Introduction
The goal of the report is to explore the consumption behavior of customers in response to price changes. To achieve this goal, the report selected energy drink as an elastic product in which its consumption is sensitive to price changes in the market. The understanding of the consumption behavior of customers plays a central role in the marketing of products. In competitive markets, the existence of substitute products makes products exhibit elastic demand because consumers prefer low prices. Some of the competitive brands of energy drinks are Lucozade, Monster, Stacker, RedBull, Shark, 5-hour energy, Liquid X, Beaver Buzz, and Burn. In this view, prices influence the kind of substitute products that customers purchase and the quantity they consume in a given instance. Therefore, this report presents findings of the data collected from 15 customers of energy drinks to determine how price changes influence their consumption behavior.
Demographic Information
Out of 15 participants, 53.3% (8) were males while 46.7% were females (Table 1).
Table 1.
The distribution of participants (Table 2) according to their gender reveals that the majority (33.3%) were in the age group of 18-24 years followed by the ones in the age group of 35-44 years (26.7%) and 45-54 years (20%). Moreover, participants between the ages of 24-34 years constituted 13%, whereas those in the age group of 55-64 years formed 6.7%.
Table 2.
Tabulation (Table 3) of the participants based on their working industries shows that the majority of them (26.3%) worked in other industries followed by 267% who worked in the communication industry and 13.3% who worked in the banking industry.
Table 3.
Table 4 indicates that most participants (40%) had the experience of over 10 years, while the minority of them (6.7%) had less than 2 years of experience. The participants with 2-5 years and 6-10 years formed 33.3% and 20% respectively.
Table 4.
The analysis of the education level (Table 5) shows that the majority of participants (73.3%) are graduates followed by ones with masters’ level (13.3%). Participants with high school level and college level had the same proportion of 6.7%.
Table 5.
The distribution according to marital status (Table 6) shows that most participants were married (66.7%), while the unmarried formed the minority of 26.7%.
Table 6.
The frequency distribution (Table 7) indicates that the majority of participants (46.7%) earned income between 16,000 and 30,000 AED followed by 26.7% who earned income between 31,000 and 45,000 AED. The participants who earned income between 6,000 and 15,000 and those who earned income over 60,000 AED comprised of 6.7% each, whereas those who earned income in the range of 46,000-60,000 AED formed 13.3%.
Table 7.
The Rate of Consuming Energy Drink
At the current prices, 13.3%, 20%, and 6.7% of participants consume energy drinks daily, few times a week, and once a week respectively (Table 8). Moreover, the majority of participants are not frequent consumers of energy drinks because 26.6%. 13.3% and 20% consume a few times a month, once a month, and less than once a month in that order.
Table 8.
Percent of Income Apportioned to Energy Drink
Table 9 depicts that the majority of respondents (66.7%) apportion less than 5% of their income, while the minority (33.3%) allocates between 5-10% of the income to the consumption of energy drink.
Table 9.
The threshold of Price Increase
Regarding the effect of the price increase, 26.7%, 46.7%, 20%, and 6.3% of participants indicated that they would change their consumption behavior at the threshold of 10%, 20%, 30%, and 50% levels.
Table 10.
Effect of Threshold Prices
When prices of energy drinks attain threshold level, 60% of participants indicated that they would quit buying, whereas 40% showed that they would shift to a cheaper product (Table 11).
Table 11.
Short-Term Effect
Table 12 depicts that a higher proportion of participants (60%) would shift to cheaper products than quit buying energy drinks (40%) when prices increase over a short-term period of 6-12 months (Table 12).
Table 12.
Long-Term Effect
Comparatively, Table 13 indicates that when prices of energy drinks increase over a long-term period of more than a year, almost the same proportion of participants would move to a cheaper product (53.3%) or quit buying (46.3%).
Table 13.
Effect of 10% VAT
Concerning the effect of a 10% increase in the value-added tax on consumer behavior, the frequency distribution (Table 14) reveals that 46.7% would reduce consumption, 26.7% would shift to a cheaper product, 20% remain the same, and 6.7% would increase consumption.
Table 14.
Effect of Removing 10% VAT
The removal of the 10% value-added tax would make participants change their consumption behavior by increasing consumption (46.7%), remain the same (46.7%), and reduce consumption by 6.7% (Table 15).
Table 15.
Conclusion
The analysis of collected data collected from respondents with varied demographics reveals that price changes influence the consumption of energy drinks. When prices increase due to value-added tax, consumers tend to decrease consumption, shift to cheaper products, or quit consumption. In contrast, when prices decrease consumers change their consumption or remain the same. Thus, the study confirms that energy drink is an elastic product because its consumption varies with prices.