The Impact of Membership Fees on Consumer Attitude and Purchase Behavior
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This study examined the impact of membership fees on consumer attitude and decision making process. The factors that are affecting the membership would also be determined like the factor of social influence and the like. The broad subject of consumer would have to be discussed in order to explain the relationship between the two. Furthermore, this study aims to enumerate and explain the different effects of membership to the firm that offers it. Factors like profit, demand, and operations may be briefly touched. This paper proposes that membership has a positive effect on the profit generation of the firm and that it also helps the retention of its clients.
Club memberships are in the groove nowadays that the consumers are jumping on to possible alternatives that would lead them to reduced costs for services and facilities. The need of the consumers to reduce the cost of living is reaching a limit beyond the standards of before. For the past years, membership of a club is generally connected to the concept of luxury, of which the people then has. But nowadays, the concept of club membership as a luxury seemed an extinct concept. To combat the increasing standards of living, one can be observed as catching memberships of health clubs and the like to reduce the rates that they would have to pay. But is this really the answer to the problems posed by the economy?
II. Research Focus
Starting of with the basic question: what drives a consumer to join memberships? The questions to follow would be: what do they expect from joining these clubs? What would they experience in joining clubs?
A. Added benefit: Cost Reduction
An incentive is one of the reasons. Consumers would normally react positively to the presence of incentives. An added benefit always seemed to be a good idea on the point of view of consumers since companies believe that a good way of motivating consumers to be a member of their club is to give away incentives; consumers on the other hand, thinks that is a bonus to the benefits and facilities that they have paid to use. Normally, an incentive works in such a way that their offerings become superior to any other company’s. Theories in economics dictate that a superior good is always preferred by consumers from an inferior good.(Lars Perner, N. D.-c) So any product or offering with a sense of “superiority” would be preferred by any consumer in the market.
B. Social network influence
Another reason may be the influence of friends, relatives, co-workers and other social ties that influence a person’s decision. One does not want the feeling of being left out that’s why the person does everything so as to be in the fad of the times. The influence of others is plays a large role since this also satisfies a need of a person, as would be explained later.
Lastly, a consumer is motivated because of the use of the company of the theories involved in consumer behavior. With the use of these theories, the company would be able to acquire the necessary topics in which they could exploit the consumers’ decision-making criteria. Without which, the company would not be able to determine the consumers’ preferences. The consumers’ tastes greatly affect the offers of the company through the factor of demand. The greater the demand, the more diverse the offers would be.
III. Review of Literature
Consumer behavior has been studied for years in hope of decoding the rational mind’s decision making capacities. The consumer should behave rationally according to studies, in such a way that they would choose the goods or services in terms of the benefit they would give and not the price of it. The assumption on this is that there is no oligopolistic or monopolistic producer that governs the market and that the consumer is located in a perfectly competitive market.(Taylor-Gooby, N. D.)
Recent studies have been conducted to analyze the people’s view of luxury, and it has been found out that consumers have been considered to be more luxurious through the years.(Johnson, 1999) Prestigious brands are being purchased left and right, prompting market analysts to predict that the more expensive brands are being preferred. The image projected by these brands pose a customer’s mind into thinking that the price won’t matter as long as the benefit is as good as it suggests.
This is somehow connected to Maslow’s Hierarchy of Needs, placing the image factor of people in the third level: the need for social connections.(Drinnien, 1987) The hierarchy reflects that after satisfying the physiological and security needs, the need for social interaction should also be satisfied. However, this particular need can be accomplished by the person by interacting with other people; therefore achieving connections.
Consumer behavior affects this part as no consumer may move freely in a market that is governed by economic theories. The specification on consumer choice entails that the consumer behaves under the laws of supply and demand and that their actions constitute the fundamental principle of consumer choice.(Allenby, 2004)
The first part to be discussed would be that of the membership fees. This is the primary step in which the company offers their membership. Employing the economic laws of supply and demand, the member ship tells us that the higher the price of the membership, the lower the desire of the consumer to be part of the club. However, the price of the membership fees also constitutes a part of consumer expectation. The price would be the benchmark at which the consumers may compare the services that it entails. The membership fees should be able to compensate the consumer so that it would be a fair deal for the consumer.
With these, we can now go to understanding principles and explanations of consumer behavior. First of which would be, what drives consumers to seek membership in clubs? Well, the answer would lie in a few fields. First of which would be the field of consumer behavior that is affected by many factors. Second is of the marketing strategies applied by the company and lastly, it can be an influence made by preference.
The factor of consumer behavior with respect to the drive of consumers to be a member of a specific club depends on certain criteria. First of which may be the preference. The consumers’ preference is reflected at the choices the consumer makes. It can also be manifested through the taste he or she has on certain goods and services. The frequency of the choices makes the consumer decide to choose the alternative at which either he/she gets the good or service at a lower price, if the selection of the good or service would be given an added benefit through incentives or if the service offered would increase in quality at the same price. These three may be the point of choice of the firm that will provide. The club, which is the firm in question, may choose to perform one of these tasks: lower their offering price, add a perk, or increase the quality of the service. All of which would point out to the same result. And that is additional satisfaction on the part of the consumer. With the added satisfaction, another factor comes into play: consumer loyalty. With this, the company would then be assured of a share in the market from that consumer alone. Along with the other club members, it would account as a significant market share. The satisfaction of these consumers would be an advantage for the firm since they may attract more clients with this, and at the same time, they would also have a certain grasp on the market share that they have wanted to protect. The implication of which is that the company would only have to maintain its present level of service to maintain the market share. It also serves as an added advantage for the firm if it would reduce the costs of the services for the clients because somehow, they would be availing of the services more frequently. For this, the consumers would be attracted.
The second factor would be the marketing strategies employed by the company. The company’s strategies are always geared towards the achievement of a higher number of market shares that they can acquire. Just how exactly would they be able to do this? They can advertise. With the power of the media, the firm may be able to broadcast that they can give better service, better facilities and lower rates. The club can also claim that certain people of higher classes prefer the facilities and services that the club offers. They can even offer that the membership fees would be lower and affordable to all classes of the society. All strategies pointing out to one conclusion: that the club is the best there is and that there is no reason not to be member of the “prestigious” club. It seems funny but psychology tells us that this is done and has been done in the previous years.(Johnson, 1999) People have been attracted to these kind of deals and that until now, they claim to be satisfied. The confirmation of which would be present in the recent developments in the club businesses.(Haussman, 2002) the boost that is all of a sudden present in the clubs sector only confirms the fact that the marketing strategies that are employed by these clubs are on the rampage. They are gathering market shares like they are just stones to be picked from the road.
The influence of preference, however, is a very tricky subject. This factor can be easily divided into a lot of parts, the most common of which are the factors of influence of others, taste and the quest for prestige.(Johnson, 1999) It is human nature to be influenced by others. It is human nature to be influenced by your taste. And, of course, it is human nature to be influenced by a person’s want and desire to be prestigious. The influence of others can be by recommendation of friends, relatives and other acquaintances; but it boils down to one thing: that they talk of the superior quality of services that club offers if you become a member. The ones that influence a particular person generally are all praises for the club, triggering a sense of curiosity in the person that makes him/her to discover the things that make these people claim such things. If the person then gets satisfied, he would also do the same in which he was influenced. The influence of taste, however, is a little murky since the taste of the consumers is a volatile topic to discuss. The market is a very dynamic unit to analyze, attributing it to the fact that tastes change so fast. The consumers may want a certain good or service now, but tomorrow, they may not want it anymore. If today, they don’t think it is wise to be a member of a tennis club, maybe tomorrow, that person would turn to a tennis buff himself. The market is very dynamic.
These are the factors from the point of view of the club. However, like many things, the factor of expectation also comes into play. If ever a person comes into an idea to become a member of the club, they would also have a certain number of expectations to satisfy. First of which would be if the club would be able to live up to the promises that they say? Would they be able to give me the services that I want? Are the facilities really of high quality that they claim it to be? Is the club really as prestigious as it claimed to be? Would the rates be really lower than before? Would the added benefits really compensate the fees that I paid for?
Such are the questions that would run in the minds of new members. How the clubs satisfy these would be at their discretion. The only thing that would matter is that: if the new member would find the benefits of being a member, he can withdraw his membership and spread his dissatisfaction about the club. That would result to a decrease in the market shares and eventually profit. Clubs would, of course, not want this.
The relationship of relationship and luxury differs from person to person but most think that being a member of a club entails a connotation of luxury. It would look like the consumer does not have any problems of financial nature that he can afford to be part of a “luxurious” club. What people do not really understand is that the luxury is just a connotation and that some members of the club just seek membership for the incentives given and the lower rates offered for the members. The concept of luxury is really subjective such that it varies from person to person. The prevailing concept is that a luxury is defined as so if it is not really needed. A person may view something as a luxury if the person does not include the activity or good in his daily routine. However, if it has become part of the routine and has become a staple for the person, it may be considered as a necessity.
But before we judge people with their thinking patterns, it would be essential for us to know the consumers’ thinking path. Learning and understanding the thinking path of consumers would definitely be beneficial to the market and the industry. The market and the industry also take advantage of the thinking and reasoning patterns of people to make the consumer behavior more comprehendible to common thinkers. The line of thinking is somehow related to the common theory of consumer behavior. However, the only difference would be that the thinking path takes on a more scientific way of dealing with the situation. Since thinking path can be generalized with accordance to the type of person, it is essential that we understand first a unit before we would be able to understand the whole group. Not using the terms in economics such as supply and demand, it utilizes the theory of people trying to accomplish the self-actualization involving Maslow’s Hierarchy of Needs.
Figure 1. Maslow’s Hierachy of Needs
Maslow’s Hierarchy of Needs indicates that there are five needs that need to be satisfied step by step in order for the person to achieve self-actualization which is the last step.(Drinnien, 1987) Each step is different from one another and is essential in every person’s life. The first step is the Physiological Needs of man. This refers to the basic necessities of man like food, shelter and clothing. After the satisfaction of this step, the Safety Needs need to be satisfied. This refers to the sense of security that a person may feel. The third step is the Need for Love, Affection and Belongingness. Every human has feelings and from time to time would need the feeling that they are cherished and loved. It reinforces the Need for Security and may satisfy other Physiological Needs. After the satisfaction of the third step, the fourth step of Esteem takes the stage. Man needs to feel that he has a high level of respect in himself, takes pride in what he do, and values his personal dignity. After the accomplishment of the four steps, the last step of Self-Actualization comes into play. This would be the realization that the person is needed in an organization and feels that his judgment of certain situations is valued. He also sees the function that he needs to perform and that other people respect him/her for doing so.
The thinking patterns of man can be judged using this theory and is applied by the clubs in the form of their memberships. Take for example, a tennis club that offers an exclusive facility, lower rates, added benefits and participation in activities tied to tennis clubs across the country like tournaments. The first need would be the satisfaction of physiological needs. Once a customer feels that he needs to exercise to keep himself healthy, it would seem logical to apply for membership of a sports club, like a tennis club. The security needs is satisfied as he gets to communicate with other members that the new member’s ability in tennis is not important; stating that the only thing important to the members is that not only do they have fun, they also get to stay healthy. The satisfaction of the third step would be accomplished when the new member gets to acquire friends through the club; Friends that he can invite for Friday night poker or for a bottle of beer on a Saturday night. The fourth step of esteem is satisfied when through current sessions in the tennis club, the new member gets to hone his skills and elevate as one of the best players in the club. He develops a high level of respect for himself then. The last step of self-actualization would then be accomplished if the member would then be asked to join an inter-club tournament. He would then realize that people respect him and that in the near future, he would also share the experiences he had with possible new members.
With this in context, it would be easier to market the memberships of clubs. The basic concepts of human behavior and marketing are being utilized by the clubs to attract regular clients to become members. The minds of the marketing staff of these clubs do not mainly focus on the facilities, but imply that a greater world would be at the regular client’s grasp once he decides to apply for membership. Usually, if the client won’t budge, the frequent contingency would be the cost and the perks that come with the membership. Also, the feeling of being one with the elite at such a low price proves to be a good motivational concept to apply for membership.
Another question would be: is the concepts of membership in clubs really help maintain the retention rate of the members? The answer would be yes. Looking back at the Hierarchy of Needs, once a person gets to satisfy all of the steps, it would really be hard for a person not to be satisfied in his current situation. Given that a person is already happy in his present state, it would be natural not to look somewhere else. Basically, a person satisfied is the person most likely to stay since it would be really a gamble in a high risk state if he would decide to look for the satisfaction he has achieved in other clubs of the same type. If a person may feel that he is not satisfied, then, we can conclude that his own Hierarchy of Needs is not well satisfied. He may have a deficiency in satisfaction in the third or fourth step that did not permit him to achieve self-actualization.
Furthermore, the retention rate would be maintained since members try hard to recruit other people in their influence to be an affiliate. Men would invite beer buddies and women may invite the other moms that they chat with at the day care center. In short, it is also a marketing strategy that is not exactly one. The members would be the marketers themselves, spreading news about their club to encourage non-members to join. The entrance rate of members may be high or low, but one thing is for sure: that the company would have to maintain its service if ever they want to lower down the rate of departure of their members, taking in mind that the members are the ones that make the clubs alive.
The last question would be if the memberships in clubs really increase profits. Well, the answer would be yes and no. Yes, in the sense that frequent usage of the facilities mean more payments although the rates are lower. The clubs also generate profit from other means like the canteen and the vending machines. Furthermore, income is realized earlier since they would come in the form of monthly fees. No, in the sense that some clubs realize their income through the financial concept that a company should not always be on the profit side of things but sometimes, the raising of its price of shares or stocks. This is commonly termed as the “maximization of wealth”. Clubs may not realize that although they would engage in a certain project that earned a small profit, the implication on the share price may also raise, which would make the shareholders of the club satisfied, and even the stakeholders like the club members and the employees.
Hypothesis 1: If price is a major determinant, a lower price would mean more members.
Hypothesis 2: If consumer satisfaction is provided by memberships then, more clients would come if the services are better.
C. Answers to Hypotheses
The answer to the first hypothesis is that price indeed is a major determinant. However, it does not necessarily lead to the conclusion that a lower price would mean more membership requests. A major factor to be considered by customers is that, although the price is high, would it deliver a higher satisfaction that the consumer has? Consumers are more concerned in getting the value of their money rather than the lower price offers. If the compensation that the club promises to be delivered is received by the customer, then the customer would be satisfied. The concerns of consumers do not necessarily rely on the pricing alone, but satisfaction that their payment has given them.
Hypothesis 2, meanwhile, is true in the sense that the satisfied customers tend to spread word about the satisfaction he or she got from a particular company’s service or product. The word of mouth factor cannot be displaced since this is one of the determinants in which the company bases their marketing strategy of marketing memberships. However, it also holds true that unsatisfied customers tend to spread his reasons of being unsatisfied t a club, therefore, lowering the membership rates for a specific number of people. Some club members are recruiting other people to join the club, simply to expand their social circle. So this means that although the hypothesis proves to be true, it doesn’t hold true for all situations.
The effect of membership depends from consumer to consumer. However, the basic benefits would make him realize that the membership is worthwhile. Just like any other members, the consumer would try to recruit new members in their club. Other members that did not feel satisfied would either withdraw or be just plain inactive. The expectation of a happy consumer, meanwhile, is that of the satisfied thoughts rather than disappointing notions. And since companies employ the theories of consumer behavior and the Hierarchy of Needs, there is no proof that the consumer would want to be a member of another club. The objective of the company is satisfied the same way that the members attained their expectations.
The expectations of a consumer are highly subjective that we have to study behavioral patterns and economic theories. However, in this case, the expectations of a consumer may be met through high satisfaction at a club’s membership activities. The price of membership does not necessarily constitute a negative mark on the club, but a club’s service on members would greatly affect the consumer’s expectation of the price; especially if the company would fail to provide the necessary services that are with regards to the client’s status. The customers’ main concern in their expectation of a membership’s price is that if the company would be able to compensate them in their being a member. Failure to do so would mean failed expectations and lower retention of old members.
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