Price versus brand : assessing the role of price and brand in low-income consumer decision-making

Allan, Meredith Leigh (2014-03)

Thesis (MComm)--Stellenbosch University, 2014.

Thesis

ENGLISH ABSTRACT: Growing competition, fuelled by globalisation, has increased the number of alternatives across almost all product categories, leaving consumers overloaded with information and overwhelmed for choice. Brand and price represent two cues that have been found to influence consumer decision-making and which can be used in marketing strategies to create value, and differentiate from competitors in this increasingly competitive climate. Responding to the misconceptions surrounding the decision-making of individuals classified in the low-income market segment, and in light of the significance of Bottom of Pyramid (BOP) supported by Prahalad (2002), this study was undertaken to assess the perceived importance of price and brand in low-income consumers’ decision-making process, and thereby examine the effect of different prices and brands on low-income consumers’ product preference. Primary causal research using a choice-based conjoint (CBC) analysis was conducted on a judgement sample of black female adults. A total of 209 questionnaires were completed through fieldwork of personal interviews in informal settlements in Gauteng. The study used a 5 price presentation (R18.99; R24.99; R28.99; R33.99; R42.99) by 5 brand presentation (Ace, Iwisa, White Star, Mnandi, Ritebrand) between-subjects design in the maize meal product category. The hierarchical Bayes procedure and multinomial logit model were used to analyse the primary data. Results of the descriptive and inferential analysis of the CBC showed that brand was perceived as more important, attributing to 65 per cent of low-income consumers’ decision-making process, opposed to the 35 per cent attributed to price, and that prices and brands had varying effects on low-income consumers’ purchase probabilities. Although lower prices did have higher perceived utilities, the price-sensitivity of low-income consumers was found to be less influential at lower price ranges, suggesting the stronger influence of brand and brand associations on their evaluation of alternatives. Familiar brands (White Star, Ace and Iwisa) were seen to positively influence low-income consumers’ purchase probability by reducing perceived risk, further enhanced by brand credibility as found with Iwisa (which indicated consistent quality) resulting in higher purchase probability. Unfamiliar brands (Mnandi and Ritebrand) were perceived as having low levels of utility, attributed to higher levels of perceived risk and unclear quality inferences. The research conclusions, drawing from secondary research, proposed a model of low-income consumer decision-making that is influenced by various factors, including aversion to loss, and the desire to satisfy aspirations. Varying levels of brand knowledge, brand quality and credibility as well as symbolic value attached to different brands as perceived by low-income consumers, are argued to influence both individuals’ aversion to loss, as well as their aspirational desires, and thus influence the decision-making process. Price and price–quality inferences, brand familiarity, brand–quality inferences, psychological factors and those surrounding the purchase context were found to have influence over the decision-making process of individuals within this market segment. Managerial recommendations emphasise the significance of the BOP as a viable market segment, warn marketers of low-cost pricing strategies, and discuss the importance of employing value-based strategies and leveraging brand to attract, satisfy and retain consumers in this market segment. Managers are challenged to find a balance between perceived quality and reliability and affordable price, in order to operate successfully in the low-income market and offer effective value propositions that provide customer satisfaction while allowing for sustained sales and profits for the firm.

AFRIKAANSE OPSOMMING: Groeiende mededinging, gedryf deur globalisering, het die aantal alternatiewe in byna alle produkkategorieë laat toeneem, wat verbruikers oorlaai met inligting en oorweldig met keuses. Handelsmerk en prys verteenwoordig twee leiseine wat verbruikersbesluitneming beïnvloed en wat gebruik kan word in bemarkingstrategieë om waarde te skep, en 'n produk van sy mededingers te onderskei in hierdie toenemend mededingende klimaat. In reaksie op die wanopvattings omtrent die besluitneming van individue wat in die lae-inkomste-marksegment geklassifiseer word, en in die lig van die betekenisvolheid van die Bodem van die Piramide (BOP) soos ondersteun deur Pralahad (2002), is hierdie studie onderneem om die waargenome belangrikheid van prys en handelsmerk in lae-inkomste-verbruikers se besluitnemingsproses te assesseer, en sodoende die effek van verskillende pryse en handelsmerke op lae-inkomste-verbruikers se produkvoorkeure te ondersoek. Primêre kousale navorsing deur 'n keusegebaseerde saamgevoegde analise ("choice-based conjoint analysis" of CBC) is uitgevoer op 'n oordeelsteekproef van swart, vroulike volwassenes. 'n Totaal van 209 vraelyste is voltooi deur middel van veldwerk in die vorm van uit persoonlike onderhoude in informele nedersettings in Gauteng. Die studie het 'n tussensubjekte-ontwerp gebruik met 'n 5-prys-aanbieding (R18.99; R24.99; R28.99; R33.99; R42.99) teenoor 'n 5-handelsmerk-aanbieding (Ace, Iwisa, White Star, Mnandi, Ritebrand) in die mieliemeel-produkkategorie. Die hiërargiese Bayes-prosedure en multinomiale logitmodel is gebruik om die primêre data te ontleed. Die resultate van die beskrywende en inferensiële analise van die CBC het gewys dat handelsmerk as meer belangrik waargeneem word, met 65 persent van lae-inkomste-verbruikers se besluitnemingsproses wat daaraan toegeskryf kan word, in vergelyking met 35 persent aan prys. Verder het pryse en handelsmerke wisselende effekte op lae-inkomste-verbruikers se aankoopwaarskynlikhede gehad. Alhoewel laer pryse hoër waargenome bruikbaarhede gehad het, is daar gevind dat die pryssensitiwiteit van lae-inkomste-verbruikers minder invloedryk is in laer prysklasse, wat dui op die sterker invloed van handelsmerke en handelsmerkassosiasies op hulle evaluering van die verskillende alternatiewe. Bekende handelsmerke (White Star, Ace en Iwisa) het lae-inkomste-verbruikers se aankoopwaarskynlikheid positief beïnvloed deur waargenome risiko te verlaag. Hierdie verskynsel is verder versterk deur handelsmerkgeloofwaardigheid, soos gesien by Iwisa (wat konsekwente gehalte aangedui het), wat lei tot hoër aankoopwaarskynlikheid. Onbekende handelsmerke (Mnandi en Ritebrand) is waargeneem as laag in terme van bruikbaarheidsvlakke, wat toegeskryf kan word aan hoër vlakke van waargenome risiko en onduidelike afleidings omtrent gehalte. Die navorsingsgevolgtrekking, wat op grond van sekondêre navorsing gemaak is, stel 'n model van lae-inkomste-verbruikersbesluitneming voor wat deur verskeie faktore beïnvloed word, insluitend 'n afkeer van verlies en die begeerte om aspirasies te bevredig. Wisselende vlakke van handelsmerkkennis, handelsmerkgehalte en -geloofwaardigheid, asook die simboliese waarde wat aan verskillende handelsmerke geheg word soos waargeneem deur lae-inkomste-verbruikers, beïnvloed sowel individue se afkeer van verlies as hulle aspirasionele behoeftes, en beïnvloed dus die besluitnemingsproses. Daar is gevind dat afleidings omtrent prys, prys teenoor gehalte en handelsmerk teenoor gehalte, handelsmerkbekendheid, sielkundige faktore en faktore vanuit die aankoopkonteks 'n invloed het op die besluitnemingsproses van individue binne hierdie marksegment. Bestuursaanbevelings beklemtoon die belangrikheid van die BOP as 'n lewensvatbare marksegment, waarsku bemarkers teen laekoste-prysingstrategieë, en bespreek die belang daarvan om waardegebaseerde strategieë te gebruik en handelsmerke te hefboom om verbruikers in hierdie marksegment te lok, te bevredig en te behou. Bestuurders word uitgedaag om 'n balans te vind tussen waargenome gehalte en betroubaarheid en bekostigbare pryse, ten einde suksesvol in die lae-inkomstemark te funksioneer en doeltreffende waardeproposisies te bied wat verbruikersbevrediging verskaf, maar steeds ruimte laat vir volgehoue verkope en winste vir die firma.

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