An analysis of Haidilao Hotpot's marketing strategies: from a consumer psychology perspective
Abstract
With the development of globalization, Haidilao Hotpot has become one typical phenomenon, which could be renowned for its marketing and promotion. Established since 1994, Haidilao Hotpot has become worldly famous for its Sichuan stylistic food and beverage providence. Behind the popularity, the consumer psychology can be the solid basis in the commercialization. The research focuses on these points. Firstly, the research background about globalization, consumer diversification have been pointed out. Secondly, marketing mix theory and consumer psychology, or consumer behavior theory have been studied. The common state are conformity, comparison, and convenience. The common marketing strategies are hungry marketing, product marketing, brand marketing. Thirdly, case study on Haidilao Hotpot is done. Service line extension would bring convenience and freshness. Word-of-mouth marketing can bring conformity. Brand establishment can bring social comparison and priorize consumers’ identity. Pricing fixing can make it cost effective in consumption.Fourthly, conclusions have been drawn out.
Key words: Haidilao, Hotpot, Marketing, Word of mouth, psychology, consumer
Contents
Chapter 1. Introduction 5
Chapter 2. Literature Review 6
2.1 Modern Consumer psychology characteristics 6
2.2 Classic Consumer psychology and sentiment 7
2.2.1 Conformity 7
2.2.2 Social comparison 8
2.2.3 Preference 8
2.3 Marketing strategy implementation 9
Chapter 3. Case study of Haidilao Hotpot 9
3.1 Haidilao Hotpot Overview 9
3.2 consumer psychological satisfaction and marketing strategic management coordination 10
3.2.1 Service line extension: convenience and freshness 10
3.2.1.1 Restaurant brand image and consumer trust 10
3.2.1.2 Product design and a sense of local Chinese dish 10
3.2.1.3 Flexible consumption experience 11
3.2.2 Word-of-mouth marketing: Conformity 11
3.2.2.1 Consumer relationship expansion 12
3.2.2.2 Social Media marketing: Youth and fashion impression 12
3.2.2.3 Recommendation on Haidilao Life Style 13
3.2.3 Brand establishment: Social comparison 14
3.2.3.1 Shame Culture 14
3.2.3.2 Freedom Culture 14
3.2.4 Pricing: cost effective 15
3.2.4.1 Self assisted catering service 15
3.2.4.2 Half purchase and half free pricing strategy 16
Chapter 4. Conclusion 16
Chapter 1. Introduction
你好，我想给你说一下，这个海底捞是全球的，美国欧洲都有，我写的客户不是说是中国客户，这个你应该和老师说一下。
The market economics have nurtured modern brandy companies in different industries. They have served for different groups of consumers. The necessity for study consumer psychology in marketing strategic management is as follows. First, in the process of marketing, the products and services should be oriented to consumers’ demands, or consumption values. Buts consumers consumption habits would vary, because of social, cultural background differences, the consumer psychology study can be helpful to optimize product design. Second, many brands have pushed products to the market without any consumer psychological study, and the market has been problematic, the consumers would not pay for the product, or service if their psychological satisfaction is not coordinated. Furthermore, the companies’ production, or marketing stretegies would not gain profitability when consumer pscyhological state is not accurately identified.
The purpose of the research is to study Haidilao Hotpot marketing strategic management as an example to reflect consumer psychological influence towards marketing. Haidilao Hotpot’ marketing strategies mainly include three aspects, first, word of mouth promotion reflects consumer conformity, brand image establishment reflects consumer’ social comparison demands, service line extention reflects consumers’ pursuit in convenience, price fixing reflects consumers’ demands in cost-effectiveness. Only through detailed consumer psychological study, can Haidilao Hotpot achieve such market success among the international market.
Chapter 2. Literature Review
2.1 Modern Consumer psychology characteristics
In consumer psychology theory, Consumer psychology is a branch of psychology, it is a discipline of consumer economics that studies consumer psychology and behavior rules in consumer activities. Consumer psychology is a mental activities for seeking, choosing, purchasing, evaluating and disposing the products or service (Wang Haiying, Li Jian, 2004). Wanke (2009) pointed out that cognitive understanding and information reflection on consumers would effect their judgement and decision making when buying products out of different types.
There are some characteristics of consumer psychology phenomenon in modern society. Fan C.Y. & Ge X.Q. (2007) suggested that the modern society encourages fast consumption. The fast food industrial service have been adaptable to current consumption values, and psychological demands because of fast social changes. Because the life pace is rapid, and radical, consumers do not want to be restricted in waiting for a long time, and want to focus on the immediate services. Yang Jingshu, Chao Ganglin (2009) pointed out that, consumers’ psychological consumption habits would be influenced by social principles, political policies, economic inclinations, and so on. When it comes to Chinese consumers, the consideration has mainly been based on convenience and practical demands. However, Fan Chunyang, and Ge Xinqi (2007) pointed out that, young consumers’ psychological demands have been rather different from the traditional consumers, they tend to search for spiritual and fashionable satisfaction, and want to keep different and outstanding through the purchase process. Li yi (2011) also pointed out that, the consumers’ psychological state would have inclination in natural, entertaining, or service enjoyment instead of some internal enforcement towards their purchase behavior.
2.2 Classic Consumer psychology and sentiment
In the process of consumption, there are some typical and classic consumer psychological states, namely conformity, social comparison, preference, convenience, and so on. Consumer behavior is the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer’s emotional, mental and behavioral responses that precede or follow these activities. it examines how emotions, attunes and preferences affect buying behavior. Conformity and comparison are two of the typical consumer behaviors which derived conformity consumption and conspicuous consumption, will be the research emphasis of the whole passage. The analysis of consumer behavior can track consumers’ performance, or reflection, reaction towards the products (Lascu,D.N.,G.Zinkhan, 1999). When it comes to Haidilao Hotpot, it could be seen that, the consumers also follow such trace, and their purchase behavior, purchase frequency, selection making, comparison, service time, or other targets should be calculated to improve consumer relationship.
2.2.1 Conformity
Conformity is the act of matching attitudes, beliefs, and behaviors to group norms. This tendency to conform occurs in small groups and/or society as a whole, and may result from subtle unconscious influences, or direct and overt social pressure. Conformity would form market trend because of the essence in “follow suit” (Lascu,D.N.,G.Zinkhan, 1999). Horsey M. J., Majkut L. and McKimmie B. M. (2003) pointed out that in the international marketing, the conformity would cause market demands creation, and increase sales volume because consumers would make recommendations from time to time. Lascu,D.N., G.Zinkhan (1999) suggested that conformity demands would drive the consumers to make comments of product, communicate with companies, friends, relatives, media, government or other stakeholders.
2.2.2 Social comparison
Social comparison theory has been proposed by American psychologist Leon Festinger (1954), it suggested that there is a drive within individuals to gain accurate self-evaluation. It explains how individuals evaluate their own opinions and abilities by comparing themselves to others in order to reduce uncertainty in these domains, and learn how to define the self. Woodside, KE Miller (2008) also pointed out that, consumers tend to prove priority in consumption, many companies have taken advantage of the consumers’ social comparison state to compete with market rivals, and produce product differentiation.
2.2.3 Preference
In psychology, preferences could be conceived as an individual’s attitude towards a set of objects, typically reflected in an explicit decision-making process (Lichtenstein & Slovic, 2006). Alternatively, one could interpret the term “preference” to mean evaluative judgment in the sense of liking or disliking an object (e.g., Scherer, 2005) which is the most typical definition employed in psychology. However, it does not mean that a preference is necessarily stable over time. Preference can be notably modified by decision-making processes, such as choices (Brehm, 1956; Sharot, De Martino, & Dolan, 2009), even unconsciously (Coppin, Delplanque, Cayeux, Porcherot, & Sander, 2010). Consequently, preference can be affected by a person's surroundings and upbringing in terms of geographical location, cultural background, religious beliefs, and education. These factors are found to affect preference as repeated exposure to a certain idea or concept correlates with a positive preference.Wang H. Y. & Li J. (2004) pointed out that, Consumer are willing to pay extra money or repeat purchase on their preference.
2.3 Marketing strategy implementation
There are some marketing skills, which have been mature, and can be coordinated to consumer psychological state. Fornell, B Wernerfelt (1987) pointed out that, consumer relationship should be managed. Their complaints have contained their problems in product design, or service making. Thus, if the marketing wants to improve consumer scales, and read consumer psychology, the consumer relationship should be maintained. Woodside, Sood, Miller (2008) pointed out, in order to attract consumers, the company should tell stories and cheer consumer groups up, and produce brand culture for consumers to acquire. Zhang Liqiong (2012) pointed out, mass majority psychology would greatly cause emotional resonance in purchase behavior for consumers. Take hunger marketing for example. This marketing strategy specially focuses on the emotions motivation, and strong desire to drive up the consumers’ instant irrational decision making.
Chapter 3. Case study of Haidilao Hotpot
3.1 Haidilao Hotpot Overview
Established in 1994, Haidilao Hotpot has been dedicated to Sichuan stylistic hotpot catering business service in chains. Until recently, Haidilao Hotpot has gained international popularity, and forms stable sales network, from China, to America, Korea, Japan, Singapore, and so on. The retailing restaurants have been amount to 117 restaurants, with complicated supply chain management from wholesale, to management, raw material providence, construction of diet environment, and logistics management. With 3 billion RMB’s yearly revenue, and 15 thousand employees, Haidilao Hotpot has enjoyed favor over other market competitors (Liyi, 2011). As one catering service, Haidilao Hotpot has insisted on “environmentally friendliness”, “raw material abundance” principles. When it comes to marketing, Haidilao has concrete marketing strategies and techniques.
3.2 Consumer psychological satisfaction and marketing strategic management coordination
3.2.1 Service line extension: convenience and freshness
The service line for Haidilao Hotpot is diversified and distinguished, and the consumers’ psychological gaps can be largely satisfied through these invisible services in high frequency.
3.2.1.1 Restaurant brand image and consumer trust
Haidilao Hotpot has built one hotpot brand in current catering market. In order to improve the profitability, Haidilao has applied standardized food management licenses such as HACCP, QS, ISO9001standard (Cheng Lijuan, Wang Jin, 2013). The sanitary protection and food security have been well protected. For example, the employees in Haidilao Hotpot should wash hands, and stay clean. The brand image of Haidilao has always been safe, secure, without food public accidents such as death or negative news exposure. The consumer trust and loyalty can be enhanced. For another example, Haidilao once has cancelled all the bills when the local restaurant has water leakage. The consumers would feel self released, and would trust Haidilao Hotpot (Liu Feng, 2018).
3.2.1.2 Product design and a sense of local Chinese dish
Haidilao Hotpot has been famous for its Sichuan spicy dish, Sichuan, China has been famous for sour, and spicy taste. The hotpot would use fire to braise while consumers directly enjoy the dish. Such kind of cooking method can be different from other districts. For example, the barbecue materials would be put on the hotpot for steaming, or stewing over medium, or high heat. The hotpot types can include double hotpots, fungi hotpots, tomato hotpots and so on. The materials include pepper, or garlic, star anise, peanut sauce, which would make the dishes luxurious. The consumers would feel the stomach is burning. Different from other restaurants, Haidilao Hotpot has heavy tastes, which would attract consumers who have desire in Sichuan food.
Haidilao life style is much more important. The consumers’ psychological satisfaction does not only come from food, or diet, but also come from the social introspection, or interaction when having diet. Especially Chinese local diet culture is mature, because China is a country, which has been abundant in food resources, and has long history of cooking, the diet culture is also comprehensive. Haidilao Hotpot diet would form Haidilao lifet style. The social ties behind diet would let consumers feel they are not isolated, the restaurant’s atmosphere would be typical, and resembles the local Sichuan restaurant, where people can shout loudly, and celebrate without any restrictions, the social class gaps can be narrowed.
3.2.1.3 Flexible consumption experience
In Haidilao Hotpot, apart from food, there are a series of services, which can attract consumers, improve consumption experience. In the first level, employees would provide service on catering, greeting, reminding, consumers would be linked with them because of the constant service in high frequency. The constant greeting can let consumers be reminded of instant encouragement. In addition, the consumers would receive the text messages such as “Haidilao welcomes you! We are powerful!” These greetings can help consumers to realize the importance of brand. In the second level, there are entertainment measurements of the products, for example, there are 64 dishes in 108 dishes including number 3,6,8, which are the lucky number. Then consumers would feel delighted, and curious (Huanglin, 2010). For another example, once new series of dishes are called “shrimp egg noodles” or “seafood porridge”, the consumers would eat these dishes with rhythm, or modern punk melodies. Especially in foreign market, consumers would even be delighted because of the odd, or strange, or a sense of distance when they have diet in Haidilao. In the third level, there are many performances, the employees would perform cooking, drama, or other special performance. Then, the consumers would feel happy. The ridiculous, and miraculous performance would have additional value.
3.2.2 Word-of-mouth marketing : Conformity
Consumers all like to follow suit both consciously or unconsciously. In this process, the conformity would drive up the consumption scale because of the recommendations.
3.2.2.1 Consumer relationship expansion
WOM marketing is a kind of brand marketing. The consumer will sharing with their friends and family with pleasure thus make a formation of WOM. The friends and family members will be affected by the pervious consumer’s comment and therefore decide to visit or not. For example, some elderly, male groups or children love Haidilao Hotpot because of the popularity in the crowded restaurants, then female groups have to follow suit. The female consumers may do not like hotpot, but they would organize family consumption because of family union. Haidilao Hotpot has created family consumption, classmate ceremony consumption, business gathering consumption or so forth.
3.2.2.2 Social Media marketing: Youth and fashion impression
In the marketing process, people are easily influenced by the others’ opinions no matter it is right or wrong, thus, the advertisement could play role in influencing the market demands, and word-of-mouth could represent a kind of general public trust, belief, interest, popular focus. Especially because of the technological development in internet and social media, Haidilao Hotpot has published one advertisement which suggests that “When I had a meal in Haidilao, I wish for (something), and the wish came true.” “I feel Haidilao Hotpot is so luxurious, I love Haidilao Hotpot.” “Human being can not stop me to eat in Haidilao”. The slogans on the advertisement can attract consumers, when they land on Weibo, Wechat, Twitter, Facebook, or other social media accounts, they would look at the brand image, and think Haidilao Hotpot is bright, brilliant, fashionable, positive. They would follow the brand fashion trend to preserve their youth memory, or so forth.
3.2.2.3 Recommendation on Haidilao Life Style
The brand culture of Haidilao Hotpot has switched from food culture, to dream culture, the brand of Haidilao Hotpot no longer becomes the symbol of food, but, some abstracted concepts have been inserted into Haidilao Hotpot, the potential consumers’ psychological gaps in social communication can be filled up and compensated through the advertisement, and recommendation, then they would be willing to go to Haidilao Hotpot, when they have such behaviors, they enjoy food, and have a sense of fulfillment, the behavior and psychological intentions have been linked together, thus, they would show positive attitudes and perspectives.
Sometimes consumers do not know the advantages inside Haidilao, however the recommendations and suggestions from friends and relatives would push them into one consumer group, they tend to follow suit to enjoy the lazy, cozy, slow life pace when having diet in Haidilao Hotpot. Especially the consumers do not want to keep different, if most of the consumers like to eat in Haidilao, the consumers would eat in groups.
3.2.3 Brand establishment: Social comparison
Haidilao Hotpot has become one food brand, it can let consumers form social comparison. It means, when they have diet in Haidilao Hotpot, they would be different, superior, prior to other consumers.
3.2.3.1 Shame Culture
Haidilao Hotpot has strong shame culture. It stems from ancient Chinese society (Wang Haiying, Lijian, 2004). Shame culture refers to culture, which relates to self esteem, hypocrisy, self awareness. The shame culture would form when there are gaps between rich and poor, power and weakness, social introspection favorable resources (Du Jiangang, 2011). In consumption at Haidilao Hotpot, consumers want to be pleased through compare and contrast, the service of Haidilao has put the employees of Haidilao in a humble, modest, subordinated state. When the consumers enter Haidilao Hotpot, they can enjoy amusement, or tease on Haidilao, or have a sense of favor. For example, in Haidilao, there are some special services such as having manicure, and polishing shoes. The role of the employees is server, while the consumers’ role is guest, or master. The consumers would think they have prior position over the waiters, or waitress, and would become shameless, and proud when they have diet in Haidilao. Compared with other restaurant, the value of Haidilao is to let the consumers feel at ease, at home, and stay extremely relaxed, without pressure.
3.2.3.2 Freedom Culture
Instead of being offered with some instructions, consumers’ sense of freedom has been exposed in Haidilao Hotpot, they can eat out of regulation, and play tricks, grab each others’ food leisurely, and play cards during diet. They have been told that, “when you go into Haidilao, you would have service just like god”, “superior”, “powerful”, “prior” (Du Jiangang, 2011). Compared with other restaurants, Haidilao has been free and flexible, there are no bounders such as exquisite politeness in having diet, the consumers can chat when they eat freely. For another example, they would leave their dishes, the employees would collect, and clean. The whole environment in Haidilao can be kept simple, and brilliant, equal. The distance between old and young, between rich and poor can be narrowed, the mutual identity is to eat at the restaurant, the mutual benefits can be having fun at Haidilao Hotpot.
3.2.4 Pricing: cost effective
Price is still one key factor for Haidilao Hotpot to develop. Consumers would consider price as one of their selection premises. Psychologically, consumers want to search for reasonable price scale, which can comply with their economic condition. The price should be affordable, practical, accountable, and favorable.
3.2.4.1 Self assisted catering service
The food can be out of limitation for consumers’ own choices, and they could take the dishes in large amount. For example, the food in Haidilao Hotpot can be in different styles for consumers to choose, from seafood, to meat slice, rolls, vegetables, to scauce, legume, or other materials. The food would be displayed in lines for consumers to pick. When they pay price for the diet, they can eat as huge as they like, the time, or experience is out of regulation. Take one dish for example, if the consumer goes to Haidilao, and pays for 100 RMB, he can eat as huge as he likes, if he goes to other restaurants, he would only eat one or two plates, or one bowl of rice, or one pizza only. This kind of self assisted catering service would make consumers have favorable psychological state, they would think they have gained cheap price when having diet.
3.2.4.2 Half purchase and half free pricing strategy
The consumers would have satisfaction because they would think that paying small price for all these performance is so favorable, and practical, at the same time, they would be more willing to enjoy food at restaurant. Haidilao Hotpot has “half purchase, and half free pricing” strategy. The consumers would think the average price is lower. And when they purchase one type of diet, they have to choose large amount to win the discounts’ favor. Therefore, the sales volume can conversely increase. For another instance, when consumers have diets in Haidilao, they would compare the food material, the sauce, or the vegetables are averagely more than other common restaurants, it means, the the same price would cost let consumers have more food. For a further instance, when consumers want to eat in Haidilao, if the consumer goes to Haidilao by himself, the price would be 100 RMB once, if he brings a friend with him, the total price can be 150 RMB, he must be more likely to go to Haidilao in groups. In essence, the profitability for Haidilao Hotpot can be huge and comparable.
Chapter 4. Conclusion
Haidilao Hotpot has take advantage of consumers’ psychological intention to keep favorable, convenience, and they would like to follow suit, and mimic the other consumers’ behavior, in addition, advertisements would expand these phenomenons as their tools for promotion. The research has provided theoretical basis on consumer psychology, and marketing approaches, techniques study. Classic Consumer psychology and sentiment in conformity, social comparison, preference should be counted.
Then, the case study of Haidilao Hotpot can be analyzed. Service line extension would bring convenience and freshness. Word-of-mouth marketing can bring conformity. Brand establishment can bring social comparison and priorize consumers’ identity. Pricing fixing can make it cost effective in consumption.
There are also some benefits and risks, which the companies should all pay special attention to. Form one hand, those strategies help Haidilao gain lots of consumers, when people put so much expectation on the customized service but they did not be treated as the same way online. Thus, they would disappoint on Haidilao. Also, the WOM is not easy to control, it can easily to lost control if unsolved the scandal immediately. And the pricing tactics can be copied by other competitors. Thus, Haidilao Hotpot’s success in marketing and consumer psychological satisfaction should also be based on the qualified and secure food supply, only then can Haidilao Hotpot achieve the profitability in a sustainable way.
