Introduction
The jewelry manufacturing and sales industry has been posting exponential growth rates in the past years. A lot of companies that operate in this industry have likewise exhibited significant upward growth rates. One of those companies is Pandora. Pandora is a Danish multinational corporation whose core business involves the manufacture and retail of jewelries. The company was founded in 1982 by Per Enevoldsen.
The company was, at that time, engaged in small scale jewelry importation. It imported pre-manufactured jewelries from Thailand and sold it to its customers for a profit. Enevoldsen, upon seeing that there is a great potential for growth in the jewelry trading business, decided to scale its operations and move up in the jewelry trading business’ supply chain. That is, it decided to no longer import its merchandises and start to design and manufacture its own instead. Enevoldsen’s vision for the company was for it to create a brand that would be recognized as the top choice when it comes to high quality but affordable jewelries.
In order to do this, he chose to focus on keeping down the costs of production low, so that the savings could be transferred to the customers in the form of low and therefore competitive prices. Because it was already designing and manufacturing its own jewelries, Pandora was able to achieve this milestone. Initially, it only offered simply hand-finished jewelries. It slowly gained popularity in the market as a supplier of low cost but high quality jewelries.
Pandora’s management team capitalized on this opportunity; it expanded into selling a wide variety of jewelries such as rings, earrings, necklaces, and even watches, just to name a few. By the opening of the twenty-first century, the company was already selling its own signature line of jewelries, a testament of its still growing popularity in the jewelry manufacture and sales industry. Fast forward to today (2016), the company managed to outperform the market (in terms of earnings expectations). It posted a twenty percent jump in revenue (for the second quarter of 2016) to 4.32 Million Danish Krone. It managed to grow its revenues by 28% in Europe, Middle East, and Africa (EMEA), 43% in the Asia and the Pacific, and 5% in North and South America.
The objective of this paper is to analyze the factors that made it possible for a company like Pandora to improve its earnings figures by the aforementioned rates. The focus of the discussions that will follow will be on the presumed changes in the company’s target market’s consumer behavior, mainly on motivation, attitude, and culture, among others. In this paper, the author touched on all the regional markets where Pandora operates in, although a higher level of attention was given to the Asia and the Pacific and the EMEA regions because these are where the biggest changes happened.
Consumer Behavior
In order to fully understand the phenomenon that Pandora experienced when its revenues shot up by a fifth of its previous year’s second quarter figures, one has to understand first what consumer behavior is and how significant it is for a company like Pandora. In almost any case where the subject is a corporation or a for-profit entity, the goal is to make money. The main objective of an organization or entity whose aim is to make money is to sell the biggest possible volume of its products (or services), for the highest possible price.
This principle can only become truer if the subject of the discussion is a publicly listed company like Pandora. As a publicly listed company (particularly in NASDAQ Copenhagen, under the ticker PNDORA) , it has the obligation to satisfy its stakeholders, most especially its investors. The only way to satisfy its stakeholders is to exhibit a continuously improving performance, financially, operationally, or both. It would be safe to assume that this was the exact goal of company when it implemented the policies and exerted the efforts that were necessary for it to increase its revenues by some twenty percent; and that investors of the company were more than happy that the company managed to achieve such as feat.
Pandora’s financial and operational success is dependent on consumer behavior. Consumer behavior refers to a concept that collectively describes how individuals, particularly customers of a certain business, view, select, buy, use, and discard products and or services. One of the fundamental principles about consumer behavior is the one that suggests that individuals buy products and subscribe to services in an effort to satisfy their wants and needs. It is also worth noting that the study of consumer behavior is not an exact science because it is essentially an independent field of study that blends principles and concepts from sociology, psychology, anthropology, economics, and marketing .
The consumer behavior dictates whether the customers are going to want or need to buy the company’s products. Consumer behavior can either be favorable or unfavorable. Either way, it is the job of the company that is selling its products to check whether the existing consumers’ behavior towards its products are favorable or otherwise, before making and executing investment decisions. It is also worth noting that consumer behavior tends to changes from time to time .
This may be due to a multitude of reasons including but may not be limited to economic cycles, changes in demographics, product life cycles . Based on these data from literatures about consumer behavior and considering the recent outcomes of Pandora’s operations, it would be safe to suggest that the company managed to time its entry and expansion in the market at a time when consumers were starting to feel more positive about buying hand-crafted jewelries, which explains the double digit surge in the company’s sales.
The Market for Jewelry Buyers, Pandora’s Customers
Pandora’s target market is composed of jewelry buyers, scattered across the different markets that it caters to (Asia and the Pacific, Americas, EMEA, and etc.). These are the individuals whom this paper is going to screen and evaluate based on their motivation, attitude, and culture, focusing on how these three variables may have changed, enough for it to warrant a surge in volume of sales and therefore earnings for jewelry retailers like Pandora.
According to an industry report that was published in McKinsey in 2014, the forecasted growth rate of the global jewelry industry for the next six years towards 2020 would only be between five and six percent . The global jewelry industry generated annual sales worth approximately $158 Billion; it was forecasted that the industry would grow to become one that generates annual sales worth $267 Billion, which is a significant increase compared to its 2014 figure .
If the figures presented in this particular report from McKinsey are to serve as a basis, then it would be safe to suggest that Pandora managed to summarily outperform the broader jewelry industry (which was only poised to grow between 5% to 6% for the next six years) because it grew by a stunning 20% on a quarterly, year on year basis. The specific growth rate forecast figures for the global jewelry industry vary from one report to another; one commonality, however, was that most reports suggest that the trend for industries like fashion (which includes the jewelry industry) is headed upwards. This bodes well for Pandora and other companies that operate within the same industry.
Motivation
The consumers’ motivation to buy a product or service plays an important role in determining whether companies operating in the industry in question are going to be profitable or otherwise. Motivation serves as the inner drive that pushes a person to buy or subscribe to something. Within the context of consumer behavior and consumer science, an individual’s level of motivation to buy a product or service reflects his desire for such .
There are numerous factors that can serve as an individual’s source of motivation to buy a product or service; in terms of their nature, they can be rational, emotional, societal, or biological. Motivation or an individual’s inner drive can be classified as a need that can and should be satisfied. In most cases, an individual gets motivated to buy something after being convinced that he needs to transition from an existing actual state to a desired state—which is where the motivation process starts.
The thought of transitioning to a desired state serves as the catalyst that creates tension or a sense of discomfort. That discomfort then serves as the stimulus that makes an individual want to reach a certain desired end-state (i.e. the goal) . This is an example of the drive theory of motivation, which is one of the most commonly used theories in explaining consumer behavior and how motivation affects it.
Focusing on the case of Pandora, its customers may be rationally, emotionally, and societally motivated, but not biologically motivated because humans have no inherent biological need to consume or buy jewelries. An individual may be rationally motivated to buy Pandora’s jewelries because he thinks of jewelries as an investment that he believes would appreciate in value over time. This theory may have some merits considering that the value of jewelries are tied up with the value of the material that was used to create them such as gold, silver, or any other precious metal .
An individual may also be emotionally motivated to buy Pandora’s jewelries. This theory makes sense because jewelries are generally considered as a luxury product. Broadly, the jewelry industry is a part of the fashion industry, which means that some of the principles that answer the question why people buy designer clothes and other fashion products may be used to explain why people buy jewelries, particularly those that are made by Pandora.
Among them, those that can be considered related to emotional motivation would be: ornamentation, to boost one’s self-worth, as a form of celebration , to commemorate life cycle events (e.g. weddings), as an impulse (e.g. when a person sees an eye-catching jewelry then decides to buy it), as a means to spend their discretionary income, or just because a person sees jewelries as an emotionally appealing commodity . A person may also be socially motivated to buy Pandora’s jewelries because jewelries have long been considered as a product that differentiates its wearer from other people because of its economic and social value; this, according to a study published by the Central European University about the factors that motivate people to buy jewelries .
There has been an increase in number of people who can afford to buy luxury and impulse goods such as jewelries in the Asia and the Pacific and the Europe, Middle East, and African regions—the top two regions where the company experienced the biggest growth.
Fashion trends have shifted and wearing jewelries have become popular again.
Or it could be that the company just initiated a widespread expansion campaign that enabled it to distribute its products to its customers on a much larger scale compared to capacity to do so in the previous years.
Attitude
Attitude refers to a person’s learned predisposition to respond to an objective in a consistently favorable or unfavorable way . One important piece of information to highlight here is that attitude is something that does not get developed overnight; it is cumulative and is the result of a person’s continuous experience of something—which can either be a product, service, a brand, a company, or any class of objects.
What makes the process of studying the attitudes of the consumers is that their responses and their buying decisions are dependent on the positivity or negativity of their attitudes. Ideally, a business’ target consumers would have a positive attitude towards its brands, products, and services, as that would equate to better chances that they would be converted into actual customers. Naturally, companies whose consumers have a negative attitude towards a business’ brands, products, and services would find it more difficult, if not impossible to sell their outputs.
Motivation, as discussed in the previous section, mostly deals with what the consumers need. Attitude, however, mostly deals with what the consumers want and expect. Consumers would normally have a positive attitude towards a business if it successfully meets its wants and expectations.
A consumer’s attitude towards a product or service depends on three factors namely affect, behavior, and cognition. Affect emphasizes the consumer’s taste, preferences, which are often subjective (i.e. whether he likes the product or service). Behavior emphasizes the consumer’s intention. And lastly, cognition emphasizes the consumer’s knowledge about the product or service. In this case, it would be safe to suggest that Pandora managed to implement the right policies and execute the right strategies to trigger the development of a positive attitude towards its brands and products among its customers. Pandora’s commitment to quality is one of the reasons why it has managed to create a positive attitude towards its brand and products among its customers.
The development of positive consumer attitude also depends on how well the marketing strategies of a business have been implemented. In Pandora’s case, its management and marketing team did a good job in communicating the company’s commitment to quality and the value of its products. For example, in the company’s marketing campaigns, it often emphasizes that its jewelries are genuine, hand-crafted, and made of the finest materials. The company then follows it up with the manufacture and sales of products that really reflect its promises in its marketing campaigns. This way, Pandora effectively establishes its image as a trustworthy retailer of high quality and genuine jewelries, a reputation which it has successfully safeguarded in the past years, as evidenced by its stellar earnings performance.
If this is indeed the case, which it probably is, then Pandora’s method of forming attitude would be based on the self-perception theory where individuals observe their own behavior and make inferences about their attitude—although there can be cases where it is the opposite of that. Initially, the consumers buy from Pandora because they believe that it is a quality and trusted brand. After a few purchases, they get to observe their behavior and as a result, they develop a stronger and more positive attitude towards the product and the brand. Of course, this would not be possible if Pandora’s products are not really genuine and high quality as that would make the customers aware that everything was just a marketing gimmick, which would then lead to the destruction of an otherwise positive perception and attitude towards the company and its product and brand.
Culture
Culture refers to the accumulation of shared meanings, rituals, norms, traditions, opinions, and beliefs that exist within an organization, population, or society. Cultures are everywhere and they continuously evolve. There are six characteristics of culture and they are: hierarchical, shared, adaptive, makes living efficient, regulates society, and learned. Focusing on explaining how Pandora managed to turn in a twenty percent jump in quarterly revenues and how culture contributed to it, there is a possibility that a cultural shift or evolution happened in areas where the act of buying and or wearing jewelries may not have been so prevalent. For this explanation to be justified, one has to subscribe to two facts: that culture continuously evolves and that the world is currently on a state of globalization.
Europeans and Americans (westerners) are more predominantly inclined to make a jewelry purchase as a result of their culture compared to Asians and Africans. This is because most westerners have long been a part of a culture that puts a significant economic and social value to owners and wearers of jewelries and consumers of other luxury goods. This particular aspect of western culture used to be absent in the Asia and the Pacific, and the African regions. For one, they have not been exposed to the cultural practice of judging one’s economic and social value based on his possessions, and secondly, majority of people living in these regions do not have the financial means (yet) to adopt that particular western culture (i.e. buying a jewelry).
Then globalization came. People in the Asia and the Pacific, and African regions became exposed to the western culture , including the act of buying jewelries for economic, social, and emotional satisfaction. Globalization also made it possible for low income countries in the said regions to improve their standard of living. For example, a lot of jobs got outsourced to countries in the Asia and the Pacific and African countries. Over time, this led to a stable and continuous increase in their citizens’ income. The combination of the exposure to the western culture of buying jewelries and the rise in the level of disposable income made in low income countries in the aforementioned regions served as the catalyst that made it possible for multinational jewelry retailers to improve their sales volumes and earnings. The fact that the largest percentage of growth in sales were observed in the Asia and the Pacific (43% growth), and in Europe (presumably low income countries in Europe), Middle East, and Africa (28%) supports this theory about how culture contributed to Pandora’s recent success.
Analysis Summary
The company's purpose can be emphasized by their statement that "all women have their individual stories to tell, a personal collection of special moments that makes them who they are. That is why we celebrate these moments. That is why we say these moments are unforgettable" (Pandora, 2017). Based on this company purpose statement, it would be safe to suggest that Pandora appeals to the emotional and social need of the customers to buy their products. It also shows that they are mainly targeting women buy jewelries as a way of defining and commemorating certain moments and having their own personal moments and stories to tell. This is more correlated to motivation (specifically emotional and social motivation) than attitude and culture. This is because the company, based on its purpose statement, uses the typical drive of women to want to separate themselves from others and to commemorate certain moments of their life, to make them want to achieve a desired state; this is in turn what motivates them to the purchase of a luxury good such as a jewelry. It would also be safe to suggest that the company has highlighted the jewelry-buying culture that is prevalent among women, and used that as a tool to help people justify the act of paying a hefty price for a Pandora-made jewelry. In terms of making the customers develop a positive attitude towards the company and its brand and products, all that Pandora had to do was to ensure that its products correspond to what they said in their purpose statement and the self-perception theory will be enough to convince the customers that what they got from the company (i.e. buying the product) was a good deal.
Conclusions and Recommendations
In conclusion, it would be safe to rule that the recent spike in Pandora’s quarterly sales were a product of changes in consumer behavior, particularly in motivation, attitude, and culture. In terms of motivation, the company may have been able to convince a larger number of people that buying jewelries is socially, economically, or emotionally beneficial to them. Pandora also did a good job in cultivating a positive attitude towards its brands and products (i.e. jewelries) among its target consumers. It also successfully communicated and executed its promises in terms of quality, affordability, value, and genuineness, leading to the development of the belief (among the customers) that buying jewelry from Pandora was a good idea. And lastly, in terms of culture, the exposure of the people in the countries in the Asia and the Pacific and the EMEA regions to the predominantly western culture of buying jewelries and the rise in their level of disposable income served as the perfect catalyst for international jewelry companies like Pandora to increase its sales.
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