Consumer behaviour for premium products

Premium products are the products that include higher level of quality and higher price compared to the others products. So that, the premium products also known as luxury. Besides that, the person that who own the premium products also can identify the status or the income level of the person because of the higher price of the product. For this assignment, the premium products that had been choose is NIKE shoes. As a student, the pocket money is very limited, so that the NIKE shoes become a premium product for the student.

Needs are states of felt deprivation. Needs includes basic physical needs for food, clothing, warmth and safety. (Philip Kotler and Gary Armstrong, 2006: p6). Even that, the shoes also is the basic physical needs for people. Now a day, everyone also needs a pair of shoes to wear, this is because shoes can protect our feet and keep away from injuring. Recently, everyone needs shoes to wear for their daily life. A pair of higher quality and comfortable internal design of the shoes are very important for a person in daily life. Without a comfortable or higher quality shoes, it might harmful to our feet and cause our feet injured. So, shoes are very important and need for everyone. NIKE shoes are one type of shoes that is higher quality and comfortable shoes that suitable for everyone to wear. This is because the quality and the internal design of the shoes are better compared to the others normal brands of shoes.

Wants are the form taken by human needs as shaped by culture and individual personality. (Philip Kotler and Gary Armstrong, 2006: p6). For example, people all need food but want to eat different dishes to fulfill hunger. Now a day, shoes doesn’t play the role of needs for people only, shoes also play the role of wants for people. People want shoes for the sign or symbol of fashion for some season or for the changes of the trend of fashion. People will follow the season or the trend of fashion to want some different shoes although it is not so necessary. This is because people want the different shoes to wear at the different of location or situation. Besides that, some people also want the premium brands of shoes or the limited edition shoes that had been manufactured by the shoes company. For example, some people will spend a lot of money to buy the NIKE shoes or spend a lot of time to find the limited edition shoes that manufactured by NIKE manufacturer. This is one types of want of people, because it is just the hobby of some people that like to collect the limited edition of NIKE shoes and it is not so necessary.

After that, this assignment is going to discuss about the Decision Making Process, Consumer Behavior, The Anatomy of a Product, Branding, Premium Pricing Strategies, Distribution Channels and Promotional Mix. At the end, the conclusion will be given.

2.0 Decision Making Process

Decision making process is the cognitive process of selecting a course of action from among multiple alternatives. The decision making process produces a choice of action or an opinion that determines the decision maker’s behavior and therefore has a profound influence on task performance. (Decision- Making, 2010). So, when doing the decision making process, it might have some influencing factors that can influence the decision making of buyer.

2.1 Consumer Behavior

Consumer behavior is refers to the selection, purchase and consumption of goods and services for the satisfaction of wants. (Asifo Shah, 2010). Besides that, the consumer behavior included three factors which can influence the consumer decision making. The three factors are:

Cultural factors

Social factors

Personal factors

2.1.1 Cultural Factors

Cultural is the most basic cause of the person’s wants and behavior. It is also part of the external influences that impact the consumer. Besides that, culture represents influences that are imposed on the consumer by other individuals. For example, a consumer will buy the NIKE shoes because the culture of buying a NIKE shoes is passed down by consumer parents, family or influences by the other individual.

2.1.2 Social Factors

Social factors also cast a significant influence on the consumer’s buying behavior. Some of the primary social factors are family and roles and status. For the social factor of family, a family member can influence the other family member buying behavior. For example, the children of the family want to have or want to buy the NIKE shoes, the father or mother will try to buy for the children to fulfill the satisfy.

2.1.3 Personal Factors

Personal factor is the factor that can affect or influence by the consumer personality. The example of the personal factors influence the consumers are age, lifestyle, occupation, economic situation, personality, and etc. The one of the personal factor that can influence the consumers was life style. For example, a NIKE consumer do not wear the others brand of shoes. This is because it is the life style of the NIKE consumers.

2.2 Types of Buying – Decision Behavior

The types of buying – decision behavior includes four types which are:

Complex Buying Behavior

Dissonance – Reducing Buying Behavior

Habitual Buying Behavior

Variety – Seeking Buying Behavior

The types of buying – decision behavior that has been choosing for the NIKE shoe was dissonance – reducing buying behavior. This is because the dissonance – reducing buying behavior which is the consumer highly involved with the purchase and the product is expensive. Besides that, the product was brought infrequently. (Philip Kotler and Gary Armstrong, 2006). For example, when the consumer buying a pair of NIKE shoes, the consumer will highly involve making the decision because the shoes is expensive and self- expressive and the NIKE shoe was brought infrequently.

2.3 Buyer Decision Process

Buyer decision making process is the decision making process undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service. (Buyer Decision Process- Definition, no date)Figure2.3 is the buyer decision making process:

Need Recognition

↓

Information Search

↓

Evaluation of Alternatives

↓

Purchase Decision

↓

Post Purchase Behavior

Figure 2.3 Buyer Decision Making Process

2.3.1 Need Recognition

Need recognition is the first stage of the buyer decision process. In this stage, the consumer will recognize the problem or need. (How do customers buy?, no date) For example, when a consumer wants to buy the NIKE shoes, the consumer will think that they need to buy it or not.

2.3.2 Information Search

Information search is the second stage of the buyer decision process. In this stage, the consumer will do some survey through internet, magazine, or get the information from friends. For example, when a consumer make sure the need of recognition to buy the NIKE shoes, the consumer will find some information that related to the NIKE shoes. The information can be the design, the quality, and the price of NIKE shoes.

2.3.3 Evaluation of Alternatives

Evaluation of alternatives is the third stage of the buyer decision process. In this stage, the consumer will collect information to evaluate alternatives brands in the choice set. (Identifying and Selecting Market, 2010)For example, after the information search the consumer also will evaluate the alternative the others brand of shoes. The consumer will compare the NIKE shoes quality, price and design with the others brand of shoes.

2.3.4 Purchase Decision

Purchase decision is the fourth stage of the buyer decision process. In this stage, the consumer will decide on the one brand that the consumer believes has all criteria which is seeks. (Philip Kotler and Gary Armstrong, 2006). For example, after compare the NIKE shoes with the others brand of shoes, the consumer feel that the NIKE shoes can satisfy the need. So that, the consumer will make the purchase decision to buy the NIKE shoes.

2.3.5 Post Purchase Behavior

Post purchase behavior is the last stage of the buyer decision process. In this stage, after the customer has bought and use the product, customer will take further action based on their satisfaction or dissatisfaction. (Philip Kotler and Gary Armstrong, 2006). For example, after the consumer has wear the NIKE shoes, the consumer feel that the NIKE shoes satisfy the need of the consumer, at the future the consumer will purchase again the NIKE shoes. If the NIKE shoes cannot satisfy the need of consumer, the consumer may not purchase the NIKE shoes at the future again.

3.0 Marketing Mix

Marketing mix is refers to the primary elements that must be attended to in order to properly market a product. The marketing mix is a very useful, if a bit general, guideline for understanding the fundamentals of what makes a good marketing campaign. (Jed C. Jones Ph. D.,2007). Besides that, marketing mix also known as the 4Ps of marketing. The 4Ps include:

Product

Price

Place

Promotion

Besides 4Ps, marketing mix also include the others 3Ps which is known as 7Ps. The others 3Ps are people, process and physical evidence.

3.1 Product

A product is a physical good, service, idea, person or place that is capable of offering tangible and intangible attributes that individuals or organisations regard as so necessary, worthwhile, or satisfying that they are prepared to exchange money, patronage or some other unit of value in order to acquire it. (Dr Frances Brassington and Dr Stephen Pettitt, 2007).

3.1.1 The Anatomy of a Product

The basic anatomy of a product as a series of three concentric rings representing the core product, actual product, and the augmented product. (Philip Kotler and Gary Armstrong, 2006). Figure 3.1.1 show the three levels of the anatomy of product:

Augmented Product

Actual Product

Core Product

Figure 3.1.1The Levels of Anatomy of Product

The first level of the anatomy of product is core product. Core product is intangible and it is a physical product. That’s because the core product is the benefit of the product that makes it valuable to the customer.(Three Levels of a Product, no date) For example, some people will buy the NIKE shoes because the shoes are comfortable to wear and can protect our feet from injured.

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The second level of the anatomy of product is actual product. Actual product is the consumable product, which can be viewed as the main good, service or idea the customer is buying. (Product components: Actual Product, no date) For example, NIKE manufacturer will follow the trend of the fashion to improve the NIKE shoes design, quality, style or colour to attract the customer to purchase.

The third level of the anatomy of product is augmented product. Augmented product is the non- physical part of the product. It usually consists of lots of added value. (Three Levels of a Product, no date). For example, the NIKE manufacturer will improve the features attributes or services of the NIKE shoes to differentiate the shoes from the others NIKE competitors.

3.1.2 Branding

A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service. Consumers view brand as an important part of a product, and branding can add value to a product. (Philip Kotler and Gary Armstrong, 2006).For example, the logo of “tick” of the NIKE shoes become the sign of the NIKE shoes. When people see the logo of “tick”, people will know about the brand of NIKE. Besides that, when people heard about “JUST DO IT “, people will know that was the slogan of the NIKE. On the other hand, the brand name of NIKE will help the consumers to identify the product and the quality of the NIKE shoes.

3.2 Price

Price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. (Philip Kotler and Gary Armstrong, 2006)

3.2.1 Premium Pricing Strategies

A premium pricing strategy involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to “skim the cream” off the top of the market. It is used to maximize profit in areas where customers are happy to pay more, where there are no substitutes for the product, where there are barriers to entering the market or when the seller cannot save on costs by producing at a high volume. (Lisa Magloff, no date). NIKE’s pricing is designed to be competitive to the other fashion shoes retailers. The pricing is based on the basis of premium segment as target customers. NIKE as a brand commands high premiums. (Gwendolyn Cuizon,2009). For example, NIKE’s company will setting the price of the NIKE shoes higher than the others brand of shoes to show that the NIKE shoes are more premium than the others brand. So, the NIKE shoes will become the premium product in the market because of the higher price compared to the others brand. Besides that, by setting the higher price of the NIKE shoes, the NIKE’s company will earn more profit from the consumers. Besides earn the profit, the NIKE’s company also gives a good service quality to the consumers.

3.3 Place

In the marketing mix model the place issue is equal with handling a distribution channel that brings the given product to its potential users, and the main task is to link an existing supply with an existing demand. Besides, place are appears as a phenomenon, created by each company at each place, through its way of combining local and distant resources. ( Hakan Hakansson and Alexandra Waluszewski, 2005)

3.3.1 Distribution Channels

Distribution channels is the route by which a product or service is moved from a producer or supplier to customers. A distribution channel usually consists of a chain of intermediaries, including wholesalers, retailers, and distributors, that is designed to transport goods from the point of production to the point of consumption in the most efficient way. (Definition of Distribution Channels, 2009)

3.3.1.1 Distribution Channel Levels

On this channel levels of this part, each layer of intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. (Philip Kotler and Gary Armstrong, 2006). The distribution channel levels as shown as figure below:

Consumer

Manufacturer-

Manufacturer

Wholesaler

Manufacturer

Consumer

Retailer

Manufacturer

Consumer

Retailer

Jobber

Consumer

Wholesaler

Retailer

Figure 3.3.1.1 Distribution Channel Levels

The distribution channel of the NIKE shoes is the first and second channel level. In the first distribution channel level, the NIKE manufacturer will distribute the NIKE shoes to the others branch of NIKE and direct sell to the customers.

While in the second distribution channel level, the NIKE manufacturer will distribute the NIKE shoes to the others branch of NIKE. After distribute to the others branch, the NIKE manufacturer also will distribute the NIKE shoes to the retailer and the retailer will sell the NIKE shoes to the customer.

3.4 Promotion

Promotion keeps the product in the minds of the customer and helps stimulate demand for the product. Promotion involves ongoing advertising and publicity (mention in the press). The ongoing activities of advertising, sales and public relations are often considered aspects of promotions. (One Definition of Promotion, no date)

3.4.1 Promotion Mix

The promotion mix is a term used to describe the set of tools that a business can use to communicate effectively the benefits of its product or services to its customer. (Promotion Mix, 2004). It consists of five main elements which is include:

Direct Marketing

Advertising

Personal Selling

Sales Promotion

Public Relations

3.4.1.1 Advertising

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or service by an identified sponsor. (Philip Kotler and Gary Armstrong, 2006). The types of advertising that can attract consumer vision to purchase are television, magazine, radio, cinema and etc. For example, the NIKE shoes manufacturer will create a few of very interesting or creative advertising to attract the vision of the consumer to purchase. Besides that, NIKE’ company every year also spent a lots of money in the advertising to promote NIKE shoes to prevent the sales of the NIKE shoes decrease.

3.4.1.2 Personal Selling

Personal selling is covering face- to- face and personally tailored messages to making the sales and building the customer relationship. The personal selling may focus on developing of relationship with the potential buyer. For example, the NIKE promoter will build up the relationship with the customer by explain the NIKE shoes design, the types of the NIKE shoes, and the function of the NIKE shoes. By giving the information of the NIKE shoes to the customer in the personal selling, it is very helpful to attract the customer purchase because of the good service of the promoter.

3.4.1.3 Sales Promotion

Sales promotion involves tactical, short- term incentives to encourage the purchase or sale of a product. (Philip Kotler and Gary Armstrong, 2006) For example, every year the NIKE will have some sales promotion by discount, giving voucher, fair or others promotion to attract customer to buy the NIKE shoes.

4.0 Conclusion

In the conclusion, the NIKE shoes are needs or want of some people. Some people need the NIKE shoes because it is the basic physical needs of people. While some people want the NIKE shoes to fulfill their satisfied and it is not so necessary. Besides that, when a consumer want to buy the NIKE shoes, the consumer behavior such as cultural factors, social factors and personal factors that can influence the consumer to purchase. On the other hand, the types of buying- decision behavior and buyer decision process also can influence the consumer to purchase. The marketing mix such as product, price, place and promotion is the most important way that to success the sales of the NIKE shoes. The product of NIKE shoes which is high quality, comfortable to wear and have many types of different design and function of shoes. So, it can attract consumer to purchase. Besides that, the NIKE shoes is one of the most famous brand of shoes in the world and the sign, symbol, slogan or design also known by the people of the world because of its brand. The NIKE’s pricing is set up higher than the others brand of shoes to show that NIKE is premium than the others brand. Furthermore, the NIKE manufacturer will distributes the NIKE shoes to the others branch then sell to the consumer and the NIKE manufacturer also will distribute the shoes to retailer then the retailer will sell the shoes to customers. Last, the NIKE will do the promotion to attract consumer to purchase. The NIKE will increase the sales or profit through the promotion mix which is direct marketing, sales promotion, public relations, personal selling and the advertising.