ECONOMIC AND SOCIAL FACTORS AFFECTING THE PURCHASING POWER OF CUSTOMERS IN FAST-FOOD RESTAURANTS
((APPLIED IN MARSA MATROUH CITY))
Dalal Abd-El Hady
The dean of the faculty of tourism and hotels, Matrouh University, Egypt
Amr Abd-El Hameed
The dean of the faculty of environmental and desert agriculture, Matrouh University, Egypt
Samar Mohamed Shebl Nada
Hotel Studies Department, Faculty of Tourism & Hotels , Matrouh University, Egypt
Abstract
Restaurants and food service industry is an important industry, which characterized by the rapid growth and the rapid and continual change in people's preferences. The growth of this service industry plays a pivotal role in the economies. Also, it is worth mentioning, there are a plenty of factors which affect the demand in general and fast food restaurants demand specifically and the most important factors are consumers' income, wages, tastes and prices of goods, alternative and complementary goods. The study of consumer purchasing behavior deals with all the ways that people do as consumers. But generally it tends to focus on behaviors that are related to searching, buying and using products and services. This study seeks to find a deeper understanding of the impact of different factors on consumer buying behavior in fast-food restaurants. It is studying the relationship between two variables and their relation with the fast-food restaurants; such social and economic factors and consumer purchasing behavior.
Key words: - customer purchasing behavior, customer purchasing power, social factors and economic factors.
1- Introduction
The hospitality industry is a broad category of fields within the service industry, which includes lodging, event planning, theme parks, transportation, cruise line, restaurants and additional fields within the tourism industry. Food service industry is an important industry, that highly represents in restaurants, which characterized by rapid growth and rapid and continual change in people's preferences (Azim et al., 2014). The growth of service industry plays a pivotal role in the economies (Cronin & Taylor, 1992).
Food service presents an interesting area for studying consumer behavior. Consuming food is effected via, a way of lifestyle and culture so that the differentiation in lifestyles and cultures leads to differentiation in food consuming behavior types. The study of consumer purchasing behavior deals with all the ways that people do as consumers (Johns & Pine, 2002). But generally it tends to focus on behaviors that are related to searching, buying and using products and services. Consumers may be treated as groups identified by geo-demographic characteristics and assumed to have common attitudes and behavior. Alternatively, individual, subjective perspectives may provide an insight into behavior patterns. Also, consumer behavior is studying many categories like individuals, groups, or organizations and the processes that they use to choose, secure, use, and dispose of products, services, experiences, or ideas to satisfy the needs and the influences that these processes have on the consumer and society (Johnsa and Pine, 2002). Consumer purchasing behavior is a huge issue which threatens the marketing and economic sectors and it is distinguished by continual change. Fast food has been appeared in the world economy since the past four decades. It has appeared since the ancient era in Rome, but it has been published and studied since the beginning of the 80’s. Earlier publications on fast food were basically cared about the positive and negative aspect of fast food and its advantages and disadvantage, also the attitudes of the customers as a whole. This study will focus on another side of fast-food restaurants by shedding the light on the factors that influence their consumers' purchasing behavior. It will expose the nature and characteristics of Marsa Matrouh city. It will also discuss the changes which happened in the entire country and their effects on its activities and the tourism movement inside it (Furaiji et al., 2012).
Consumer purchasing behavior entails studies that take into its account how people determine things they will buy, what they choose to buy, the place they prefer to buy from it, why, and when they buy it (Muniady et al., 2014). Consumers are the ultimate users of finished products or the persons who purchase, or have the capacity to purchase goods and services offered for sale by marketing institutions in order to satisfy personal or household needs, wants or desires.; they could be industrial organizations, institutions, government, intermediate or households (Orji, 2013). The current research will discuss social and economic factors and will apply in fast-food restaurants because of its importance for the economy of the country and the whole community.
2- Literature review
As noted by Hawkins and Mothersbaugh (2015), consumer buying behavior refers to the selection, buy and consumption of goods and services to satisfy their wants. There are distinct procedures involved in the human's behavior. Many factors, specificities and traits have an effect on the individuals about where is the purchaser into his decision making process, shopping habits, buying behavior, the brands to buys, the shops and restaurants that go. A purchasing decision is the result of each one of these factors. Initially the consumer tries to discover what the goods or services he would like to consume; afterwards he selects only the commodities that will saturate his desires and commensurate with the money he has. Lastly, the consumer analyzes the spread prices on merchandise and takes the choice about what goods he or she will consume.
2.1) Purchasing decision making process:-
1) Consumer’s decision-making process
At the early stages of consumer's behavior researches, its emphasis on the interaction between the seller and the buyer. While after the expansion in researches and studies, the process has been eruditeness as an entire process which contains factors affecting the consumer behavior during all the stages of purchase (Einarsdóttir, 2016). The consumer’s decision-making process is divided into five stages. These stages include levels from the pre purchase till the post-purchase. During these levels, the consumer recognizes his needs, gathers information, evaluates alternatives and finally makes the purchase decision as shown in Figure 1. After the actual purchase happens, post-purchase behavior comes where the consumer evaluates the level of satisfaction he has received (Lautiainen, 2015). Kotler and Armstrong (2010) point out that, consumers may skip few stages during the processes of routine purchases. However, when a consumer makes a new and complex purchase, all of these stages need to be used to complete the buying process.
Figure 1: purchasing decision making process
1.1) Need's recognition
Problem recognition is the first stage in the consumer decision making process. It is the result of the variance between the desired state and the actual or current state which is sufficient to motivate people and make the decision process as shown in Figure 2 (Hawkins & Mothersbaugh, 2013). There are few types of classifications of recognition's need. The first type is when the purchaser realizes his need or problem that can be affected by internal or external factors (Kotler & Armstrong, 2010). According to Hawkins and Mothersbaugh (2013) the process of need's recognition can occur naturally or in a planned manner, it means that marketers can play a significant role in affecting the consumers' decisions. Marketers always develop the products that will help consumers to solve their problems. They also attempt to help consumers recognize problems, sometimes before their occurrence. The second type of recognition need include; Functional need, Social need and Need for change (Lautiainen, 2015).
Figure 2: stages' of needs recognition
1.2) Information search
It is the second stage of the decision making process. At this stage the information, that will satisfy the consumers' needs, is gathered. For example, if he/she wants to eat outside in a restaurant, he/she will gather information about restaurants that have the type of food they prefer to eat and convenience also with their budget. It is not a simple step, because it is consuming both physical and mental energy and effort. Although it takes a lot of time, money and effort, there are many benefits for this step such as increasing and growing the awareness up towards available restaurants increases and grown up and preventing the wrong product selection because the consumer will select the most appropriate product for him like product with low price, high quality and preferred style. The consumer can get information from many sources like friends, newspapers, family magazines, the internet or trying the product previously. Personal sources considered as the best source such as family or friends because of the human nature which strongly affects by the others' views and opinion (Lautiainen, 2015). The next figure 3 showed some sources of information for consumers.
Figure 3: Sources of gathering information
1.3) Alternative evaluation
After collecting information, the consumer will be able to evaluate different alternatives; they are variety of choices in order to solve a problem or satisfy a specific desire. For example, before choosing a restaurant for dining out the consumer should consider the cost, speed of service, reputation of the place, the dishes, service excellence, product quality and the treatment of staff, all of them will be the evaluation criteria (Hawkins & Mothersbaugh, 2013:556). It means that different alternatives and choices will appear to consumers when the previous stage is finished. The process of evaluation varies according to the nature of the consumer and the purchases themselves, A successful information search leaves the buyer with possible alternatives which called "evoked set" that refers to the alternatives' used during the selection process. For example, if the consumer is hungry and decides to eat out, the evoked set will consist of Chinese food, Indian food and burger king etc (Solomon & Rabolt, 2004).
There are three types of the selection alternatives' processes; firstly the affective or emotional choice which is high when a consumer’s motives focus on promotion and propaganda which include motives associated with hopes, aspirations, and growth. Secondly, attribute-based choice which requires knowing the specific attributes at the time that the choice has been made. Thirdly, attitude-based choice includes the use of general attitudes, summary impressions, intentions, or heuristics.
1.4) Outlet selection
According to Kotler and Armstrong (2010:179) at this stage, the consumer is ready to take the actual purchasing decision. Attitudes and beliefs highly affect the consumer’s buying decision. Solomon and Rabolt (2004:312) pointed out that sometimes consumers make mental shortcuts which meaning makes the decision according to limited and not obvious information that leading to imprudent decision. These kinds of shortcuts can range from expanded believes and thoughts to specific and limited one. There are three basic strategies, the consumer can follow when making the actual purchasing decision; A) brand first, then outlet, B) Outlet first, and C) Brand and outlet at the same time (Hawkins & Mothersbaugh, 2013).
1.5) Post purchase
This is the last stage of the consumer’s decision-making process which the consumer will evaluate his satisfaction level. There will be two types of scenarios; first if the consumer feels disappointing, it means that his expectations towards the product have not been achieved and that place loses this consumer forever. Second, if the product meets consumer's expectations, he will be satisfied and ready to spend more on this brand in the future. (Kardes & Cronley, 2011: 91).
2.2) Consumer's decisions and their types
Consumer behavior is changing greatly from a generation to another and it is a part of the whole human behavior. It is not necessarily the person who makes the purchases is the same person who consumes it. As a consequence, human behavior considered as a total process where an individual interacts with his environment and with others in the society. There are many varieties in consumer decision processes; it means that, the consumer moves between two levels of involvement; low and high level of involvement. However, there is two parts at this stage should be distinct between them; purchase involvement, which means the level of intention or interest in the purchases that arise from the need to purchase a particular product or service and product involvement, which is intended to refer indirectly to the loyalty of consumers or their involvement with a particular brand or a product category (Voinea & Filip, 2011). There are different types of consumer's decisions:
Nominal or habitual decision making: This kind of decisions also known as routine purchase which used when the decision taken for items that frequently purchased, the internal information is limited, the involvement with the purchase process and the items' cost is low (Lautiainen, 2015).
Limited decision making: This type of decisions does not include searching for lots of information. The consumer search for items, he is familiar with and knows previously, but still need to gather more information about which brand fits his needs more (Sharma & Sonwalkar, 2013 : 33-48). This level is distinguished by internal search and limited external information search, few alternatives, simple decision rules, and little post purchase evaluation.
Extended decision making: This type is totally the opposite of limit decision-making, when the consumer spend long time in gathering information, whether internal or external which followed by a complex evaluation for multiple alternatives and post purchase, so it will take longer period than other types to make a decision and the consumer has a high level of purchase involvement and it is used when items which purchasing are expensive.
Impulsive buying decision: it is refer to unorganized and sudden decisions. It is also called unplanned behavior which is driven mostly by emotional forces. These decisions contain a high level of risk because they occur suddenly without thinking (Gvion & Apter, 2017: 92-94).
2.3) Purchasing power:-
Purchasing power is a reflection of the value of money, which expressed in the case of purchase an amount, number or quantities of goods or services that the consumer can purchase by his income at a specific time. The purchasing power of the person decreases as a consequence of the income's stability state while there is an increase in the prices' level so a higher real income means a higher purchasing power since real income refers to the adjusted income for inflation. The inflation decreases the amount of goods or services the consumer will be able to purchase. Therefore, the relationship between the inflation and the purchasing power is an inverse correlation (Bahmani-Oskooee et al., 2017:463-483). It can be measured by a calculation which developed by the Bureau of Labor Statistics in United States. The following part will clarify the steps must follow to calculate the purchasing power (Leonard, 2018).
- Placement the base year
- Placement the target year
- Placement the Consumer Price Index (CPI) for both of years
By applying to the study:-
1) – The base year is 2009
2) – The target year is 2017
3) – The CPI for 2009 is 98.90 and for 2017 is 258.10
The calculation will be: - (98.90/258.10) * 100 = 38.32%
4) - Subtract the percentage you have derived from 100 to determine the percentage of change, as follows 100 - 38.32 = 61.68 %
This means that the purchasing power of the person which is represented in the Egyptian pound declined by 61.68 % from the year 2009 to year 2017.
2.4) Purchasing power parity (PPP)
It is a term that economists use to measure how much a currency can buy relative to other currencies. This method is used for comparing standards of living between different countries. The simplest form called "law of one price" and the way in which the PPP method uses is considering and placement a group of goods, then calculates the price of this group in each country with its own currency. The desire is to reflect some products may be cheaper in one country due to supplies of raw materials and other factors (Bahmani-Oskooee et al., 2017:463-483). It cannot used to determine the equilibrium exchange rate, and will be invalid in the case of excluding the monetary approach to exchange rate determination, which requires PPP to be a fact. How to calculate the (PPP), for example, between Egypt and United States for fast food (Kimata & Khan, 2017):-
First step: - Determine two currencies
Second step: - Determine the product
The price of a Big Mac in Egypt is 50 EGP and in United States is 5.3 dollars.
The formula is:
Meaning that each 9.43 pounds equals one dollar
Third step: - Comparing the result of the purchasing power parity to the currency exchange rate between both countries. Here are 17.88
The calculation shows that when comparing the result with the exchange rate, appears a clear decrease in the purchasing power of the Egyptian consumer compared to the American consumer. It means that the Egyptian pound is less than its real value by 52.74% (17.88 - 9.43 = 8.45), where the exchange rate of the dollar is higher than this result. The whole of that, indicate to that the standard of living for the US citizen is higher than the Egyptian.
3) Research objectives:-
- Analyze and understand the consumers' buying behavior in fast-food restaurant
- Study the effects of social and economic factors on the consumers' purchasing power
- Know the characteristics of fast-food restaurants
- Gain knowledge on how the purchase decision process is being made by individual consumers
- Identify the effects of the January revolution in purchasing power of meals at fast food restaurants in the city of Marsa Matrouh.
4) Methodology
To fulfills the research objectives; this study used the quantitative approach. The survey instrument was two forms of face to face questionnaire which is a type of collecting primary data. The questionnaire comprised of two sections where the first section covered the demographic data of the consumers while the second section contains questions about consumers' purchasing power and behavior. Likert scale format was used as responses. The descriptive survey provides a realistic description of the purchasing power and behavior in fast food restaurants and how they affected by the nature of the city. Study was applied on the international and local restaurants' chains which open in Marsa Matrouh only in summer season.
The researcher was distributing the questionnaire from 1 June 2018 till 15 September 2018 to the customers of fast food restaurants. The number of distributed questionnaires was 432 customers, which visit these restaurants; Tekka, Hardez, Kfc, Moamen, Pizza Hut, Pizza King and Mcdonald's. The number of correct surveys which collected was 425 with the response rate of 98.37%.
After reviewing the relevant literature, the hypotheses which presented below are formulated:
H1: There is a significant correlation between consumer's characteristic and the type of fast-food restaurants.
H2: There is a significant correlation between economic circumstances and consumer purchasing power.
H3: There is a significant correlation between social factors and consumer purchasing behavior.
H4: There is a significant correlation between consumer's purchasing behavior and the nature of the city as a summering city.
H5: There is a significance correlation between the revolution of 2011 and the percentages of turnouts for these restaurants at the year of 2011.
4) Results and discussion
Table 1: Demographic Characteristics of consumers
|
Variables |
Frequency |
Percentage(%) |
|
Age |
|
|
|
From 12 to less than 18 |
94 |
22.2% |
|
From 18 to less than 30 |
155 |
36.4% |
|
From 30 to less than 40 |
93 |
21.8% |
|
More than 40 |
83 |
19.6% |
|
Gender |
|
|
|
Male |
186 |
43.8% |
|
Female |
239 |
56.2% |
|
Marital status |
|
|
|
Single |
155 |
36.5% |
|
Married |
165 |
38.8% |
|
Widowed |
60 |
14.1% |
|
Divorced |
45 |
10.6% |
|
Qualification |
|
|
|
Preparatory degree |
64 |
15.1% |
|
Secondary degree |
177 |
41.6% |
|
University degree |
154 |
36.2% |
|
More than university degree |
30 |
7.1% |
|
Additional job |
|
|
|
Yes |
130 |
30.6% |
|
No |
295 |
69.4% |
|
Monthly income level |
|
|
|
Less than 1500 LE |
40 |
9.4% |
|
From 1500 to less than 3000 LE |
90 |
21.2% |
|
From 3000 to less than 4500 LE |
150 |
35.3% |
|
From 4500 LE to less than 6000LE |
60 |
14.1% |
|
More than 6000 |
85 |
20% |
|
Less than 1500 LE |
40 |
9.4% |
Table 2: section two about specific questions
|
The variable |
Likert scale |
Recurrences |
Percentage (%) |
Average (µ) |
Sd (α) |
General percentage |
|
Reasons for preferring a specific restaurant |
||||||
|
The prices are acceptable |
Strongly agree |
205 |
48.2% |
4.17 |
0.947 |
83.4% |
|
agree |
120 |
28.2% |
|
|
|
|
|
Neutral |
70 |
16.5% |
|
|
|
|
|
disagree |
30 |
7.1% |
|
|
|
|
|
strongly disagree |
ـــــــــــــ |
ـــــــــــــ |
|
|
|
|
|
The quality of the taste |
Strongly affect |
125 |
29.5% |
3.79 |
0.857 |
79.4% |
|
Affect |
182 |
42.8% |
|
|
|
|
|
Neutral |
100 |
23.5% |
|
|
|
|
|
Doesn't affect |
15 |
3.5% |
|
|
|
|
|
Doesn't strongly affect |
3 |
.7% |
|
|
|
|
|
Important factors when selecting a fast-food restaurant |
||||||
|
Personal taste |
Very important |
147 |
34.6% |
3.75 |
1.202 |
75% |
|
Important |
116 |
27.3% |
|
|
|
|
|
Neutral |
93 |
21.9% |
|
|
|
|
|
Unimportant |
44 |
10.3% |
|
|
|
|
|
Very unimportant |
25 |
5.9% |
|
|
|
|
|
The income of the consumer |
Very important |
140 |
32.9% |
3.67 |
1.239 |
73.4% |
|
Important |
112 |
26.4% |
|
|
|
|
|
Neutral |
100 |
23.5% |
|
|
|
|
|
Unimportant |
40 |
9.4% |
|
|
|
|
|
Very unimportant |
33 |
7.8% |
|
|
|
|
|
The price |
Very important |
144 |
33.9% |
3.56 |
1.162 |
71.2% |
|
Important |
21 |
4.9% |
|
|
|
|
|
Neutral |
208 |
48.9% |
|
|
|
|
|
Unimportant |
29 |
6.8% |
|
|
|
|
|
Very unimportant |
19 |
4.5% |
|
|
|
|
|
Social factors which influence the opinion |
||||||
|
Sons in childhood |
Strongly affect |
152 |
35.8% |
3.85 |
1.109 |
77% |
|
Affect |
127 |
29.9% |
|
|
|
|
|
Neutral |
90 |
21.2% |
|
|
|
|
|
Doesn't affect |
43 |
10.1% |
|
|
|
|
|
Doesn't strongly affect |
13 |
3% |
|
|
|
|
|
Husband or wife |
Strongly affect |
142 |
33.4% |
3.65 |
1.197 |
73% |
|
Affect |
90 |
21.2% |
|
|
|
|
|
Neutral |
119 |
28% |
|
|
|
|
|
Doesn't affect |
54 |
12.7% |
|
|
|
|
|
Doesn't strongly affect |
20 |
4.7% |
|
|
|
|
|
Friends and colleagues |
Strongly affect |
127 |
29.8% |
3.64 |
1.155 |
72.8% |
|
Affect |
100 |
23.5% |
|
|
|
|
|
Neutral |
144 |
33.8% |
|
|
|
|
|
Doesn't affect |
30 |
7% |
|
|
|
|
|
Doesn't strongly affect |
25 |
5.9% |
|
|
|
|
4) Findings:-
The results refer to important points like the nature of the city, which effects on the consumer purchasing behavior, that characterized by the recreational internal tourism just in summer season. The major findings of the study indicated that the overall set of independent variables is highly associated with the dependent variable. However, the analysis found that social factors and economic factors are strongly associated with the buying behaviors of consumers. Also, it was featured that there is an unusual redistribution of social strata where people with fixed incomes and pensions (employees) became the most category which affected by the inflation so their social level is decreased as a consequence of the decrease of their financial level. While the entrepreneurs who can face the inflation became the top level even if they were lower in the social level. Although the increasing of inflation rates lead to a decrease in the purchasing power per capita by 61.68%, it did not affect the turnouts of these branches for the aforementioned reasons. There is a significantly reduction in the purchasing power. There is a strong relationship between the characteristics of the consumer and this type of restaurants, economic conditions and consumer purchasing power, social factors and behavior of the client, the customer purchasing behavior for the customer and the nature of the country as a summering country and finally between January revolution of 2011 and the turnouts of these branches.
5) Conclusion:-
This thesis aimed to focus on the social and economic factors and their effects on the consumer purchasing behavior in fast-food restaurant. It attempts to reach greater and deeper understanding of the consumer purchasing decision and behavior in fast-food restaurants which worked partially in summering cities. This type of work leads to influence the customer purchasing behavior whether a vacationer or a resident, because of the nature vacationer that he has the sufficient amount of money for accommodation, food and recreation to satisfy his needs and enjoy in the travel. So, going to these restaurants is popular matter while the resident is waiting these restaurants from the year to another even if it meant pressuring himself financially.
For future research, it is recommended to take larger sample where it is possible to emerge new relationships and other factors. Also, apply the study in more than one country to study the consumer personality and consumer behavior according to the nature of the city he located in. Making an expand study about the traits and characteristics of the consumers and customers of these restaurants in addition to apply this study again on other types of restaurants, but this time excluding fast-food restaurants. It must carry out studies about the economic situation of the country and making a comparison or evaluation between the exiting economic programs and suggestions to create other programs to correct the present economic path in an attempt to reduce this terrible disparity in exchange rates and price rise of the Egyptian pound. It is possible to study the management method which used by studying maintenance programs that used at the beginning of the summer and during the season, compared with the use of the principle of preventive maintenance where it was one of the most important recommendations of the managers of those restaurants. Finally, examine the different consumer situations which happened as a result of economic conditions comprehensively and design programs or ways to deal with them to recover from this condition and return back to their usual shopping behavior without any fear from the future.
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