concerns for the retail sector. Since this study is based on primary survey, which is designed on sound theatrical background of consumer demand and choices, it would provide an insight for the consumer preference process and factors affecting it. Taking M&S chain of retail stores as a case study makes it more relevant, as it would include how M&S being one of the oldest supermarket chains has evolved its marketing strategies by addressing consumer choices. Therefore, this study can be significant for marketing planning and future study of consumer preferences.
1.7 Scope of study:
The present study is useful in understanding the marketing strategies for the retail sector. Since it covers the factors of consumer preferences, it has a broad range analysis. This study tries to respond these questions related with the large horizon of the marketing. How do the factors affecting the decisions of consumers could be utilized for branding and marketing purposes? What are the areas of further research? What could be done for the better retail marketing strategy? This research has addressed these crucial questions in perspective of an existing and successful retail business.
A literature survey enquires about the subject matter and provides a holistic understanding of earlier research and findings. The conceptual framework for the study is based on the background of thorough understanding of the related literature and theories for marketing in retail sector. The secondary information are very useful for the understanding and conceptualizing theoretical framework for the study.
One of the most recent and relevant study on consumer demand and behavior is done by Taylor and Houthakker (2009). Though this particular study is focused to the US consumers which are different from other places; it provides a theoretical background on the subject matter. This contemporary study consists of a review of the present state of demand theory, its application for consumer’s demand. It also has an overview of the econometric techniques used for analyzing the demand theory. This study also provides a comparison between Conventional Theory of Consumer Choice and Neoclassical Demand Theory. The consumer behavior dynamics and consumption models are studied along with their econometric derivations. These theories discussed in this study are useful to construct the conceptual background for consumer preferences.
In order to understand the process of consumer decisions, number of theories has been postulated. Among these, the ‘Theory of reasoned action’ is focused on consumer’s decision making process based on rational thinking. Fishbein and Ajzen (1975) have studied ‘the theory of reasoned action’ (TRA). The TRA proposes that behavior is determined by an individual’s intention to perform the behavior, and intention is influenced by attitudes and subjective norms. This study underlined the importance of rational action while decision making. Taylor and Todd (1995) have used TRA successfully to identify key elements of consumer decision-making. While most of the support for the theory has come from the social psychology literature, there has been success in applying this theory to consumer decision-making (Sheppard et al., 1988).
For the theoretical construction of consumer preferences, there is another theory named as ‘theory of planned behavior’ (TPB). According to Bagozzi and Kimmel (1995), the ‘theory of planned behavior’ (TPB) can be thought of as an extension of the TRA in that it ‘‘accounts for behaviors that a decision-maker regards as potentially subject to interference by internal or external impediments.” These impediments could be anything related with the personal convenience of the individuals. In case of the buyers, these impediments could be the result of various interferences including proximity and quality and brand loyalty and so on.
The rational of a consumer is based on the pricing greatly. Therefore, setting optimal prices is of great importance. Nevertheless, firms often experiment with different pricing schemes at great cost (Essegaier, Gupta, & Zhang, 2002). Though, most of the time, buyers do not prefer for price comparison, still the pricing factor is a major issue in determination of particular retail shop.
A research by Dickson and Sawyer (1990) provides the consumers’ selection of retail store based on pricing. Comparative pricing could play a crucial role in decision making process of buyers. This Study suggests that consumers may have relatively poor knowledge of individual product prices; hence it might not be a single factor to choose a particular retail store. On this issue, there is another study by Alba et al. (1994), which found that consumers can make accurate distinctions about price levels in different stores. Here, the comparative pricing became one of the crucial factors while choosing a particular shop.
Once the brand is selected, many times, it develops a kind of loyalty among the buyers. Krishnamurthi and Raj (1991) show that brand loyal households are relatively inelastic in brand choice; they tend to prefer the particular brand. However, when it comes to the purchasing quantity, these households are relatively free in making such decisions. On the matter of brand loyalty, Bucklin, Gupta, and Siddarth (1998) have also observed the same tendency.
The specific study of M&S marketing history by Christopher and Peck (2001) provides an over view of the shifting priorities. In its early days and up to 1920s the business adopted by M&S was then revolutionary policy of buying direct from manufacturers, instead of through wholesalers. It was a unique innovative way for this business. These unique suppliers gave the business an advantage that few of its rivals could match. In later years it was already recognizable as an established and effective practitioner with its supply base.
Historically M&S has designed most of its clothes in-house before putting the designs forward to favoured manufacturers with notoriously strict specifications regarding the finished product. These manufacturers provided dedicated facilities for M&S who required suppliers to refrain from bidding for work from other clients. But this UK based supply strategy was inhibiting the development of the retail business in Asia and the Pacific. Also M&S still officially encouraged its suppliers to source in the UK, enabling it to maintain its ‘buy-British’ marketing stance. But their suppliers were now struggling to remain price-competitive. Hence some had therefore opted to supply at least a proportion of M&S’s orders from overseas facilities or buy-in virtually finished goods produced in low-cost manufacturing centres such as China (Seth and Randall, 1999).
With an advent of globalization and scale of economies such marketing strategies are getting older, eventually M&S too is also coming up with new marketing ideas. Some of the specific studies underline the importance of M&S in retail business and its success in Asia and Europe markets.
There is an interesting case story presented by Seth and Randall (1999). This book provides thorough details about different retail chains. Chapter five is dedicated to the Marks and Spencer. Here, the authors have tracked the development of M&S since its foundation time. The founder Michael Marks was a Polish born Russian Jew who had arrived Britain as penniless.
This study has linked this fact with the retail store’s pricing strategy of early days, which is known as ‘Don’t ask the price, it’s a penny.’ Further elaborating on this, authors have stated ‘Given the spending power of his customers, he (Michael Marks) sold only items on which he could make a profit at the price of one penny. It is said that he coined the famous slogan, ‘don’t ask the price, it’s a penny’ because of his poor English: if so, it was one of the more inspired ways of adapting to a limitation’ (Seth and Randall, 1999. p. 117).
It was an innovative pricing strategy for that time. This study also provides the interesting account of the successor Simon, who emphasized on quality and value. Further, innovative pricing, quality, supplier partnership and focusing on food items became the seasons of M&S growth. The specialization in food retailing provided an edge to M&S over others.
Putting together, the M&S success strategies and consumer preference theories, we find that there is close resemblance and similarity. These studies bring about a clear picture of the consumer behavior which can be incorporated for the study of the marketing strategy of M&S. Adopting new marketing strategies are very crucial for the survival in competitive market. With the development of markets, M&S has always introduced the innovations (Christopher and Towill, 2002).
Based on the theoretical constructions of earlier studies, the consumer’s preference could be understood in terms of certain factors. These factors are inevitably related with the buyer’s behavior. Though, there could be several factors influencing the consumer behavior and some of these factors could not be measured, we certainly can have some major factors which make the great proportion of the decision making reasoning.
P = ¦(x1, x2, x3, x4….. xn) (1)
P = Consumer’s preference
x1 – xn = Factors influencing the consumer’s choice
The function of preference is largely influenced by few major factors. As discussed in earlier studies on consumer behavior, pricing, quality, socialization, branding are such factors which influence the decision making process. Among them, pricing is the major factor for a reasoning of choice. (Equation 1)
The price factor also is seen as an important factor for future marketing strategy, as we have internet and over it, consumers can compare the prices. Hence, the other factors are gaining ground over price. We also can predict the future trends by considering the Preference Function of an individual Consumer. The futuristic approach is also important for framing a successful strategy. The choice between present and future consumption is result of preference function based on the reasoning of necessity.
It is required to identify the exact nature of the relevant function for preference decision for any theory which deals with consumer choice. While considering the future perspective of consumer preference, its function deals with choices between consumption today and consumption next year or any other timeline is future. This relation could be presented in a workable equation.
To analyze this formally let, X represents expenditure on current consumption and Y represents money set aside (saving) for future consumption. Hence, we can write the general form of our consumer utility function as:
U = ¦(X, Y). (2)
The indifference curve associated with the above utility function can be graphically depicted as shown below. This indifference curve is convex from the origin and it assumes that the marginal utility from both goods (X, Y) are positive. Furthermore, the indifference curve traces the locus of all the combinations of present and future expenditures or consumption (X, Y) that yield the same level of utility or satisfaction. (Equation 2)
What exactly does the slope of the above indifference curve, dY/dX, inform us? As you would expect, it measures the marginal rate of substitution of a dollar expenditure on current consumption for future consumption. For example, if MRSx/y = 1.10, it suggests that the consumer is willing to substitute a dollar consumption today for $1.10 worth of consumption in the future.
The theoretical analysis further investigates the customers’ shopping behaviors to provide a better understanding of the retailer marketing strategy. The brand making process is outcome of these strategies. The study finds that the rational and utilitarian behavior of consumers based on the pricing projections.
RESEARCH METHODOLOGY AND DATA COLLECTION
In order to answer these questions, I have used the opinion survey, based on a questionnaire designed to address the questions related to the choices and decision making factors of an individual as customer/potential customer. The survey is done at M&S’s three different retail stores in Abu Dhabi and a total of one hundred and fifty respondents were interviewed. These interviews are based on the random intercept surveys of buyers. The individual interviews based on these questionnaires are gathered and transcripts have been analyzed as per the have been used to elaborate these factors in comparative terms. The results are discussed in framework of theoretical design of consumer preferences. The suggestions are based on these results and their inferences. As per the part of action research, this study considers the respondents’ view as an indicator of choices and selections.
3.2 Sampling and Data Collection
To select customers at M&S stores, Simple Random Sampling method was adopted. As scope of study is to understand the views of consumers, the random selection was suitable for the purpose of survey. The primary data is consists of the response from these customers of M&S.
ANALYSIS AND INTERPRETATION
4.1 The Case Study of Marks and Spencer:
Since M&S provides us an oldest example of successful retail business, it was appropriate to choose it as a subject of case study. This case study focuses on the response from the buyers at M&S. Questionnaire based was conducted on 150 random buyers. Among them 93 female and 57 male respondents were participated. These respondents had age groups ranging from 17 years to 68 years. The demography of these buyers is not further analyzed as per the scope of the study.
The survey was designed to map the aspects on which M&S get regular and loyal consumers thus; it was mainly focused on particular M&S buyers. The structure of analysis is also directed to understand this perspective. As it is based directly of buyer’s choice, it reflects the intuitions of their decision making process and rational of selecting M&S. There are some comparative questions from consumers about M&S and other retail shops. The outcome and results are discussed in later part of the paper.
4.3 Factors for consumers’ Preferences for M&S:
Since the parameters of decision-making are diverse, the proxy measures have been used to study them. These qualitative and quantitative measures are indirect methods of understanding the consumer’s behavior. Since the selection of M&S was done for this study, the opinion survey also denotes the buyer’s choice for the M&S outlets.
The shopping frequency, for example, is used for the proxy indicator of the proximity and convenience. It also reflects the reoccurrence of purchasing or bulk purchasing for household needs. The five classes are taken according to the general tendency of shopping. These time intervals are ranging from daily to monthly shopping frequencies. Based on the survey, it was observed that the weekly shopping, i.e. once in a week was the most favorable time. 77 out of 150 respondents preferred shopping once in a week. At same time, most of the buyers prefer one week or less to visit the retail store, which is M&S in this case study. It shows that the daily use consumer goods are preferably purchased at M&S. More than half of the respondents consider pricing as most important factor. Figure 1 shows the shopping frequency for M&S.
The food items, consumable goods and daily use utensils are shopper’s favorite at M&S store. Though there is similar tendency for those who also opt for other retail stores. The Table 1 shows the comparative figures.
It is important to assess the main factor while considering the preferences for retail marketing. By analyzing the results of the survey, it was found that the price of the articles is a big factor for choosing a retail shop. Unlike old days, now consumers can compare the prices online and then go for purchasing.
These factors were based on respondents ranking. The rank scale was 1 being least important and 5 being most important. Though this method don’t quantify the impact exactly, but it does reflect the importance of the factor according to the buyers. Out of 1582, priceing scored 667. That means 42 percent of total score was allocated to pricing by consumers. Hence, M&S offers a better pricing to its costomers which makes it’s a preferable brand.
However, when we compare it based on the buyers choice, the quality score more than the price. This comparison gives us a better picture as it compare the buyers decision for choosing M&S based on certain criteria. Here, M&S scores well over others except the diversity part. Since the focus of M&S marketing has been on food items and specialized retailing, this was expected.
As shown in Figure 3. M&S has a better score over respondents choices compare to other retails. However, they lack in diversity as provided by others, still they are the favorite brand for consumers.
While addressing the question of brand loyalty, 60 percent respondents said to choose M&S only while some of them reported that they could opt for other retail store if better facilities are provided. For such buyers, diversification and schemes were two main reasons for shifting to other retail stores.
Next to it, three main aspects are important to understand the consumer preference: Service, Pricing and Quality.
The services at retail outlet are very important in regards of customers’ convenience. These services include the assistance and counter services, online or plastic money services etc. As shown in figure 4, most of the consumers were satisfied with the services at M&S. The number of neutral and dissatisfied consumers is very less. This is because of the regular customers and brand loyalty among them.
Similar trend of response was found for pricing and quality. (Figure 5 and 6). There was little more better response in terms of quality. However, these aspects are identical in terms of the choice of an individual for selecting M&S as shopping destination. (Table 2)
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