Ferraris are a luxury good, known for their performance and prestige with prices of up to £500,000. In this study there will be an effort to evaluate if a Ferrari would still be as desirable if it was available at £20,000. To do this we must examine the relationship between the behaviours of consumers and price with a further examination of marketing activities. Firstly we need to define what consumer behaviour, price and marketing activities are, by understanding the consumer we can then create products that meets their wishes and needs which is vital in achieving success. An investigation of the Utilitarian (rational) consumption model will follow allowing the identification of driving factors that affect consumer’s decisions. This allows the introduction of Pricing, viewing towards perceived quality and value. The contrasting Hedonic view allows the introduction of socio-psychological factors on consumer behaviour such as personality and social class. We must appreciate our level of involvement with the product and what factors this may cause. This will allow us to fully appreciate whether the change in price will result in the Ferrari still being as desirable as when it was at a higher price.
The study of consumer behaviour “is the study of the processes involved when individuals or groups select, purchase, use or dispose of products, service, ideas or experiences to satisfy needs and desires” (Soloman et al, 2002, p4). Therefore by studying what factors affect how and why consumers make these consumption decisions, marketers may be able to understand and therefore adapt to these decisions. Consumer behaviour incorporates ideas from many different disciplines such as psychology, sociology and economics. (Schiffman and Kanuk, 2000), in a marketing context we take note of all these concepts and try to come to a balanced answer. A full examination of consumer behaviour looks at how consumers maximise their utility (satisfaction) based on a cost-benefit analysis of price and product scarcity, this was thought of the Utilitarian or rational way of behaviour. (Baines et al, 2011). The key determinant is that the functional benefits must be greater than the costs expended. Very often we would class the cost expended as being the price paid for an item, this is a difficult term to classify but is best explained by Baines, Fill and Page (2011), (p331) “we consider price as the amount the customer has to pay or exchange to receive a good or service”. This however fails to mention that how consumers “perceive a price-as high, as low, as fair- has a strong influence on both purchase intentions and purchase satisfaction.” (Schiffman and Kanuk, 2000, p 144). For example a passenger who paid £1 for his Ryanair flight will feel more satisfied one who paid £71 due to purchasing at a later date. Here we look at whether a Ferrari is still as desirable at a lower price, to do this we must examine how customers affect to a change in prices, known in economic terms as the elasticity of demand. This measure how much demand will shift as a result of a change in price. To do this we can look at how in rational thinking consumers wish the benefits to outweigh the costs, the benefits of buying a new Ferrari may be the quality and value you get for the price you paid. However as each person has a different wished level of quality we use the term ‘perceived quality’, often based on “informational cues that they associate with the product” (Schiffman and Kanuk, 2000, p145). Looking at the relationship between the perceived qualities and pricing often it is thought that price reflects quality (Baines et al, 2011). This is challenged by the aspect we take our perceived quality from many cues, not just price, such as more extrinsic values such as brand image. Therefore it can be classes that “consumers use price as a surrogate indicator of quality if they have little or no information to go on” (Schiffman and Kanuk, 2000, p150). The idea of brand...
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