Coursework "Psychology of Marketing for Pret A Manger"
The Pret A Manger Company is a retailer of sandwiches based in the United Kingdom . It was established in 1986 by 2 college friends. They were Julian Metcalfe and Sinclair Beecham. Julian Metcalfe is also the owner of the Itsu, a sushi restaurant and bar. The Pret A Manger is currently an international business. Julian Metcalfe and Sinclair Beecham’s company was then called ‘Pr?t a Manger’, in relation to the French translation of the words that mean ‘ready to eat’. A product, being a set of physical qualities in a form that is identifiable, is singly recognized through The Pret A Manger Company producing sandwiches, coffee, salad, soup, and filled baguettes. It also specializes in the preparation of croissants, cakes, muffins of the American assortment and desserts. Other Pret A Manger stores in some places also serve noodles and sushi. The Company has a variety of vegetarian choices that include roasted hummus wraps and sandwiches (Dimant, Dysart, Lanoix & Lindner, 2011).
However, nn Pret’s promotional strategy the consumers seek to buy its quality and benefits. Pr?t fundamentally offers fresh fast food that is cooked with natural ingredients. This is due to the Company’s appreciation, value, and passion for freshness. Each and every food sold by the Pret A Manger is prepared while fresh in their shops on the same day they were purchased. Rather than using sealed plastic, the company’s packaging of sandwiches is done in paperboard. The follow this strategy in order to put emphasis on the freshness of their products and to stress that they cannot be held in preserve overnight.
Some of the by Pret A Manger packaging has recipes for a number of their products. These recipes are meant for persons who feel the wish to make sandwiches like those by Pr?t for themselves. Pret, furthermore, also runs a delivery service for any order above ?30. A service is an activity that meets the wants or needs of a customer exclusively on incorporeal benefits (Rix, 2004). The services offered by the Pret Company are outstanding. Their staff is sociable and pleasant. They are also approachable and enthusiastic thereby making Pret’s customers feel welcome. Marketers are more and more being faced with the challenge of choosing between beneficially satisfying the needs of their consumers and conforming to the demands and desires of several other groups in the society (Dimant, Dysart, Lanoix & Lindner, 2011).
Utility is a term used to refer to the subjective pleasure, helpfulness or satisfaction derived from the consumption of goods. It is an analytical concept used in the explanation of how the consumers split their limited resources among those products or services that give them satisfaction or utility. The basic tenet of the transaction utility theory is that a consumer’s perspective of value does not solely dependent on the value of goods and services presented relatively to the respective costs. It also depends on the notion of the quality of the monetary deal.
This theory has found applications in various contexts. One of the studies examined the determinants of the consumer’s prospects buying towards products that are recycled. It established that the psychological benefits from the purchase may be more considerable than the product itself. In the context of social exchange, utility theory explores the concept of a fair price regarding the relationship between buyer and seller and also the validity of profits. Transitional utility theory has also been applied to show the difference between coupon proneness and the buyer’s value cognizance.
Transaction utility is linked to a purchase or a sale. It is a representation of the like or the dislike linked with the monetary terms of the deal per se. It signifies the variance between the selling cost and the reference cost. Thaler proposed the transaction utility theory to describe that the value derived by a client or a customer from an exchange comprises of two drivers. The two drivers are acquisition and transaction utilities. Acquisition utility denotes the commercial gain or loss from the transaction while the transaction utility regards the pleasure or displeasure of the commercial deal per se. The transaction utility is also a concept of the variation between the trading cost and the buying cost. The transaction utility theory is applied by many firms as well as by Pret A Manger Company as a suitable approach to make good financial decisions. This theory also proposes that customized packages with similar composition and cost may provide dissimilar transactional utilities for the same consumer subject how the pricing is outlined. The view of the consumer on the merits of the deal for a former minimum bundle buying can considerably impact on the prospect of a sale and the size of the package. Pret A Manger has discovered that when the consumers have a higher perception of the original or the former transaction utility, they are more probable to buy the product. The company effectively adjusts the features of multipart pricing schemes to effect the decisions with respect to custom information of the good package creation (Wilson & Keil, 2001).
Pret A Manger has also resolved to digitization of their goods to make them easily and cheaply manufactured and supplied. The normative model of an idyllic and reasonable decision maker has shown to be beneficial in several of the Pret A Manger Company’s setting. Many prominent economist, however, have debated that it does not avail a precise description how real persons make decisions. The company has, therefore, realized that an alternative structure is availed by the behavioral model of economic decision-making through description of actual life circumstances. This has had a great effect on the company’s choices and decisions.
The Equitable Buying Price
Transaction utility is a function of the value paid for the produced and the equitable buying price of the user. The equitable buying price is considered to be what the consumer views as a fair price for the product given the sales perspective, which does not essentially correspond to their inherent valuations. The Pret A Manger Company recognizes that the buying price may be affected by the environment and perception in which people buy. It is, therefore, vulnerable to framing impacts present in the buying process. For example, a consumer’s purchase price for croissant or coffee to be bought for consumption on a beach may be different if they are buying it in an average fast food store. This average food store, such as Pret A Manger, is against a run-down convenient store. Though the good and drinking experience will be similar, the consumer may anticipate being charged varying prices at the Pret A Manger store due to the difference in purchasing context or perspective (Dimant, Dysart, Lanoix & Lindner, 2011).
The perception of Thaler regarding transaction utility means that the nature of the deal affects the buying decision of the consumer and, therefore, it is the blend of both the acquisition and transactional utility. This determines the fact if a buyer receives positive worth from buying an item. A person may make a sensible assumption that a user only buys an item if the total worth they experience from the purchase is positive. Therefore, the model of Thaler implies that a positive transaction utility may offset negative acquisition utility and vice versa. For example, a consumer may want to take a sandwich the price of which is $20. However, she, chooses not to buy it since her regular restaurant has increased the price of the sandwich form the normal $13 to $15. Even though the price is still below their price, it is equivalent for the sandwich; the bad deal relative to their buying price of $13 offsets their acquisition utility. This results in a negative utility from the buying.
Pret A Manger Company also transacts in complience with the theory to increase its sales and retain more customers. The theory proposes that if the transactional utility is considerably positive, that is, if the consumer believes they are getting a good deal, this may be adequate to outweigh negative acquisition utility. This may in turn result in a purchase. The company also clears its sales occasionally to give an enticement to its customers by offering them deep discounts to buy goods. Transaction utility and acquisition utility can, therefore, be concurrently positive or simultaneously negative with evident implications. In particular, transaction utility does have any effect on the purchasing decisions of the consumer (Wilson & Keil, 2001).
Similarly to many businesses, Pret A Manger has evaluated the enablers and the deterrents in its sale services. It has managed to do it through the identification of the main drivers of growth, the profile of its clients, and their anticipations. It has also used the transaction utility theory to evaluate the character of the challenges and competition in the marketplace. Therefore, Pret A Manger can decide the necessary elements needed to satisfy the requirements of its target market efficiently as compared to its competitors, thus giving it a competitive advantage.
Mental Accounting Theory
Mental accounting discusses tendency for individuals to separate their finances into different accounts based on various subjective criteria such as the money’s source and the intention for individual account. According to the mental accounting theory, persons assign various functions to each asset group. This usually has an impact that is not rational and is detrimental to their behaviors and decisions regarding consumption. Mental accounting also tries to define the process through which individuals categorize, code, and make an evaluation of their economic returns (Kahneman & Tversky, 2000).
In compliance with mental accounting theory, framing is used to denote the way an individual intuitively frames a transaction in their mind determining the utility they will anticipate or receive. Acquisition and transaction value are also two concepts that are employed in the explanation of the mental accounting theory. Acquisition value stands for the portion of money that a person is prepared to spend for physical gaining of some good.
Mental accounting cost is also used by Pret A Manger to understand the consumer’s cost of making important decisions, particularly the decision to purchase. It may decrease the dependence on important price granularity in a marketplace.
Mental accounting concentrates on an individual stock instead of portfolio. The absolute size of the saving is not as important as the relative amount put aside. Thaler explained the mental accounting as a method of giving explanation to the disposition impact of the prospect accounting mental theory. The basic notion behind this theorem is that the choice of the investors is mainly to separate accounts and then use the prospect theory to each of the accounts failing to envisage their interactions (Thaler, 1991).
Pret A Manger puts the mental accounting theory into practice through various ways. For example, if a customer intends to buy coffee for $ 5 and a sandwich for $5, it may mention to the customer about a discounted sale in another of its branch. It may also remind about one of the snacks the customer wants to buy. Although the customer may have to walk for a few minutes to the other branch to buy, for example, the sandwich, he will buy it at a discount. The client’s willingness to walk to the other branch for the discount shows that they are relating to the discount offered for the specific item. This is added to the calculated mental accounting by Pret A Manger.
In making their investment decision, Pret A Manger also relies on the mental accounting theory. For example, it may divide its investment between a speculative and safe investment portfolio. This is aimed at preventing the negative yields that speculative investment may have from impacting on the whole portfolio. The problem in this practice is that irrespective of the work and money that Pret A Manger spends to save each portfolio, their net wealth is not different from the one they could have if they had one big portfolio (Dimant, Dysart, Lanoix & Lindner, 2011).
While using mental accounting theory, Pret A Manger has discovered that money is fungible. This means that despite the origin and the projected use of money, it is all the same. This has made the managers of Pret realize that they may personally reduce the spending of found money by appreciating that the amount is not different than that they earned through working.
In addition to the fact the money is fungible, Pret has realized that saving money in an account that earns no interest or has very low interest bears no fruits if they are still indebted to people. Mostly, the interest that has accumulated on the debt will decrease any interest that one may earn in many savings accounts. This shows that as much as savings is relevant, occasionally it is more sensible to waive one’s savings in order to pay debt.
The status quo bias is the state of preferring this status in a way that any alterations or deviations from the current state of affairs are considered as a loss.
Status quo is a business effect first used by Knetsch and Sinden and advanced by Samuelson and Zeckhauser. The status quo principle is employed in the describing of the disadvantages experienced when a person or group of persons let go off an element or possession. The attribute of loss aversion by the status quo bias is directly founded on the framing of gains and losses. In the researches of Knetsch, Sinden, Samuelson and Zeckhauser, they gave details about status quo. They described it as existing more than simply possessing something. It has the potential of becoming a habit sometimes (Kahneman & Tversky, 2000; Wilson & Keil, 2001).
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In the example they provided, loyal beer drinkers were questioned whether they would have a preference for the appreciation of other beers. Among the participants, a large number of them provided their answer in the affirmative way. This majority, however, expressed that their choice was to continue with their loyalty to the same beer brand that they had been drinking. This life case describes the status quo behavior of the beer drinkers not desiring to lose their position as loyal drinkers of that specific brand of beer.
Samuelson and Zeckhauser and Their Work
Samuelson and Zeckhauser (1988) also stated the relation to the endowment effect in their work. They described the conduct as that of having losses that appear to be larger than the gaining of something. Samuelson and Zeckhauser proceeded to describe that in the event that the alternative becomes more popular, it substitutes the original select as the status quo. In cases with more than one alternative, Samuelson and Zeckhauser explain that there arises an increase in the advantage of the status quo (Kahneman & Tversky, 2000).
For Kahneman, Knetsch and Thaler, due to the drawbacks that it’s appearing is more than the benefits, status quo also helps make clear a certain experiment described earlier by Thaler. In his experiment, Mr. S purchased a good wine case for around $5 per bottle in the 1950s. Some years subsequent to Mr. S’s purchase, the wine merchant offered to get a good deal for Mr. S at $100 for each bottle. Mr. S declined the offer despite having never exceeded the payment of $35 for a bottle of wine. The essence of the experiment was to prove that Mr. S did not want to lose the status quo as the possessor of the wine. Based on their study, the justification for this is that every investor has a reference point before the acquisition of their stock. This is typically the price used in the acquisition of the stock. It, however, can change over a certain period. Gains and losses defined in relation to a reference point are the carriers of value are gains (Wilson & Keil, 2001; Kahneman, Knetsch & Thaler, 1991).
As the reference point moves, the status quo becomes progressively essential to the persons. This is due to the mental advancement of the original status quo. This growth in the significance of the status quo results in the pain being felt more strongly.
The rational and emotional factors attached to or obtained from a particular service or product is crucial in the modeling of the people’s opinions. It is such service offered to customers that influences on the opinions of clients regarding certain products and services. In the case of Pret A Manger, the services and products offered by the company have earned a good level of loyalty from the consumer.
The Pret A Manger Customers
The Pret A Manger customers approach Pret shops through the perception of the aroma of freshly made foods. After entering the Pret shop, the customers are greeted in a cheerful manner. Their orders are then confirmed. The order is then packed and given to the consumer, and the Pret A Manger wishes the customer a good morning or good day, thanking them for the purchase.
This has been essential to the attainment of loyalty from Pret A Manger’s customers. The loyalty earned from the consumers is as a result of the cheerful service provided by the employees of the company. This has been followed despite the existence of other major competitors, some of which operate within the same locality as some of Pret A Manger’s outlets. This situation is also notwithstanding since some of the competitors offer their services and products at lower prices as compared to those offered by Pret A Manger (Szwarc, 2005).
With customers streaming in a steady manner, the uniformed staff is friendly and assertive. The employees at Pret A Manger shops appear to be familiar with many of the customers. In addition, they also appear to know the regular orders of some of Pret’s customers. The Pret A Manger stores also offer free Wi-Fi to their customers who are eating their meals from their shops.
The Pret A Manger customers do not want to lose the status quo of being served well by Pret A Manger and consuming their highly rated products. This is despite the existence of other fast food restaurants that offer even better related services or products. These customers would rather walk past other points and restaurants just to get the “Pret experience” once more. Employee commitment and consumer excellence are inherently interconnected.
The endowment effect was first acknowledged and put forth by Thaler. It suggests that in the event an individual comes into ownership of a good, they give it a greater value than it had prior to its acquisition. The endowment effect wields the ability to influence the persons to give additional weight to a loss than relinquished gains. It is, as a result, impacted upon by the loss aversion. The effect of endowment is closely connected to the effect of the status quo. This is also illustrated by the simple test of Thaler. The experiment is that of Mr. S buying a case of good quality wine. He was then approached some years later by his wine dealer offering to purchase the wine back at a higher cost than Mr. S had bought it. Mr. S declined the offer despite having never bought a bottle of wine for more than$35 (Thaler, 1991).
From the above experiment, the endowment effect is the influence that the owner of a certain item appears to value more than persons who do not have ownership of that item.
The Mr. S analysis demonstrates that Mr. S is exhibiting a behavior of not willing to sell the wine bottle that will, in reality, benefit him in gaining a good amount of money. Selling of the bottle of wine would, however, result in his losing the bottle of wine. This evidently illustrates that Mr. S is presenting loss aversion conduct. Thaler categorizes such an outcome as an endowment effect.
When someone loses something that he possessed, it is regarded as a loss whilst if one were to gain another item similar to the item they already owned, it is regarded as a gain. This explanation is applicably true to the stock portfolio of an investor. By having possession of the stocks, the investor has an inclination of overpricing it as they are greater than the prospect cost of giving up a gain.
Kahneman, Knetsch and Thaler (1990) stated that an endowment impact occurs when the reference point moves. The resulting value changes when a person is offered ownership of a good that they initially do not possess. The difference between purchasing and retailing prices is also subject to the individual's personal market understanding. Kahneman, together with his colleagues, also stated in their investigation that based on the natural, usual behavior, individuals normally do not desire to lose a benefaction at a loss. They also would not wish to spend additional money to acquire an item that they were not awarded with (Wilson & Keil, 2001).
In relation to Pret A Manger, the endowment effect is based on the way the customers of the food chain business stick to the services and products of the company. After tasting the food of the Pret A Manger, the consumers find it difficult to go and try other restaurants. The reason is that despite learning or hearing about the experiences derived from other restaurants, these customers do not want to lose the value they place on the experience they have had with Pret (Szwarc, 2005).
As discussed above in this coursework, the transaction utility plays an important role in influencing on the consumer’s purchasing decisions. The contents of the customer’s shopping list are highly determined by his internal valuation. They will consider the product that gives them a positive value for their money. Pret A Manger has put this theory into practice by offering affordable products to its customers. This makes them feel a positive value of their money; therefore, they come back to this store for more products. The equitable buying price is dependent largely on the sale’s context. Thus, the transactional utility is highly determined by the framing impacts of a multi-pricing scheme. The higher the probable total utility a consumer identifies, the more is the possibility that the consumer will buy a given product. Pret a Manger recognizes that a positively perceived transaction will provide a positive framework for perceived value obtained from the purchase of any product it offers.
In status quo, the customers remain loyal to Pret A Manger because they do not want to lose the good quality they receive despite the existence of other food restaurants. In the endowment effect, after the customers get an experience from the Pret A Manger, they stick to it as they also do not want to lose the great service they got. Through the mental accounting theory, the company can make good financial decisions regarding its customers that include offering them discounts so that they may feel they are getting a value for their money.