Impact of Marketing Mix on Customer Buying Decision of Luxury Housing Industry in UK
01. Introduction (Research proposal)
01.1 Industry background of the study
01.1.1 Industrial review
Property development industry can be classified into several sectors, the largest being middle income land and property market which is increasingly being dominated by property developers selling ready build houses and plot of land. This sector is largely depended on the domestic economy and the housing loans market, which is driven by prevailing rate of interest. The demand for houses, condominiums, commercial property and office space, leisure property segments is also a significant contributor to the property market & luxury segment generates lucrative profits.
1.1.2 International overview
International property development industry; especially luxury housing industry shows same industry conditions worldwide. The Luxury Home Council (Authority for world luxury houses – based in USA) has presented lot of findings on this industry with their primary collected information. Their findings are very interesting and show some cross functional relationships towards the industry and customer behavior and trends. Professionals in the real estate industry says luxury homes are more optimistic industry and majority (around 55%) is willing to get growth in the industry. These predictions based on the trends will appear in next twelve months. Based on the Forbes magazine (USA) shown better world growth of 25% in the year 2006. This trend really affected to the luxury housing industry worldwide. But existing recession conditions shows pure hit to the luxury housing industry. People try to fulfill their basic requirements.
As per the survey conducted by American Affluence research center shows richest 10% will invest in real estate industry. Survey realized that portion 49% for new constructions and 11% for pre own home market. Balance invests in land sales market.
1.1.3 Market trends in the UK
Based on the UK government, housing and planning statistics there are many trends find around 22 million in year 2007 contributed for the dwellings. From this market in the England 82% are bungalows, but in the London around 43% dwellings are flats. There are some secondary information released in the year 2008 and showing many rational findings. 68% are living in their own houses. Around 18% people are social tenant and private renters are around 14%. (Source:http://www.communities.gov.uk/publications/corporate/statistics/housingplanningstatistics2009)
The global economic crisis has adversely affected the UK property market – In the wake of the collapse of the sub-prime mortgage market in the United States, the global financial system has changed significantly. Long-established UK financial organizations have had to change their working practices with particular focus on management and containment of further lending and exposure to higher risk activities such as property investment.
As a result the UK Construction industry has suffered – The UK Construction industry has been hit particularly hard as the rate of investment into property-based activity slows significantly. The appetite for new private development has reduced dramatically as the economic crisis affects the financial performance of businesses. Equally the UK banks, which are already heavily exposed to property investment, are reluctant to fund new projects. There are also significant concerns that the UK Government’s spending plans for large scale public projects will be cut to help balance the books.
Falling workloads are changing market behavior – UK Construction workloads are currently falling at a rate faster than any time since the late 1980s. As workloads fall customers are clearly taking advantage of increased competition amongst contractors and driving prices down accordingly. Contractors margins are reducing and businesses face a fight for survival.
The competitive arena is changing as contractors seek new work – As the market place changes and reliable opportunities in familiar sectors dwindle, contractors are widening their interest in projects previously outside of their regular scope and size. This is changing the nature of the competitive arena and is forcing firms to re-consider their approach to marketing strategies and their existing customers.
Long-term strategies must be adopted by contractors – Forward predictions indicate that the downturn in workload has years, not months, to run. As such, contractors have to develop new strategies to develop their markets and protect existing customer relationships or history tells us that they may not survive.
1.1.4 Segmentation according to UK context
Top 10% to 1%
Top 1 % to 0.1% (adults)
Top 0.1 % (or the “very, very rich)
Entry level for group
Mean Value for group
Average Income tax paid
Percentage of personal income tax revenue
(Source: http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom – 08/12/2009)
Worth of each segment can range as follows, (lower income earners not create value to the luxury housing industry.) Source: Introduced by the researcher
1.2 Research Problem
Even though number of players trying to capture or maintain, UK Luxury Housing industry has very limited opportunity of the total market. Because of niche situation it is difficult to find potential customers to sell premium houses for GBP millions. Industry rivalry has doubled this limited prospect. Because of stagnant conditions, many companies can’t sell their luxury hoses and making losses due to loan interests & construction cost increases. Customers will take time, check other options and need total solution for their requirement with strong confident. To build customer confident should focus on customer decision making and buying behaviour. Thereafter developers can provide perfect solutions for customers’ requisitions.
United Kingdom context based on the http://www.emeraldinsight.com/Insight/ there are lot of possibilities can arise. Developer’s brand positioning & promises should be supported by the – quality of houses, attributes, customer service, staff responsiveness, technical services, engineering, architecture, after sales, inter departmental relationships etc. All these divisions have to set the highest standards in order to deliver what they promise.
The number of customer dissatisfaction is on the increase. Sometimes the customer- developer conflict has intensified with a large number of customers unhappy with many issues such as – quality of the houses, legal issues, product faultiness, after sales service, etc. The number of competitors tying to position themselves at the level of existing market leaders. A large number of luxury housing projects are being launched in London & suburbs which signifies the rising competition in the niche property market. There is no truthful information based on Accurate Market research is essential for decision making & implementation of the correct management process. Don’t have proper understanding about market trends, opportunities and further developments in the industry. Especially house features are expecting by customers, suitable and matching price, location and place, effective promotional methods.
1.3 Research Objectives
Key Objective –
To identify that what extent Marketing Mix impact on Customer Buying Decision of Luxury housing industry in UK.
Through the research want to identify that what are the forfeiting factors will affect to the consumer buying behaviour and how major marketing elements / marketing mix affect to the buying decision making process. Will discuss major 4 elements and extended mix to gain clear understanding about Therefore, through this research will identify the “impact of marketing mix on customer behavior of Luxury housing industry.”
Specific Objectives –
* To measure the impact on product on consumer buying behavior of Luxury housing industry.
* Ensure the impact on price.
* Understand the impact on location.
* Quantify the impact on promotional methods.
* To measure the impact on extended marketing mix (People, Process, and Physical Evidence).
1.4 Research Questions
What extent Marketing Mix impact on Customer Buying Decision of Luxury housing industry in the United Kingdom?
How product features (luxury house) impact on buying decision?
How house design, plinth area & architectural design specifications influence?
How fittings, using materials & additional features & engineering solutions on house will impact?
How Brand image impact?
To what extent impact additional services (total solution package)?
How impact price factor to customer buying decision?
How selling price, land value, construction cost persuade?
How legal & stamp fee, bank loans, special discounts for cash payments, interests on delay payments convince?
How payment structure encourage?
How other costs involve?
How location influence to buying decision?
How convenience, easy access, security force?
How neighborhood, community & number of houses change the decision?
How area recognition, name of the district, provincial council or urban council concern?
How view, higher elevation, nature beauty concern?
How promotional methods & communication influence to buying decision?
How promotional method, media selection & media schedule success?
How selling and marketing strategies should use?
How advertising, personnel selling, direct marketing, public relation, word of mouth, sales promotions effective?
How use internet promotions, event organizing and foreign promotions effectively?
How extended marketing mix (People, Process, and Physical Evidence) influence to buying decision?
People – How sales and marketing staff, architectures, engineers, supervisors, maintenance team members, labours involve?
Process – How time period to build the house, bank loan arrangement, payment arrangement, realize customer requirement, legal framework, after sales service cause?
Physical Evidence – How company image, dress code of officers, traveling method (vehicle), equipments (laptop, etc), office location and layout, stationeries, language affect to first impression?
1.5 Theoretical Background
1.5.1 Marketing Mix
Jerome McCarthy has suggested the 4P’s via major tools as product, price, place and promotions as the marketing mix. But in recent practices has introduced another basic three parts as people, proceed and physical evidence. Through controlling major four variables can any organization to achieve their objectives. These variables are currently practicing with modern trends. After McCarthy’s introduction Bernard Booms and Mary Bitner built an extended theory model and modernized the marketing mix and named as 7P’s. (Booms,B. and Bitner, M. 1981).
* Product – Philip Kotler (1988) suggest that three distinct elements should be considered as the product’s attributes, its benefits, and the nature of the support service.
* Price – More important element for some industries is the price potentially the most controllable and flexible element of the marketing mix. Price is also in many cases one of the most important elements and, together with the product as a key component of an organizations marketing strategy. (Source: D. Mercer, ‘Marketing’ (Blackwell, 1996)
* Place / Location – Neil H.Borden’s clarifying the Marketing Mix is named the distribution as Place. There are lot of definitions as channel, intermediary methods, distribution and etc to the same task. The majour task is delivering goods from the manufacturer to the final end user.
* Promotion – Marketing mix has its own identical ‘promotions mix’. The basic elements of the promotion mix are advertising, sales promotion, direct marketing, public relations and personal selling. The final outcome is determined as how to handle these tools.
* People – According to the Kotler, People are the most important element of any service or experience. Services are produced and consumed at same time. Services are combined with individuals who deliver the services and according to the personality, experience and personal qualities of the service provider the quality of services are altered.
* Process – this is another important element of the extended marketing mix. The process is determining the efficiency. Emending automated systems can increase the efficiency of processes. There are a number of perceptions of pro buying process or luxury housing.
* Physical evidence – this is the tangible aspect of the service. As services are intangible, people rely on tangible items to build their perception on services. In the case of luxury houses, the tangible aspect and appearance of houses play a mojor role in building customer perception.
1.5.2 Consumer behavior
According to the Belch and Belch consumer behavior is “ The process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires”
To understand consumer behavior we need to examine how an individual interact with the marketing mix elements. According to Cohen (1991), the 4P’s should be adapted according to the psychology needs of each individual. The Psychological requirements are based on consumers own culture, attitude, learning and experience. Based on these values consumers decide whether or not to purchase. If the product or service match with their own values consumers decide to buy it.
1.6 Research Methodology
Research has given priority to primary data to take impartial result through the study. Both of qualitative and quantitative techniques have being used to collect primary data from the target audience. Also has being used effective secondary sources to develop the research and to have a sophisticated output (Broadly discussed under the research methodology part). There are few methods has being applied by the researcher to get perfect solution. Survey method, interview method, internal data collections of property developers & published secondary data has used as data collection method.
1.6.1 Survey Method
Given the priority and research analysis based on the collected data through the survey. Questioner focused on customers who already bought luxury house.
1.6.2 Interview Method
Researcher not given more priority to this method, but has added more findings through industry expert ideas.
1.6.3 Published Secondary data
Internet, Industry Magazines, Government Institutions, News paper articles added more findings to the research.
1.6.4 Internal data of Property Developers
Internal data collections as existing customer researches, competitor analysis, marketing and communication plans and other important and relevant data captured.
1.7 Limitations of the Study
Sample size not enough – For 100% accurate conclusion should cover 50% of the total market. Because of difficulties to find particular target market researcher have selected small sample size. (Limited number of people can afford for luxury house and they having busy scheduled life pattern).
Limited secondary data – there are no more information on luxury housing industry. Also can’t find updated records through any government institute related to the housing industry and having only outdated records. Also researcher has concerned only the London and suburbs, but in some others cities & other suburb areas should include to island wide result. For convenience has selected grater London and suburbs and it is difficult to based on these data to get overall picture. Didn’t’t put more weight on other macro factors as governmental influences as regulations, legal issues & economic changes. Political stability, foreign forces, employments and wages, etc. Not consider other luxury alternative can invest or spend. Through comprehensive research should pay attention on alternatives.
02. Literature Review
2.1 Theoretical background of Marketing Mix
Meaning of the Marketing Mix
The meaning of the Marketing Mix is a mixture of core factors which affecting to marketing strategies as well as consumer purchasing decision. Basic marketing mix comprises four elements as product, price, place & promotion. When provide a service it should be an extended mix with people, process and physical evidence. According to McCarthy. J marketers should work with all marketing mix variables. Also he described that even change all variables it is difficult to change the product and distribution channel.
Kotler, P. K. (2005). What is Marketing Mix. In P. K. Kotler, “Marketing Management”. Prentice Hall.
Kotler (1988) suggest that three distinct elements need to be considered; the product’s attributes, its benefits, and the nature of the support service.
* Product attributes are associated with the core product and include such elements as features, styling, quality, brand name, packaging, and size and color variants.
* Product benefits are the elements that consumer perceive as meeting their needs. This is some time refers to as the “bundle of potential satisfactions” that the product represents.
* The marketing support services comprise of all the elements that the organization provides in addition to the basic product. These typically include delivery, installation, guaranties, after sales service and reputation.
(Source: Strategic Marketing Management by Richard M.S. Wilson Colin Gilligan)
(Source: researcher developed based on www.wikipedia.org , 15/01/2010)
Core Product – this is the basic output of the product. Even you cannot touch it crates the vale to the entire product. The house example, the benefit is shelter, place to live with basic facilities.
Actual product – This is the tangible product of the output / physical product. As an example, it is the house with modern featured, quality construction, serenity appeal & etc.
Augmented Product – This is the value additions can add to the particular product. Most of the time augmented value use to delight the customer. Structural warranty, customer support service from maintenance team, after sales service & etc can show as examples.
For many industries price is the potentially the most controllable and flexible element of the marketing mix. It is also in many cases one of the most important elements and, together with the product, a key component of an organizations marketing strategy.
When buying a luxury house will consider selling price, easy payment structure, discount and other cost as legal & stamp fee.
Mercer, D. (1996). Pricing. In D. Mercer, ‘Marketing’ . Blackwell.
Premium Price – Premium pricing strategy is the best and normal payment method which is applicable to the luxury housing strategy.
Channel of distribution comprises a set of organizations which perform all of the activities utilized to make difference in the process up to the consumption. (Bucklin – Theory of Distribution method Structure, 1966). Neil H.Borden’s has introduced location factor as more important variable in the Marketing Mix. Location is most crucial factor in luxury housing industry. Because of easy access, neighborhood, serenity, reputation of the area will consider according to the above facts.
Another step of the 4P’s is ‘promotion’. This consists all of the tools available to the marketer for ‘marketing communication’. As with Neil H.Borden’s marketing mix, effective marketing communications has its own ‘promotions mix.’ Think of it like a cake mix, the fundamental ingredients are always the same. However if you vary the sum of one of the ingredients, the final outcome is different. It is the similar with promotions. The functions of the promotions mix are integrated to form a coherent campaign.
* Advertising – is a ‘paid for’ effective communication. It is used to develop attitudes, add awareness, and transmit information in order to gain a response from the particular market. There are many advertising ‘media’ as newspapers (local, national, free, trade), trade magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides)
* Personal Selling – is an effective way to control personal customer relationships. The sales person acts on behalf of the organization. They tend to be well experienced in the approaches and techniques of personal selling. However sales people are too expensive and should only be used where there is a decent return on investment. For example salesmen are generally used to sell cars or home improvements where the margin is high
* Sales promotion – this tends to be thought of as being all promotions vary from advertising, personal selling, and public relations. As an example the BOGOF promotion, or Buy One Get One Free. Others include couponing, money-off promotions, competitions or free accessories (such as free blades for a new razor), introductory offers (such as when buy digital TV and get free installation), and so on. All sales promotion should be carefully cost and compared with the next best alternative
* Public Relation – This is defined as ‘the deliberate, planned and sustained effort to be established and maintain mutual understanding between an organization as well as its publics’ (Institute of Public Relations). It is relatively cheaper, but certainly not cheap. Successful strategies tend to be long run and plan for all eventualities.
* Direct mail – Thi is very highly focused upon targeting consumers based upon a database. As with all marketing, the potential consumer is named based upon a series of attributes and similarities. Creative agencies are working with marketers to design a highly focused communication in the form of a mailing. The mail is sent out to the relevant consumers and responses are carefully monitored. For example, if you are marketing medical text books, you would be used a database of doctors’ surgeries as the basis of your mail shot.
* Trade fair & Exhibitions – Such methods are very good for making new contacts and renewing old ones. Companies will individually sell much at such events. The purpose is to develop awareness and to encourage trial. They offer the opportunity for companies to meet with both the business and the consumer. Expo has recently finished in Germany with the next one planned for Japan, despite a recent decline in interest in such events.
* Sponsorship – this is where an organization pays to be associated with a relevant event, cause or image. Companies will sponsor to sports events such as the Olympics or Formula One. The attributes of the all event are then associated with the sponsoring organization.
Gilligan, R. M. (1995). Strategic Marketing Management. In R. M. Gilligan, Strategic Marketing Management. Business & Economics
People are the more important element of any service or experience. Services tend to be produced and consumed at the same time, and aspects of the customer experience are options to meet the ‘individual needs’ of the person consuming it. Most of us can think of a condition where the personal service offered by individuals has made or tainted a tour, vacation or restaurant food. Remember, people buy from people that they more like, so the attitude, skills and appearance of all staff need to be first class. Here are some ways in ways of people add value to an experience, as part of the marketing mix – training, personal selling and customer service.
Eg: Marketing staff, architect, engineers and financial officers will participate to buying process of luxury housing.
Process is another constituent of the extended marketing mix, or 7P’s.There are a of perceptions of the concept of process within the big business and marketing literature. Some see processes as a means to attain an outcome, for example – to achieve 30% market share company equipment a marketing planning process. One more view is that marketing has a number of procedures that integrate together to create an in general marketing process
This is the material fraction of a service. Strictly speaking there are no corporeal attributes to a service, so a customer tends to rely on fabric cues. There are many examples of physical evidence, including Packaging, Internet/web pages, Paperwork (such as invoices, tickets and dispatch notes), Brochures, Furnishings, Signage (such as those on aircraft and vehicles), Uniforms, Business cards, The building itself (such as prestigious offices or scenic headquarters) and etc.
www.marketingteacher.com. (2010, January 12). lesson_marketing_mix. Retrieved from www.marketingteacher.com: http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm
2.2 Theoretical background of the Consumer behavior
Consumer behavior is the findings of how people buy, what they buy, when they buy and why they buy. It blends factors from psychology, sociology, psychology, anthropology and economics. It attempts to realize the buyer decision making process, both individually and in groups. It examines characteristics of individual consumers such as demographics, psychographics, and behavioral variables in an effort to understand people’s wants. It also tries to assess affect on the consumer from groups such as family, friends, reference groups, and society in general.
Belch and Belch defined consumer behavior as “The process and activities people work in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to make their needs and desires”.
Consumer decision making process
Consumer decision making process is the best as well as crucial factor to change and influence to the buying decision. Number of philosophers had been introduced their own idea about the buying decision process. But all of them accepted the normal buying decision process.
Consumer decision making process can shows as following model. With few changes in this model can apply in to luxury house buying decision process. Wikipedia-encyclopedia explains consumer decision making process according to number of researches and consumer behavior books. This common process can identify in each buying decision (consumer). In organizational buying behavior will be change the process with few rational approaches).
In luxury housing industry also can apply normal buying process. But customers will be more rational than other buying products as FMCG or low valued product or service. Standard buying process will explain that to what extent it will affecting to the buying decision making.
The consumer perceives a need and normally motivated to solve the problem.
The consumer searches for data required to make a purchase decision
The consumer comparing various brands and products
The consumer decides which brand should purchase
The consumer is evaluates their purchase decision
Howard, J. S. (1968). Theory of Buyer Behavior. In J. S. Source: Howard, Theory of Buyer Behavior. J. Wiley & Sons, New York, NY.
* Problem recognition
Problem recognition shows when there is a difference between one’s desired state and one’s actual state. Consumers are form to address this discrepancy and therefore they commence the buying process. Sources of problem recognition exists:
o An item is out of the stock
o Dissatisfaction with a existing product or service
o Consumer needs & wants
o Related products purchases
o New products
The relevant internal psychological activity that is associated with problem identification is motivation. A motive is a element that compels action. Belch and Belch (2007) give an explanation of motivation based on Maslow’s hierarchy of needs & Freud’s psychoanalytic theory.
* Information Search
Once the consumer has realized a problem, they search for information on products and services that can solve that problem. Belch and Belch (2007) introduced that consumers undertake both an internal (memory) and an external search. Sources of datainclude:
o Personal sources
o Commercial sources
o Public sources
o Personal experience
The correct internal psychological process that is associated with information search is perception. Perception is recognized as ‘the process by which an individual receives, selects, organizes, and interprets information to develop a meaningful picture of the world’
The selective perception process step Description Selective exposure consumers choose which promotional messages they will expose themselves to. Selective action consumer’s select which promotional messages they will put attention to Selective comprehension consumer communicate messages in line with their beliefs, attitudes, motives and experiences Selective retention clients remember messages that are more meaningful or important to them
* Alternative Evaluation
At this time the consumer compares the existing brands and products that are in their evoked set. How can the marketing organization develop the likelihood that their brand is part of the consumer’s evoked (consideration) set? Consumers find alternatives in terms of the functional and psychological benefits that they offer. The marketing organization should understand what benefits consumers are seeking and therefore which attributes are most significant in terms of making a decision.
The relevant internal psychological process that is merged with the alternative evaluation step is attitude formation. Note that attitudes are ‘learned predispositions’ in an object. Attitudes comprise both inner cognitive and affective elements – that is both what you think and how you feel the something. The multi-attribute attitude model shows how consumers evaluate alternatives on a range of attributes. Belch and Belch (2007) identify a number of ways that can be used to influence the process (attitude change strategies).
* Purchase Decision
Once the alternatives have been analyzed, the consumer is ready to make a purchase decision. Sometimes purchase intention does not show in an actual purchase. The marketing organization must give the consumer to act on their purchase intention. The provision of credit or payment terms may motivate purchase, or a sales promotion such as the opportunity to get a premium or enter a competition may provide an incentive to buy now. The relevant internal psychological process that is goes with purchase decision is integration.
* Post Purchase Evaluation
Once the consumer has bought and used the product, they will eva