Price Influence on Energy Drink Consumption Behavior

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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.

Gender of Customer
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Male	8	53.3	53.3	53.3
	Female	7	46.7	46.7	100.0
	Total	15	100.0	100.0

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.

Age Group
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	18-24 Years	5	33.3	33.3	33.3
	25-34 Years	2	13.3	13.3	46.7
	35-44 Years	4	26.7	26.7	73.3
	45-54 Years	3	20.0	20.0	93.3
	55-64 Years	1	6.7	6.7	100.0
	Total	15	100.0	100.0

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.

Working Industry
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Communication Industry	4	26.7	26.7	26.7
	Education Industry	1	6.7	6.7	33.3
	Manufacturing Industry	1	6.7	6.7	40.0
	Banking Industry	2	13.3	13.3	53.3
	Transport Industry	1	6.7	6.7	60.0
	Security	1	6.7	6.7	66.7
	Other	5	33.3	33.3	100.0
	Total	15	100.0	100.0

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.

Work Experience
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Less than 2 Years	1	6.7	6.7	6.7
	2-5 Years	5	33.3	33.3	40.0
	6-10 Years	3	20.0	20.0	60.0
	Over 10 Years	6	40.0	40.0	100.0
	Total	15	100.0	100.0

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.

Education Level
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	High School Level	1	6.7	6.7	6.7
	College Level	1	6.7	6.7	13.3
	Graduate Level	11	73.3	73.3	86.7
	Masters Level	2	13.3	13.3	100.0
	Total	15	100.0	100.0

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.

Marital Status
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Unmarried	4	26.7	26.7	26.7
	Married	11	73.3	73.3	100.0
	Total	15	100.0	100.0

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.

Income Level
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	6,000-15,000 AED	1	6.7	6.7	6.7
	16,000-30,000 AED	7	46.7	46.7	53.3
	31,000-45,000 AED	4	26.7	26.7	80.0
	46,000-60,000 AED	2	13.3	13.3	93.3
	Over 60,000 AED	1	6.7	6.7	100.0
	Total	15	100.0	100.0

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.

Consumption Rate
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Less Than Once a Month	3	20.0	20.0	20.0
	About Once a Month	2	13.3	13.3	33.3
	A Few Times a Month	4	26.7	26.7	60.0
	About Once a Week	1	6.7	6.7	66.7
	A Few Times a Week	3	20.0	20.0	86.7
	Everyday	2	13.3	13.3	100.0
	Total	15	100.0	100.0

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.

Percent of Income Consumed
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Less than 5%	10	66.7	66.7	66.7
	5-10%	5	33.3	33.3	100.0
	Total	15	100.0	100.0

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.

Threshold Price Increase to Change Behavior
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	10%	4	26.7	26.7	26.7
	20%	7	46.7	46.7	73.3
	30%	3	20.0	20.0	93.3
	50%	1	6.7	6.7	100.0
	Total	15	100.0	100.0

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.

Change of Consumption Behavior
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Move to Cheaper Product	6	40.0	40.0	40.0
	Quit Buying the Product	9	60.0	60.0	100.0
	Total	15	100.0	100.0

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.

Short Run (6 Months to 1 Year) Behavior Change
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Move to Cheaper Product	9	60.0	60.0	60.0
	Quit Buying the Product	6	40.0	40.0	100.0
	Total	15	100.0	100.0

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.

Long Run (More than 1 Year) Behavior Change
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Move to Cheaper Product	8	53.3	53.3	53.3
	Quit Buying the Product	7	46.7	46.7	100.0
	Total	15	100.0	100.0

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 10% VAT Increase
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Reduce	7	46.7	46.7	46.7
	Increase	1	6.7	6.7	53.3
	Remain the Same	3	20.0	20.0	73.3
	Shift to Cheaper Product	4	26.7	26.7	100.0
	Total	15	100.0	100.0

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.

Consumption Behavior Change
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Reduce	1	6.7	6.7	6.7
	Increase	7	46.7	46.7	53.3
	Remain the Same	7	46.7	46.7	100.0
	Total	15	100.0	100.0

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.

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