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How Consumer Behavior Affects Supply and Demand: Fast Foods Industry

The paper comprehensively evaluates how consumer behavior affects the supply and demand of products and services in the fast-food industry. The operations of companies such as McDonald’s highly rely on consumer behavior to determine the rates of products and services supply. Consumer behavior directly affects the demand for products and services in the market. In turn, this influences the supply conceptualization and how it aligns with demand. The consumer behavior profoundly affects the market demand and supply as the three aspects are intertwined. Consumer behavior is essential in the evaluations of the products and services offered by McDonald’s. It impacts on the increase in demand and supply of the operations of the company. Due to market variations in the fast-food industry, the quantity supplied exceeds the quantity demanded in the market. This attracts price variation and differentiation of products and services as consumer behavior determines where to access similar products and services from some competitors, i.e., McDonald’s, Wendy’s, Burger King, Subway, KFC, Starbucks, Pizza Hut, Papa John’s Pizza, Domino’s, Dunkin’ Donuts, among others. Therefore, consumer behavior plays an integral role in influencing demand and supply in the fast-food industry.

Consumer Behavior

The consumer behavior is significant in determining the rates of demand and supply of products and services in the fast-food industry. The operations of McDonald’s are based on an extensive understanding of consumer behavior to inform product differentiation, prices, designing, and development (Gorham, Gibdon & Irlbeck, 2016). The research on consumer behavior is vital for the development and improvement of McDonald’s’ products. Consumer behavior determines the decision-making process in which consumers engage in assessing, acquiring, using, and disposing of goods and services from the target company (Victor, Thoppan, Nathan & Farkas, 2018). The consumer behavior covers a wide range of demographics such as sex, age, income status, lifestyles, tastes, culture, preferences, educational level, employment status, health needs, among others. These aspects collectively determine the process by which consumers source their products and services. For companies such as McDonald’s, understanding of the consumer behavior is fundamental to enable it in identifying the key target consumers and market, how to target the market or consumers, when to launch different new products or services, as well as, how to reach the consumers (Arenas-Gaitan, Sanz-Altamira & Ramirez-Correa, 2019). Moreover, determining what message is to be given to the target audience for promotion and marketing purposes is crucial to enhance high sales, that is, demand for the products and services.

The analysis of consumer behavior finds that one consumer cannot affect the demand and supply rates to a company in any industry. It requires a collective number of consumers who induce market variations and affect the demand for the products and services from a company (Liviu & Claudia, 2011). For instance, the production of menus containing pork products in India can profoundly trigger a mass consumer behavior against the company to prevail in the region. This is in line with a lack of customer satisfaction and a violation of the people’s culture (He, Huang, Shi & Wu, 2018). Such tendencies would culminate in a zero demand in the country and subsequently result in no suppliers into the country. However, a single consumer can affect the demand rate from a company. The size and magnitude of the consumer determine their potential to affect the demand for products and services from a company (Ratchford, 2009). For instance, if the consumer is a conglomerate in which, as a company, you supply various products and services – a termination of such a contract will affect demand and supply of products to the company.

Key Elements of Consumer Behavior

When to Buy. In the fast-food industry, companies experience an increase in demand following events that occur in the territories they operate. The consumer demand for products is based on the desire to quench their needs (Jang, Prasad & Ratchford, 2016). This goes hand in hand with Maslow’s theory of needs motivating consumers when to buy and how to resolve their needs. The when to buy the products comprises of the moments when one is hungry and needs to consume something to regain energy. High demands of the fast-food eateries are experienced in the morning, lunchtime and evenings which constitute of the peak hours. This shows a trend in consumer behavior where outlets in the peak hours must brace to handle many customers (Lusk & McCluskey, 2018). Sustaining quality and high standards for the products and services is vital in meeting customer expectations, generates the perceived value of McDonald’s products and services, and builds customer loyalty.

What to Buy. The determination of what to buy is an integral feature of consumer behavior. In the operations of the fast food industries – specific products will attract more sales than others. This is in line with consumer preferences and tastes, which indicate the context of what to buy from the restaurants (Njagi, 2017). Menus such as fried chicken and French fries, as well as burgers and soft drinks, attract high sales. The capacity of the products to satisfy the consumer needs and expectations is crucial in influencing the consumer’s behavior on what to buy.

How Consumers Use the Products. Some products are more preferred and often used by consumers than others. Consumer behavior, in line with the use of products such as essential nutritional content, determines the decisions and preferences of the consumers (Lusk & McCluskey, 2018). For instance, consumers need products rich in vitamins, proteins, carbohydrates, and other essential nutrients used for health diets purposes. As a certified company – meeting the customer demands in line with usage and expectations is vital to attract consumer behavior in the company’s favor.

How Often to Buy. The capacity to maintain customer satisfaction influences the frequency of buying products from a company. To increase how often consumers purchase products and services from McDonald’s, the company offers friendly menu prices and ascertains that consumers are comfortable (Yu & Zhang, 2009). The affordability influences consumer behavior to demand more products from the company and more frequently. Thus, this leads to an increase in demand for products from the company.

Where to Buy. Amid hundreds of alternatives and critical competitors, both local and international brands – the consumers are exposed to a wide range of choices. Companies have a profound mandate to influence consumer behavior in their favor and attract more consumers (Jang et al., 2016). For a company such as McDonald’s, the building of a robust and vibrant organizational culture, brand, and ascertained customer satisfaction is a crucial component to attract consumer behavior in its favor. Thus, marketing strategies of the company focus on building customer loyalty.

Key Factors Influencing Consumer Behavior – [Affect Supply and Demand]

Diversity of Goods. McDonald’s operates based on product differentiation to ensure consumers access the best and quality products and services from the company. The differentiation of products is fundamental in keeping the consumers satisfied through competitive services (Clemons, 2008). The application of creativity and innovativeness in the development of products that conform with the consumer needs is vital to generate a competitive edge in a market saturated with similar products. Thus, the capacity to offer the consumers a unique sense and quality is vital in influencing consumer behavior and demand from the company’s products.

Freedom of Choice. In the fast-food industry, consumers have access to a wide range of choices and freedom to determine the restaurants to purchase products and services. The availability of many key competitors with high-value products and services equal to McDonald’s profoundly influence consumer behavior. The consumer behavior vital since increasing the demand from McDonald’s is based on the company’s capacity to satisfy the consumer needs, maintain the value and quality of its products and services, as well as the value proposition for improved services to the consumers.

Target Market. The target market is selected based on market segmentation, such as region, size, and population density. To ensure the high competitiveness of the company, market segmentation is a significant aspect of consideration to assess consumer behavior towards the products and services from a company. Such measures influence the opening of new outlets by McDonald’s in urban centers where there are high population density and regions such as Dubai that have a large number of high-income earners (He et al., 2018). Consumer behavior is ascertained of success, having met all the target market’s segmentation requirements.

Inflation. The consumer behavior is affected by inflation following an increase in prices of products and a lack of increase in wages to accommodate the new prices. The increase in inflation leads to an increment in the prices of products. As an international company, McDonald’s’ operations are affected by inflation rates, whereby the value of the dollar is influenced by the changes in the local currency (Kearney, 2010). Thus, an increase in the inflation of respective economies determines the pricing of products in the country. Therefore, consumers are affected by the affordability of the products and services from the company. Hence, the impact on demand and supply of products and services into the country.

Income. The income levels influence consumer behavior in sustaining their capacity to afford different products from a company. To sustain the high demands of products from McDonald’s, the company offers its products at relatively low prices. For example, $1.00 for a cheeseburger, $2.00 for a double cheeseburger, $1.00 for a hamburger, $1.69 for a double hamburger, $1.99 for McDouble, $1.89 for four McNuggets among others (Gorham et al., 2016). The pricing of products is vital to ensure the affordability of products for middle-income earners.

Interest Rates. The interest rates affect consumer spending behavior following the fact that high-interest rates impede consumers’ access to credit. This makes it impossible for the generation of funds that are essential for investments and replicate with more cash ushered into the economy (Coker & Helo, 2016). The high-interest rates also lead to high costs in suppliers (Figure 4). The high costs incurred in the suppliers attract higher prices from the products and services offered by a company in efforts to recover the money. In turn, low demand is bound to be experienced, following an increase in production that deters consumer behavior preferring expensive products.

Impacts on Supply and Demand

Consumer behavior profoundly impacts the supply and demand for products and services in the fast-food industry (Coker & Helo, 2016). The operations of McDonald’s are based on enhanced analysis and understanding of consumer behavior. As a critical component of determining market progress, demand, and supply of products and services, consumer behavior requires a positive approach to sustain its continuity (Figure 2). The capacity to satisfy consumers depends on the creation of customer loyalty. Customer loyalty is the basis in which companies such as McDonald’s operates for long-term competitiveness and operations in different parts of the world (Jang et al., 2016). Consumer behavior is influenced by the responsiveness to market variations in pricing based on several features.

Responsiveness to Market Variations in Pricing

Market Demand for Commodity. The market demand for McDonald’s products and services such as burgers, French fries, chicken, among other products, is critical (Figure 3). The target market determines the products to be developed and the differentiation strategy to be applied. In turn, it leads to the production of a variety of products that surpass others in the market (Arenas-Gaitan et al., 2019). Thus, it positively influences consumer behavior towards the company and leads to the generation of customer loyalty and commitment.

Price Given to Commodity. Compared to other key competitors in the market, McDonald’s products attract relatively low prices (Figure 1). The pricing of similar products in the same market, which is readily available is critical to influencing consumer behavior (Clemons, 2008). The pricing given to commodities is key to the increasing demand for products by the consumers from the company.

Related Goods and Prices. In the fast-food industry, the availability of related goods with better and competitive prices is a significant phenomenon influencing consumer behavior. The consumer behavior is attracted to companies that offer friendly prices for related goods (Victor et al., 2018). To ascertain that McDonald’s remains competitive – selling of its products follows the regulation of prices to best suit a wide variety of consumers in the target market, thus maintaining a high demand for products from the company (Fristedt, Hansson, Huge-Brodin, Rehme & Sanberg, 2012).

Tastes and Preferences. The tastes and preferences that influence consumer behavior include the changing needs of the consumer. For example, the rise in improved lifestyle and dietary consumers among the new generation of consumers and changing health needs lead to the demand for better certified and nutritious products. Therefore, McDonald’s has focused on product differentiation and creativity to ensure that they conform with a wide range of consumers across different demographics (Kanyana, Ngana & Voonc, 2016). This enables the company to maintain a competitive edge in the market that is highly saturated.

Pricing Effects on Demand

Figure 1. Demand and Pricing Graph (Source: Author).

 

Variations in Demand and Supply

Figure 2. Variations in Demand and Supply (Source: Author).

Demand Curve

Figure 3. Demand Curve (Source: Author).

 

Supply Curve

Figure 4. Supply Curve (Source: Author).

Conclusion

In conclusion, the adaptability to consumer behavior follows a continuous analysis of consumer trends and feedback on the products from the company. Extensive research on consumers is vital to understand the consumer behavior and the market better. In turn, it facilitates the increase in demand for products from the company better than others in the same industry. The regulation of the supply and demand trends is crucial for future predictions and toward enhancing the capacity of the company to maintain a competitive edge over its competitors. McDonald’s competitiveness based on consumer behavior is sustained through pricing strategies, product differentiation to satisfy consumer needs, and control of product availability and accessibility. That is, the affordability and satisfaction of the consumers are key to positively influencing their behavior on increased loyalty and demand from the company.

References

Arenas-Gaitán, J., Sanz-Altamira, B., & Ramírez-Correa, P. E. (2019). Complexity of Understanding Consumer Behavior from the Marketing Perspective. Complexity2019.

Clemons, E. K. (2008). How information changes consumer behavior and how consumer behavior determines corporate strategy. Journal of management information systems25(2), 13-40.

Coker, J., & Helo, P. (2016). Demand-supply balancing in manufacturing operations. Benchmarking: An International Journal.

Fristedt, M., Hansson, A., Huge-Brodin, M., Rehme, J., & Sandberg, E. (2012). Supply chain management in practice: a case study of McDonald’s Sweden. Linköping University Electronic Press.

Gorham, L. M., Gibson, C., & Irlbeck, E. (2016). Making a case for McDonald’s: a qualitative case study examining the McDonald’s” Our Food, Your Questions” campaign. Journal of Applied Communications100(4), 17-33.

He, Y., Huang, H., Li, D., Shi, C., & Wu, S. J. (2018). Quality and Operations Management in Food Supply Chains: A Literature Review. Journal of food quality2018.

Jang, S., Prasad, A., & Ratchford, B. T. (2016). Consumer spending patterns across firms and categories: Application to the size-and share-of-wallet. International Journal of Research in Marketing33(1), 123-139.

Kanyana, A., Ngana, L., & Voonc, B. H. (2016). Improving the Service Operations of Fast-food Restaurants. Procedia-Social and Behavioral Sciences224, 190-198.

Kearney, J. (2010). Food consumption trends and drivers. Philosophical transactions of the royal society B: biological sciences, 365(1554), 2793-2807.

Liviu, N. E. A. M. T. U., & Claudia, N. A. (2011). The role of supply and demand analysis in substantiating the company’s business policies. African Journal of Business Management5(22), 9180.

Lusk, J. L., & McCluskey, J. (2018). Understanding the impacts of food consumer choice and food policy outcomes. Applied Economic Perspectives and Policy40(1), 5-21.

Njagi, P. G. (2017). Factors That Influence Consumption Patterns of Junk Foods In Fast Food Restaurants In Nairobi City County, Kenya (Doctoral Dissertation, School Of Business, University Of Nairobi).

Ratchford, B. T. (2009). Consumer search behavior and its effect on markets. Foundations and Trends® in Marketing3(1), 1-74.

Victor, V., Joy Thoppan, J., Jeyakumar Nathan, R., & Farkas Maria, F. (2018). Factors influencing consumer behavior and prospective purchase decisions in a dynamic pricing environment—An exploratory factor analysis approach. Social Sciences7(9), 153.

Yu, C., & Zhang, T. (2009). American Fast Food in Chinese Market: A Cross-Culture Perspective: The Case of KFC and McDonald’s.

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How Consumer Behavior Affects Supply and Demand: Fast Foods Industry . (2022, July 12). Essay Writing . Retrieved September 29, 2022, from https://www.essay-writing.com/samples/how-consumer-behavior-affects-supply-and-demand/
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How Consumer Behavior Affects Supply and Demand: Fast Foods Industry . [online]. Available at: <https://www.essay-writing.com/samples/how-consumer-behavior-affects-supply-and-demand/> [Accessed 29 Sep. 2022].
How Consumer Behavior Affects Supply and Demand: Fast Foods Industry [Internet]. Essay Writing . 2022 Jul 12 [cited 2022 Sep 29]. Available from: https://www.essay-writing.com/samples/how-consumer-behavior-affects-supply-and-demand/
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