Chapter 3: Consumer Behavior
Economic Factors in Consumer Behavior
Economic factors are crucial in determining consumer behavior. These factors include personal income, savings, and credit availability. They influence what people can afford and are willing to buy. Understanding these factors helps marketers tailor their strategies to meet the financial realities of their target consumers.
Personal Income
Personal income is the amount of money individuals earn from their jobs, investments, and other sources. It directly impacts their purchasing power. People with higher incomes tend to have more disposable income, which they can spend on non-essential items, while those with lower incomes focus more on necessities.
Example: BMW’s Luxury Branding
BMW, a luxury car manufacturer, targets high-income consumers who can afford premium-priced vehicles. Their marketing emphasizes performance, advanced technology, and exclusivity, appealing to consumers who have the financial means to purchase luxury cars. By focusing on high-income individuals, BMW ensures that its marketing strategies align with the purchasing power of its target market.
Savings
Savings represent the amount of money that consumers set aside for future use. People with substantial savings might feel more comfortable making significant purchases or investments, while those with little to no savings may be more cautious with their spending.
Example: IKEA’s Affordable Home Solutions
IKEA, known for its affordable and stylish furniture, appeals to consumers who want to save money. By offering a wide range of budget-friendly products, IKEA attracts customers who prefer to save rather than spend excessively. Their marketing often highlights affordability and value, reassuring consumers that they can achieve stylish home décor without breaking the bank.
​
Credit Availability
Credit availability refers to the ease with which consumers can obtain loans or credit. When credit is easily accessible, people are more likely to make large purchases, such as homes, cars, and expensive electronics. Conversely, when credit is tight, consumers might cut back on spending.
Example: Best Buy’s Financing Options
Best Buy, a leading electronics retailer, offers various financing options to make high-ticket items more accessible. By providing payment plans and credit card offers, Best Buy enables consumers to purchase expensive electronics without needing to pay the full amount upfront. This strategy appeals to customers who might otherwise be unable to afford these products immediately.
Economic Downturns
During economic downturns, consumer behavior shifts significantly. People become more price-conscious and prioritize essential items over luxury goods. Businesses that adapt their strategies to meet the needs of cost-conscious consumers can maintain their market position even in tough economic times.
Example: Walmart's Positioning During Economic Downturns
Walmart, a leading retail chain, often positions itself as the go-to store for affordable products, especially during economic downturns. By offering low prices and various discounts, Walmart attracts cost-conscious consumers who are looking to stretch their dollars further. Their marketing emphasizes value for money, ensuring that shoppers see Walmart as a reliable source for essential goods at lower prices.
The Impact of Economic Conditions
Overall economic conditions, such as inflation, unemployment rates, and economic growth, also influence consumer behavior. For instance, high inflation can erode purchasing power, leading consumers to cut back on spending. Conversely, a strong economy with low unemployment and rising wages can boost consumer confidence and spending.
Example: General Motors During Economic Recession
During economic recessions, car manufacturers like General Motors (GM) often offer incentives like zero-percent financing and cash-back deals to stimulate sales. These promotions make it easier for consumers to afford new vehicles despite the economic challenges. By understanding the broader economic environment, GM adjusts its strategies to maintain sales and market share.
