Understanding the Consumer Preferences 2012

Acknowledgment First of all, I would like to say Alhamdulillah, for giving me the strength and health to do this project work until it done Not forgotten to my family for providing everything, such as money, to buy anything that are related to this project work and their advice, which is the most needed for this project. Internet, books, computers and all that as my source to complete this project. They also supported me and encouraged me to complete this task so that I will not procrastinate in doing it.

Then I would like to thank my teacher, Madam Ayesha for guiding me throughout this project. I had some difficulties in doing this task, but she taught us patiently until I knew what to do. She tried and tried to teach me until I understand what I supposed to do with the project work.

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Understanding the Consumer Preferences 2012

ABSTRACT The research study examines the various factors or variables affecting consumer preferences across all segments. The Coca-Cola Company was a reference point for this research. The purpose of the research was to identify and analyze the key variables that affect and influence consumer preferences. This study gives an in-depth insight into the procedure and materials used for the analysis of the research. It involves a rigorous and insightful analysis of data which was processed in the software. It produces extensive conclusions, recommendations and suggestions for the beverage industry and especially for Coca Cola Company. This research found that age has an inverse relationship with consumption of soft drinks. Next it found that consumer preferences are affected and influenced by sociological factors. Consumers also base their preferences based on the psychological and other key factors that are discussed in this paper. Most of the people are unaware of the factors that change or influence their prime preference. And finally it was concluded that cola flavored drinks are most widely acceptable, consumed and purchased. This research acts as a stand point for other marketers and soft drink producing companies as well.

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INTRODUCTION The thesis research project is a compulsory requirement of the Superior University Lahore as part of the master degree. This report incorporates the subject of Marketing. Marketing is an essential tool for leading any product, organization, business or service to success. This study will be looking at an interesting aspect of marketing in which a market survey is conducted to observe and analyze the consumer preferences. Consumer Behavior itself is a very broad subject that is compulsory to be studied by marketers who wish to be successful as it is the study of when, why, how, and where people do or do not buy a product. It blends elements from subjects like

psychology, sociology, social anthropology and economics. Another significant part of our research is examining all the segments of consumers. Consumer segmentation is the process of classifying people into groups that have some set of similar characteristics, resulting in the ability to be studied and targeted. The Pakistani society is divided into three socio economic classes known as Socio-Economic Class A, B & C. The consumers preferences across these SECs would be the focus of our presentation.The topic is finalized by keeping the Coca-Cola Company as a reference point. The research has been done keeping the various flavors of soft drinks Coca-Cola Company is offering to its customers in Pakistan. We will study the various variables and components that were used and affected the research in detail ahead. Consumer preferences is a very interesting field, it involves rigorous field work and undergoes market related surveys. The vast knowledge adds to the research significantly but the important fact is that the market trends change from time to time. An important job of a marketer is also to identify these changes and act accordingly to stay in tune with the fast changing trends in this competitive market. Consumers have certain buying behavioral patterns and they vary from geographical locations to segments. The preference of buying a certain consumable product varies from person to person across all segments, but different societies adapt to norms handed over from them from their elders. These norms can include clichs and stereotype beliefs or assumptions about some products which can lead to a success or failure of that product. Similarly the basic problem that I have identified before conducting the research was that: - What is the reason behind the preconceptions of consumers about some carbonated drinks? - What leads consumers to eventually buy different soft drinks apart from their prime preference if one variable in the environment changed? To understand these basic problems we will look at the study objectives in detail next.
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Understanding the Consumer Preferences 2012

Purpose of the study:

The purpose of this research is to develop a model that predicts the likely course of events given particular intervening variables or circumstances. Understanding the Consumer Preferences (Across All Segments With Reference to Cola vs. Clear and Flavored Drinks)

Objectives of the Study:

Main objective: The main objective of this study is Understanding the Consumer Preferences (Across All Segments With Reference to Cola vs. Clear and Flavored Drinks)

Sub objectives:
The sub objectives of this study are:
To determine the relationship between Social Factor and Customer Preference To determine the relationship between Weather Factor and Customer Preference To determine the relationship between Content and Customer Preference To determine the relationship between Demographic and Customer Preference

Significance of the study:

The study will broaden our understanding f customer Preferences about your product. Although the concept is very wide but the current study will add to existing body of knowledge by specifying,

The role of efficient service to customers. Factors that brings satisfaction to customers.

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Research Hypotheses:
This research study dependent and independent variables one by one. H1= There is relationship between Social Factor and Customer Preference Ho= There is no relationship between Social Factor and Customer Preference H2= There is relationship between Weather Factor and Customer Preference Ho= There is no relationship between Weather Factor and Customer Preference H3= There is relationship between Content and Customer Preference Ho= There is no relationship between Content and Customer Preference H4= There is relationship between Demographic and Customer Preference Ho= There is no relationship between Demographic and Customer Preference

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Literature review:
The article Is Caffeine a Flavoring Agent in Cola Soft Drinks? has been written by Roland R. Griffiths, PhD; Ellen M. Vernotica, PhD, which was published in the archives of family medicine. The article is set to see whether the content of caffeine is a factor influencing the consumer preferences. It was found out in the research that almost 70% of the soft drinks put caffeine in their drinks. The results of the research also found out that a mere 8% of the respondents of regular cola soft drink consumers could detect the effect of the caffeine concentration. The caffeine concentration was found in most of the cola soft drinks. It was also at variance with the claim made by the soft drink manufacturers that caffeine is added to soft drinks because it plays an integral role in the flavor contents. This finding is valuable for the general public, the medical community, and regulatory agencies to recognize that the high rates of consumption of caffeinated soft drinks more likely reflect the mood-altering and physical dependenceproducing effects of caffeine as a central nervous systemactive drug than its subtle effects as a flavoring agent. In general this conclusion of the article is a bookish reference what it implies has a greater notion. The effects of flavor might be relevant to the consumers but caffeine goes unnoticed by a majority of consumers. This article has helped identify the fact that most of the people know about caffeine and its effects but in general the reality is that they cannot actually identify its concentration level. For example a person cannot actually tell which soft drink has more or less caffeine in it but he can obviously tell which drink seems sweeter to him or her. This article is in direct relationship with the research topic because it helps to identify a major point which will definitely help in the research findings as a comparison to the findings of this research. We can also see whether the preferences are being affected by caffeine usage. At the end one thing is for certain that people do know about the affects of caffeine but it is difficult for them to actually deduce how much caffeine is being put in a soft drink which makes one thing quite clear that caffeine plays a physiological or informative role rather than directly affecting the consumer preference in a real manner. The article: Descriptive Analysis of Cola and Lemon/Lime Carbonated Beverages, has been written by S.M. Kappes, S.J. Schmidt and S.-Y. Lee Bulk, it was published in the Journal of Food Science. The articles basically states that artificial sweeteners have different mouth feels than real sweeteners. They have tested these both concepts via different methods. They used the terms bulk sweeteners and alternate sweeteners. The authors divided the test process into two main objectives. The first one was to quantify the various mouth feel attributes. Or in simple terms they were trying to explain that different beverages have different sort of aromas and mouth feels, in lay man term what they wanted to say was that different soft drinks have different perceptive inclinations and after tastes. These vary from person to person but the general consensus was that invariably every other beverage has the contents which lead to different performance of mouth feel SUPERIOR UNIVERSITY LAHORE Page 6

Understanding the Consumer Preferences 2012

attributes. The second was to investigate the halo attribute dumping effect of rating various attributes from the sensory attributes. This article has given way to a good perspective about the various similarities and seemingly small difference which in turn are quite big. These have been implemented on a general level to know the physiological backing of a persons know-how. Consumers often base their buying decisions on how the after effects or how good the product makes them feel. Relationship between Physical Properties and Sensory Attributes of Carbonated Beverages is an article written by S.M. Kappes, S.J. Schmidt and S.-Y. Lee Bulk, it was published in the Journal of Food Science. The article looks at a very interesting aspect of carbonated drinks. Its taking in account the various attributes of carbonated drinks such as after tastes and aromas. In short it sees the relationship between the physical properties and sensory attributes of carbonated beverages. The key objectives of the article were stated to be as: to measure sweetener profile, Bricks, refractive index, viscosity, aw, carbonation, titratable acidity, and pH of commercial carbonated beverages; and to correlate the physical property measurements to descriptive analysis of the beverages. Basically the authors try to explain that typically sweeteners provide functional properties in beverages, including sweet taste, bulking, bitter masking, structure, and mouth feel. The authors further describes that the diet beverages try to come close to the regular beverages by addition of artificial sweeteners. An important aspect was to relate physical properties to the human sensory for the understanding of how and why mouth feels different to different types of users and the when the amounts of sweet is changed significantly. For the result part the methods of correlation among different variables was used. The results of the article were that it has identified, quantified and seen the reason behind the consumer preferences of the carbonated drinks in terms of sensory and physical properties. It concludes that there is a difference but the apparent reason to consumers is there that is the health conscious consumers or simply some consumers are separating the two, diet and regular drinks. So in short it tells us that consumer buying patterns also change when consumers identify changes in taste being sensory or physical. The article How important intrinsic and extrinsic product attributes affect purchase decision was written by Ulrich Ennekinga, Claudia Neumann, and Sven Henneberg published in the issue of Food Quality and Preference. The article is very interesting and it gives an insight to the importance of either intrinsic and extrinsic product attributes which affect the purchase decision of a consumer of carbonated or soft drinks. The authors write in this article that they have taken a sample size of 621 testing 3 different carbonated drinks they most preferred. The consumers or the test subject or simply the respondents were tested on two major things, level of sweetness and brand sweetening systems. Sweetening system means all the other things or facts that make up the quality of product appeal more to the consumer. For example if a brand image is as such that people think it is a status symbol to consume that product it will in turn mean that the product has acquired itself a sweetening system. So in the result part of the article it was seen that the sweetening systems were heavily dependent on brand information. The research deduced that sugar is not SUPERIOR UNIVERSITY LAHORE Page 7

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significantly superior to the sweetening systems. This clearly gave the solution or gave an indication of how important market segmentation is in sensory analysis. This article was well incorporated in this research as well due to the fact that it has clearly identified a few variables and enhanced the understand of the fact that market segmentation is important in the sensory analysis. My research is based on consumer preferences and these consumer preferences are mainly based on the sensory element of human beings. Some consumers tend to buy products on basic instinct. It is wise and logical to understand the system behind these sensory analyses. This gives way to what a questionnaire or the variables should be directing at. Changing Consumer Preferences of Carbonated Drinks is an article written by Eric Foss and has been published in the Chief Executive Magazine taken from achieves & articles section of their website. Eric Foss is the chief executive officer of Pepsi Bottling group. The reason this article was selected was that it looks at the rival companys perspective which will give a strategic advantage to this research as it involves the reference point of the Coca Cola Company. The article looks at the changing trend of increased mineral water consumption amongst the markets that were once dominated by the carbonated drinks in question. Carbonated drinks demands have significantly decreased in the west due to the increasing awareness and health conscious consumers. This is evident from the fact that bottled water has stolen a lot of shelf space from the soft drinks or carbonated bottled drinks in almost all the retail outlets. This is in correlation with my research as I will have to consider the fact that consumer preferences are also being based on the fact that preconceptions of consumers are build of notions about health consciousness and awareness of newer better facilities of hydrating oneself. The article suggests that there should be a consideration to the configuration of the contents of carbonated drinks. This basically, in lay man terms, means that producers of soft drinks should now realize that people have become more aware and health conscious and they cannot be fooled by cover or aggressive advertising campaigns. There is more to be done for this cause in order to grab hold of the attention of the loss of potential market share. Karan E. Dylan in their article Habit Formation in Consumer Preferences: Evidence from Panel Data directly talk about habit formation process present in consumers by testing for the presence of habit formation using household data. The article suggests that habit formation is basically a process that implies a condition relating the strength of habits to the evolution of consumption over time. The condition was practically estimated with the help of food consumption data which was gathered from PSID of penal study of income dynamics. The results of this study showed that there is no proof of habit formation on annual basis. This article is very well aligned with the topic that I have chosen for research as habit formation plays a major role when it comes to consumer preferences. Consumer Preference Formation and Pioneering Advantage is written by Gregory S. Carpenter and Kent Nakamoto and it was printed in The Journal of Marketing Research in 1989. The article basically put forwards the statement that innovators and pioneers of the market outsell in both consumer and industrial SUPERIOR UNIVERSITY LAHORE Page 8

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markets as compared to the later entrants. The reasons put forward behind this study include entry barriers that arise from preemptive positioning and switching costs. The difference created by these very barriers is termed as pioneering advantage. The article also suggests that empirical studies show that pioneering advantages are present even in mature markets in which brands reposition and switching costs are minimal. This is where consumer preferences play a significant role. The pioneering advantage can also be a cause of consumer preference. This process can produce a preference structure that favors the pioneer, making it difficult for later entrants to "compete away" the pioneer's large market share; even if brands can reposition and switching costs are minimal. The article is perfectly explaining a lot of concepts that my own research topic will cater to. The Effect of Deal Knowledge on Consumer Purchase Behavior is written by Aradhna Krishna and it was published in 1994 in The Journal of Marketing Research. The article deals with the research that has shown that there is heterogeneity in consumer knowledge of prices and deals. Further, the research shows that that it has been found that purchases behaviors of buyers are not only affected by the current prices by they are also affected by the future prices of the products. The study contrasts the two kinds of consumers, one who has the knowledge of future price deals and the other who doesnt. The response of both the consumers is observed keeping in mind their preferred and less preferred brands. The result shows that there is a significant amount of difference between the two kinds of consumers. Consumers with knowledge of future deals could be more likely to purchase on low-value deals and deals on less preferred brands compared with consumers without knowledge of future deals. It was also found out through controlled experiment that actual behavior of consumer varies depending on deal knowledge and is quite consistent with model predictions. The article is a very relevant one keeping in mind the research topic as it talks about consumers preference affected by psychographics and demographics of the consumers. The article I have chosen next is Time-Inconsistent Preferences and Consumer Self-Control and it is written by Stephen J. Hoch and George F. Loewenstein and it was published in the Journal of Consumer Research in 1991. This article is in perfect relevance with my research topic as it covers an important aspect of consumer behavior which is consumer self-control. The questions like Why do consumers sometimes act against their own better judgment, engaging in behavior that is often regretted after the fact and that would have been rejected with adequate forethought? More generally, how do consumers attempt to maintain self-control in the face of time-inconsistent preferences? are answered in this article in much comprehensive way. This article explains how and why consumers experience sudden increases in desire for a product, increases that can result in the temporary overriding of long-term preferences. Two general classes of self-control strategies are described: those that directly reduce desire, and those that overcome desire through willpower. Tactics that consumers use to control their own behavior are also discussed. Consumer self-control is framed as a struggle between two psychological forces, desire and willpower. SUPERIOR UNIVERSITY LAHORE Page 9

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The Experiential Aspects of Consumption: Consumer Fantasies, Feelings, and Fun is written by Morris B. Holbrook and Elizabeth C. Hirschman and it was published in The Journal of Consumer Research in 1982.This paper fights for the acknowledgment of significant experiential facets of consumption. Particularly, a general framework is constructed to signify typical consumer behavior variables. With this paradigm as the base, the widespread information processing model is contrasted with an experiential view that centers on the symbolic, hedonic, and esthetic nature of consumption. This point of view basically regards the consumption experience as a phenomenon directed toward the pursuit of fantasies, feelings, and fun.

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Theoretical Framework:
Customer preference attained through these factors which brings customers loyalty for an organization.

Social Factor

Weather Factor

Content

Customer Preference

Demographic

Shop Location

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Methodology:

Research design: Quantitative research methods approach will be used, where the structured questionnaire would be designed. It would be in connection with two main variables and some supporting variables. Data collection method: The data collection tools used in this survey research will comprise a questionnaire designed by using effect of customer satisfaction on customer loyalty as a main variable. The reason to choose the questionnaire is that will describe a population by providing a quantitative numeric description of some fractions of population through the data collection process of asking question of the people. This will enable to generalize the findings from sample of response to a population. Questionnaires also have a number of strengths like; it is good for measuring attitude and eliciting other content from research participants. It is inexpensive and can be administrated to probability samples and has a quick turnaround. Sample: The population of this study will be the customers of telecom industry of Pakistan. Stratified random sampling techniques will be used to generalize the findings and to ensure equal representation of both the genders.

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Limitations and delimitations:

Limitations:
The sample of 500 respondents will be taken for this proposal may not be enough to investigate or generalize the findings or appropriate result.

Delimitations:
This research is restricted to customers of any telecommunication industry with 01 or more years of experience of using a service of a cellular company.

Ethical consideration
It would be clearly defined that this study is to find the effect of customer satisfaction on customer loyalty. The participation in this study would be completely voluntary, which may end at any time within the survey by the refusal of the participants. All the information provided would be held in strict confidence. The privacy of the participants would be protected to the maximum extent. Steps would be taken to ensure the research participants that they will not be deceived about the research and its purpose. The results and outcomes of the study will be shared to the participants.

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Referencing:
Gregory S. Carpenter, G. S. &Nakamoto, K. (1989, Aug).

Consumer

Preference Formation and Pioneering Advantage, Journal of Marketing Research, 26(3), 285298
Aradhna, K. (1994, Feb). The Effect of Deal Knowledge on Consumer Purchase Behavior,

Journal of Marketing Research, 31(1), 76-91

Hoch, S. J. &Loewenstein G. F. (1991, Mar), Time-Inconsistent Preferences and Consumer Self-

Control, The Journal of Consumer Research, 17(4), 482-507

Holbrook M. B. & Hirschman E. C. (1982, Sep), The Experiential Aspects of Consumption:

Consumer Fantasies, Feelings, and Fun, The Journal of Consumer Research, 9(2), 132-140 Stable
Melton B. E., Huffman W. E., Shogren J. F. & Fox J. A. (1996, Nov), Consumer Preferences for

Fresh Food Items with Multiple Quality Attributes: Evidence, American Journal of Agricultural Economics, 78 (4), 916-923
Griffiths R. R. &Vernotica E. M., (2000),Caffeine a Flavouring Agent in Cola Soft Drinks, Arch

Fam. Med.,727-734.
Kappes S.M., Schmidt S.J., Lee S.-Y. (2006), Descriptive Analysis of Cola and Lemon/Lime

Carbonated Beverages, Journal of Food Science, 71 (8), 583-589

Kappes S.M., Schmidt S.J., Lee S.-Y. (2007), Relationship between Physical Properties and

Sensory Attributes of Carbonated Beverages, Journal of Food Science, 72 (1), S001S011

Ennekinga U., Neumann C., &Henneberg S., (2007, Jan), Pages How important intrinsic and

extrinsic product attributes affect purchase decision, Food Quality and Preference, 18(1), 133-138.
Foss E., (2008, Mar), Changing Consumer Preferences of Carbonated Drinks, Bubble

Troublehttp://www.chiefexecutive.net Consumers' Hot and Soft Drink Preferences: New Trends & Future Perspectives.
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