Consumer Perception of Pet Food Industry and Brands in Korea

Introduction

Background

Recently, the pet industry in Korea has grown greatly. According to the nonghyup economic research laboratory (2019), the market size, which stood at 1.8 tillion won in 2012, has grown rapidly to 2.89 trillion won in 2018 and is expected to grow to 5.8 trillion won in 2020 (The domestic pet market is worth 3 trillion won. Get the peddlers, get the petfam! 2019). As the pet market grew, there were even new words ‘Petfam’ (pet+family) and ‘Petconomy’(pet+economy) which is reflecting the growth of the companion animal market. With the continued growth of ‘petfam’ which reach 10 million and ‘petconomy’, interest in the pet food industry, a part of the pet industry, has risen (The age of 10 million pets 'Evolving petcony' 2019). However, according to the Korea Customs Service's Export-Import Trade Statistics (2019), imports of dog and cat food amounted to $148 million in 2015, increasing 13.8 to 22.5 percent from a year earlier between 2016 and 2018. The trade deficit also expanded 18.5 percent annually until 2018 from $135 million in 2015 (280 billion won in imports and 17 billion won in exports...Pet Products Foreigner's Owner's 2019). In other words, most of the pet food in the pet market in Korea is imported brands. According to KB Economic & Finance Institute, the combined sales of 26 local pet food companies account for only 20 percent of the pet food market, while 50 to 60 percent of the pet food market is income (280 billion won in imports and 17 billion won in exports...Pet Products Foreigner's Owner's 2019).

Through this Korea’s current situation, I want to examine why Korea should import more than half of Korea’s pet food market and why they don't use domestic brands, and the reason of this problem is a consumer perception problem for Korean domestic brands, or whether it's a Korean domestic brand’s marketing strategy problem. Therefore, this study will investigate the current status of Korea pet food industry, and identify problems in Korean domestic pet food, present marketing strategies for growth of Korean domestic brands that fall behind foreign brands, and study consumers' perception about Korean domestic pet food brand and consumers’ consumption status in order to develop their marketing strategies.

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Problem definition

Recently in Korea, the spread of negative perceptions of marriage and low birth rates have caused an increase in the number of one to two-person households, along with an increase in demand for pets. In 2015, among the households that owned pets in Korea, about 27 percent were thirties single-person households, and 30 percent were first-generation households consisting of two-person households (agencyAnimal 2015). And the proportion of first-generation households consisting of only one-person and two-person households in Korea increased from about 27.9 percent in 2000 to 46.1 percent in 2019 and is estimated to reach about 50 percent in 2025 (Special Estimation of Future household 2019).

Therefore, the demand for pet-owned households and pets in Korea is expected to continue to grow in the future. With the rise of pet-owned households and the rise of living standards and overall income, the number of people who do not spare money on pets has increased, and the pet industry has also grown significantly.

Statement of Problem

Although the pet food business is growing in Korea, most consumers still use foreign pet food brand products, not domestic brands. Currently, since domestic and foreign brands of pet food have different marketing strategies, this is creating different consumer perceptions for each brand in the pet food market in Korea, which is showing different result.

Thesis objectives

• To study the comparison marketing strategy which used by Korean domestic brand, and foreign brand
• To investigate the consumer perception with comparing between Korean domestic brand and foreign brand

Research questions

• What is the perception of Korean consumer about Korean pet food brand?
• What is the perception of Korean consumer about foreign pet food brand?
• What is the marketing strategy of the domestic pet food brand in Korea?
• What is the marketing strategy of the foreign pet food brand in Korea?
• What is the marketing strategy for domestic brand to get a better perception than foreign brand?

Review of Literature

1. Definition of Consumer perception

As times change, a number of brands and products are pouring out In line with the change. And when consumer first encounter such products and brands, the consumer has their own meaning and thoughts about them. In marketing, this is called consumer information processing. At this stage, all the senses of the consumer are involved in receiving brand marketing messages (Gianluigi GuidoPh.D. 2001).

1.1.1. Process of Consumer perception

And during the processing of consumer information, there are four distinct perception steps: Sensation, Attention, Interpretation and Retention.

Firstly, ‘Retention’ describes what happens when a people’s senses are first exposed to external stimuli, such as product or brand marketing. Consumers’ sensory receptors are involved with products or brands through five-sensory senses. For example, Starbucks, which people usually use, builds all the senses and relationships in sensuous brand marketing. Customers who enter Starbucks can hear their own music and enjoy Starbuck’s own coffee flavor and taste.

The following ‘Attention’ occurs when people stays at the external stimuli of the product or brand and gives them mental processing power during the processing of information. Selective perception is for consumers to pay attention to messages which do not match consumer attitudes, beliefs, and needs. And when a product or brand does not match these factors, the consumer will push out the attention.

‘Interpretation’ occurs when people accord meaning to sensory stimulation from product or brand marketing. ‘Interpretation’ help with expectations and familiarity with products or brands. Consumers recall consumers’ memories, bringing back their previous experience of the brand or similar brands.

Lastly, ‘Retention’ is the final step in the consumer perception process. This is indicated by storing the product or brand information in short- and long-term memory. The goal of marketers is to give positive stimulus to the process of consumers storing information about products or brands in long-term memory (CrossVanessa 2019).

1.1.2. Enhance Consumer perception

Customer perception is fluid. First, as the relationship between the customer and the company develops, consumer perception of the company and its products or services will change. As the customer experience increases, their perception will shift from factual judgments to more general meanings. Over time, consumers focus more on the results of product or service consumption. Moreover, when a customer's situation changes, the customer's needs and preferences often. In an external environment, if a competitors of customer's existing product or brand create a better perception, the customer's perception can be changed. There is also the fact that public opinion can be changed by certain issues (RecklesDagmar 2015).

• Add social media to the marketing mix- Social media can further accelerate two-way communication with consumers and enable them to share information in real time quickly.
• Communicate with customers both online and offline- Social media deals with more audience, but personal engagement allows business owners to create private relationships.
• Employees are the company's top brand ambassadors- Every phone call they receive, every email they write or receive, and their product and service sales are all important. Because employees are the public 'face' of the company. Therefore, regular training and motivation should ensure that the customer's recognition process is always and consistent with the services it provides to the customer no matter what stage it remains (CrossVanessa 2019).
• Increasing market share on customer perception- Increased market share can create positive perceptions by acting as an indicator of superior quality perceived by more and more other customers. This effect is especially powerful for products in the premium price range. Customers generally think that if they can achieve such unexpected market success despite their high prices, their reason is that the product is of superior quality. And the value of a product or service can rise as the number of users using it increases (RecklesDagmar 2015).

Definition of Marketing

With increased disposable income, consumers have begun to choose products or brands that they like. To cope with this trend, manufacturers have begun to produce a concept called ‘marketing’. In other words, marketing is about looking at the market from the perspective of consumers rather than from the perspective of producers. This new concept of ‘marketing’ has had an important impact on economy. Because of this reason, companies have shifted from production-oriented to marketing-oriented. This greatly increased the proportion of sales promotion, which was followed by the growth of advertising. But even if things have changed like this, we will still have to take the ads as the right view. That is, advertising is important, but it is just one of the elements of the marketing mix (Don E. SchultzStanley 1981).

Jerome E. McCarthy defined marketing as '4P' management; product, place, price and promotion. In other words, to make a successful marketing plan, consumers must be able to buy the right ‘product’ at the right ‘place’ and right ‘price’, but appropriate ‘promotion’ should be combined to ensure consumers are aware of the product and the benefits from it. Advertising is part of the corporate promotion planning sector, but it is not the only factor (McCarthyE. 2011).

1.1.3. Definition of Marketing strategy

[bookmark: _Hlk26883394]Many pet food sale-stands in large-scale supermarkets have many brands on display, each with its own marketing strategy. In fact, pet food is basically all made to feed it. However, each brand has many products and carries a different message. The reason is that the products were developed to satisfy different consumer needs. For example, some dogs may need a lot of protein for growth, while some of others may need products with high levels of care for their fur. As such, the pet food market is very fragmented in the minds of consumers. And each brand is struggling to gain their place in the market. To occupy the market, one must be able to promise something different compared to other products, or to address the problem of different consumers' differences and communicate it clearly (Don E. SchultzStanley 1981). This is the marketing strategy.

In other words, a marketing strategy is a form of marketing message that conveys the benefits or problem-solving characteristics that a product or service can give to a consumer. The key word here is 'profit or problem-solving characteristics'. If a commitment in a marketing strategy fails to satisfy a consumer's needs, does not solve a consumer's problems, or does not provide the desired benefits, the strategy fails. In addition, the promises contained in the strategy should be important to consumers and not to producers or advertisers (Don E. SchultzStanley 1981).

Consumer perception and Marketing strategy

Jim Adams, the author of ‘Sparks off my Anvil’, said about the profits of producers and the interests of consumers: “People who design marketing do not start thinking about themselves or their products at first, but first about consumers who want them to buy the product. Since sales are done by consumers, you first start with your potential consumers’ minds in order to establish an appropriate marketing strategy. In order to change the way that consumers perceive your product to be superior to any other competitor, consumers need to figure out what they need to believe in your product. If you don’t, you will get nothing out of it, even through you may succeed in getting your marketing to believe. In fact, pure products alone do not attract even a small amount of interest from any consumer. Because a product only attracts consumers’ attention when it is changed to the term consumer satisfaction, and the consumer’s perception of it changes.” (AdamsJim 1958). And there are four conditions for establishing a good marketing strategy which can change consumer perception:

• Strategies must have measures to address consumer’s interests or consumer’s problems.
• The benefits or solutions must be what the consumer wants.
• The brand shall be directly linked to its profits problem-solving solutions
• The benefits or problem solving measures shall be communicated through marketing.

Positioning strategy

Previously, ‘positioning’ was the method which manufactures applied to their products to generate the benefits that would be provide to a particular group of people. But now it has a different meaning. As Trout and Ries said, “Positioning now refers to placing the product in the consumer’s mind through advertising.” The overall concept of positioning theory is that advertising is intended to give the product a place in the consumer’s mind or to establish a foothold (RiesJack 1969). Once that position is constructed, consumers will consider buy the product when consumer needs to get the benefits which product gives or the problems which consumer faces.

Positioning serves to ensure which the product meets all the needs of a particular class of consumers rather than advertising a product with special benefits. As an example, Michelob beer has strengthen image as the best U.S. premium beer ever by creating a “First class” position (Michelob 1961). While other strategies are the same, it is always important to keep in mind which ‘positioning’ should also provide benefits and problem solving to create a good perception for consumers.

Research Methodology

The paper seeks to investigate why Korea should import more than half of Korea’s pet food market, why Koreans do not use domestic brands, and the reason of this problem is a negative consumer perception, or whether it is a wrong marketing strategy. These needs for research will lead to primary and secondary data. To get the primary data, I will conduct a survey of Koreans residing in Korea and to get the secondary data, I will use literature research methods, including papers, Internet materials and government statistics which are related to pet industry, consumer perception, etc., to develop marketing strategies for the growth of the Korean pet food brand in Korea. Since the main data in this paper will be conducted on a large number of people for a broader and more objective study, it will be carried out as a quantitative study.

Anticipated Results

The survey will be performed on people living in South Korea. The survey is thought to be relatively easy to get feedback from people in Korea, but there is a question of whether the process can go smoothly, as the target to be interviewed is a South Korean conglomerate. And other articles will also be utilized to make the study clearer overall.

Planning (Tentative Schedule to Finish the Thesis)

S/N Tasks Deadlines

1 Literature Review Jan 13- Feb20, 2020

2 Survey and Data collection Feb 10- March 10, 2020

3 Thesis Feb 20- March 10, 2020

4 Reviewing Thesis March 15, 2020

5 Submission March 31, 2020

Budget

There would be no budget to get all information and data for this paper.

References

1. “280 billion won in imports and 17 billion won in exports...Pet Products Foreigner's Owner's.” 2019. http://news.chosun.com/site/data/html_dir/2019/09/11/2019091102262.html.
2. “280 billion won in imports and 17 billion won in exports...Pet Products Foreigner's Owner's.” 2019. 수입 2800억·수출 170억원…반려동물 제품 외국産 독주.
3. AdamsJim. “Sparks Off My Anvil.” 1958.
4. agencyand plant quarantineAnimal. “A Report on the Results of the 2015 National Survey on Animal Protection.” Animal and plant quarantine agency, 2015.
5. CrossVanessa. “The stages of Perception in Marketing.” 2019.
6. Don E. SchultzTannenbaumStanley. “Essentials of Advertizing strategy.” 1981. 53.
7. Gianluigi GuidoPh.D. “The salience of marketing stimuli an incongruity-salience Hypothesis on Consumer Awareness.” 2001.
8. McCarthyJeromeE. “4P's of Marketing.” 2011.
9. Michelob. “In beer, going first class is MICHELOB.” 1961.
10. RecklesDagmar. “Understanding and Managing customer perception.” 2015.
11. RiesTrout & AlJack. “Positioning.” 1969.
12. “Special Estimation of Future household.” “StatisticsKorea.” 2019. file:///C:/Users/zld00/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/Àå·¡°¡±¸Ãß°è%20º¸µµÀÚ·á(2017~2047)%20(1).pdf.
13. “The age of 10 million pets 'Evolving petcony'.” 2019. http://biz.khan.co.kr/khan_art_view.html?artid=201911132102005&code=920100.
14. “The domestic pet market is worth 3 trillion won. Get the peddlers, get the petfam!” 2019. http://www.viva100.com/main/view.php?key=20191120010006117.