Consumer behavior and spending pattern
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Consumer behavior involves the various stages a consumer goes through when purchasing goods or services. Understanding consumer behavior is essential for marketing success as consumers are increasingly value-conscious. Globally, consumers are worried about job stability but many feel secure in North America and China. While some consumers are loyal to favorite brands if prices are reasonable, others proactively search for savings, selectively splurge in some categories, and shop across channels. Key factors influencing consumer behavior include culture, subculture, social groups, personal characteristics, psychological aspects, and marketing activities. Household spending varies globally with countries spending more on healthcare, housing, food, transportation, or education depending on their needs and priorities.
Consumer behavior and spending pattern
- 1. Consumer Behaviour & Spending Pattern
- 2. Who is a Consumer •A person who has indicated his or her willingness to obtain goods or services from a supplier with the intention of paying them •Someone who has purchased goods or services for personal consumption •A person or group of people such as household who are the final users of product or services
- 3. Consumer Behaviour It is a branch which deals with the various stages a consumer goes through before purchasing products or services for his end use.
- 4. Need to study ? ‘You cannot take the consumer for granted any more’ Therefore a sound understanding of consumer behaviour is essential for the long run success of any marketing program
- 5. Globally ,more than half of consumers are worried about job loss,one- third are optimistic about their finances Consumer Sentiment
- 6. •The majority of consumers in Mainland China and North America aren’t worried about job loss. •About one-third of shoppers around the world are staying loyal to their favorite brands instead of downgrading to cheaper options, and some are even splurging on certain types of purchases. •In North America, 65 percent expressed no concern about losing their job. •Consumers in Mainland China also felt more secure in their employment, with 57 percent saying they’re not worried about job loss. Customer Insights
- 7. Four truths about today’s consumers 1. They proactively search for savings. Forty-four percent agreed that they’re “increasingly looking for ways to save money 2. They are brand-loyal . . . but only if the price is right. Fifty-eight percent of survey respondents said they’ve modified their buying behavior when it comes to their favorite brands. 3. They are selective splurges. Eleven percent of consumers decided to upgrade their purchases in certain categories. In aggregate, the world’s consumers appear to be “rebalancing the portfolio”—spending less in categories where they don’t favor any particular brand, and spending more in others 4. They shop across channels. Consumers claimed to have shifted a considerable fraction of their spending toward online and discount channels.
- 8. Factors Influencing Consumer Behaviour Culture: •Basic values, perceptions, wants and behaviors •Learned from family and important institutions Subculture: •Group of people with shared value systems •Based on common life experiences and situations
- 9. Social factors: •Groups: reference, membership, and aspirational groups •Opinion leader •Family •Roles and Status Factors Influencing Consumer Behaviour
- 10. Personal factors: •Family life cycle •Occupation •Economic situation •Lifestyle: activities, interests, and opinions (AIO’s) •Personality and self-concept: brand personality Factors Influencing Consumer Behaviour
- 11. Psychological factors: •Motivation: needs and motives, Maslow’s Hierarchy of Needs •Perception: selective attention, distortion, and retention •Learning: drives, stimuli, cues, responses, and reinforcement •Beliefs and attitudes Factors Influencing Consumer Behaviour
- 12. Changes in Global Consumer Behaviour •The most recent Accenture Global Consumer Survey found that 64 percent of consumers switched from at least one service provider — a bank, utility or wireless carrier, for example — due to poor customer service •73% – say they have increasingly been using the Internet to research and buy products and services in the past three years •Use of social media is disrupting patterns of loyalty, creating new forms of commercial communities and recreating the purchasing process •over half of consumers globally tell us they increasingly consider the environmental impact of the product or manufacturer before purchasing • to deliver more tailored services and to shift from traditional products to the more experiential offerings to consumers •Customer experience begins before a consumer is actually a customer. All consumer touch points should offer consistent, relevant experiences
- 13. Models of Consumer Behaviour •Learning Model •Economic Model •Psychoanalytic Model •Sociological Model
- 14. Learning Model •The response of satisfaction reinforces the relationship •Learns to associate connection between stimulus and response which becomes habit Drivers of Learning Model:- Drive − A strong internal stimulus which compels action. Stimuli − These are inputs which are capable of arousing drives or motives. Cues − It is a sign or signal which acts as a stimulus to a particular drive. Response − The way or mode in which an individual reacts to the stimuli.
- 15. If the response to a given stimulus is “rewarding”, it reinforces the possibility of similar response when faced with the same stimulus or cues. If an informational cue like advertising, the buyer purchases a product (response); the favorable experience with the product increases the probability that the response would be repeated the next time the need stimulus arises (reinforcement)
- 16. Economic Model Individuals allocate their resources to maximum needs and wants • Law of Principal of Maximum utility • Law of equal marginal utility enables a customer to secure the maximum utility from limited purchasing power 1)Price effect 2)Substitution effect 3)Income Effect Consumers have complete knowledge about the utility of each product and service, i.e., they are capable of completing the accurate satisfaction that each item is likely to produce. Price is used as a measure of sacrifice in obtaining the goods or services. The overall objective of the buyer is to maximize his satisfaction out of the act of purchase
- 17. Psychoanalytic Model •According to this model, the individual consumer has a complex set of deep seated motives which drive him towards certain buying decisions. • The buyer has a private world with all his hidden fears, suppressed desires and totally subjective longings • His buying action can be influenced by appealing to those desires and longings
- 18. •According to sociological model, the individual buyer behaviour is influenced by society—by intimate groups as well as social classes •As his role, status, interaction, influence, group relation, lifestyle , income, •occupation , place of residence, social class etc •That is, his buying decisions are not totally determined by the concept of utility. That is his buying decisions are governed by social compulsions Sociological model For instance A manager and an employee may have different buying behaviors given their respective roles in the company they work for But if they live in the same society or attend the same people , they may buy the products from the same company
- 20. Global Household spending •USA Spends maximum on healthcare about 21% and the least is spend •by Saudi Arabia 1.7% •Japan Spends maximum on housing , fuel and utilities about 21% and the least is spend by Russia 10.3% •South Korea Spends maximum on education about 6.7% and the least is spend by Russia 1.1% •Russia Spends maximum on food about 30.7% and the least is spend by USA 6.8% •Mexico Spends maximum on transport about 19% and the least is spend by Saudi Arabia 9.1%
- 21. Spending Pattern
- 22. Demand Function of an Individual The individual demand function has a functional relationship between individual demand and the factors affecting individual demand. It is expressed as − Dx = f (Px, Pr, Y, T, F) Where, Dx = Commodity Demand x; Px = Commodity x”s price; Pr = Related Goods’ Price; F = Expectation of Change in Price in future. Y = Consumer’s Income; T = Tastes and Preferences.
- 23. https://www.emergogroup.com/resources/worldwide-health-expenditures •USA population spends heavily on healthcare followed by Switzerland •USA, also tops in private healthcare and spends a total of USD 9000 annually on the healthcare Global Health Expenditure
- 24. Global Food & Beverages Asia spends around $1500 billion on food, followed by Sub-Saharan Africa $286 By 2030, global food demand is expected to rise by 35% Top countries spending on food – •Switzerland — $8,024 per person •Norway — $7,624 per person •Australia — $7277 per person •Japan — $6,556 per person
- 25. Global and regional per capita food consumption (kcal per capita per day • The increase in the world average consumption would have been higher but for the declines in the transition economies that occurred in the 1990s. •It is generally agreed, however, that those declines are likely to revert in the near future •current energy intakes range from 2681 kcal per capita per day in developing countries, to 2906 kcal per capita per day in transition countries and 3380 kcal per capita per day in industrialized countries
- 26. Global Education Expenditure •Asia spends maximum on education, especially South Korea 7% of their household income, while Europe and Central Asia spends least(Russia approx, 1%) •Luxembourg , Norway, Switzerland are the highest spending countries on education with $19,049.81, $13, 510.48, $13,066.64 per student
- 27. Demand Function of Market The market demand function has a functional relationship between market demand and the factors affecting market demand. The market demand function can be expressed as − Dx = f(Px, Pr, Y, T, F, PD, S, D) Where, Dx = Market demand of commodity x; Px = Price of given commodity x; Pr = Related Goods’ Price; Y = Consumer’s Income; T = Tastes and Preferences; F = Expectation of Change in Price in future; PD = Size and Composition and Size of population; S = Season and Weather; D = Income Distribution.
- 28. Overall Model of Consumer Behaviour Self-Concept & Learning Decision ProcessesExternal Influences Internal Influences Culture Subculture Demographics Social status Reference groups Family Marketing Activities Perception Learning Memory Motives Personality Emotions Attitudes Problem Recognition Information Search Alt Eval & Selection Outlet select & Purchase Postpurchase Processes
- 29. Expenses Total Purchases (%) Doctors and Dentists 3.0% Groceries 8.6% Hospitals and Nursing Homes 1.7% Rent or Mortgage 31.5% Utilities 5.3% USA Spending Pattern The percentages cited below are based on an average American household income of $63,000.
- 30. China's $2.2 trillion budget Chinese Government Spending China spends about 2.3 trillion yuan on education sector followed by social security and employment
- 31. Chinese Spending Pattern •Chinese mostly on FMCG goods and consumer electronics •Most Chinese tend to do more saving than spending
- 32. Chinese HNWIs are worlds apart from American HNWIs when it comes to luxury spending There is a gaping 41% difference between Chinese HNWIs (86%), and American HNWIs (45%), in terms of future aspiration to buying luxury items
- 33. China’s working-age population •By 2030, this group will expand by 20 percent—an additional 100 million people—and per capita consumption is expected to more than double •2016 McKinsey Global Sentiment Survey of more than 22,000 consumers finds that nearly 30 percent of these Chinese consumers are willing to pay more for new and innovative household products—double the share of their counterparts in North America and Western Europe •These individuals are more optimistic about their financial future and more willing to spend a greater share of their disposable income than previous generations.
- 36. •More than 30% of Indians say they cannot afford vacation/travel. •Around half of all Indians spend 500 to 2,500 on clothes each month. •75% of Indians with a household income of 15 lakhs or more spend 1,500 or more per month on clothes •46% of full-time workers spend over 1,500 per month on clothes, for part-time workers this is 18%. •21% of Indian women spend more than 3,000 per year on new footwear compared to 16% of Indian men •1 in 3 Indians in Central India say they can't afford eating out, as opposed to 1 in 10 in West India. •16% of Indian women state they spend 3,000 or more on a date, while only 14% of men spend the same. Spending Behaviour Survey In India 2016
- 37. Japan Spending Consumer Spending in Japan decreased to 297004.80 JPY Billion in the fourth quarter of 2016 from 297023.80 JPY Billion in the third quarter of 2016.
- 38. Monthly Expenditure Household of Japan Japan is an aging population and is under huge debt of (US$10.46 trillion) in 2013, more than twice the annual gross domestic product
- 39. •About two thirds of internet users in the EU shopped online in 2016 •The most popular type of goods and services purchased online in the EU was clothes and sport goods (61 % of e- buyers), •followed by travel and holiday accommodation (52 %). •68 % of e-buyers reported to have no problem when purchasing online •32 % of online shoppers bought or ordered goods or services from sellers in other EU countries EuroStat of Individuals
- 40. • E-shoppers aged 16-24 were the top age group when it came to clothes and sports goods purchases (69 %), •Those aged 25-54 in buying household goods (49 %) and the older age group (55-74) in online purchases of travel and holiday accommodation (57 %). EuroStat of Individuals
- 41. Clothes and sports goods predominate in online purchases •The 16-24 age-group had the highest proportions of e-shoppers purchasing clothes and sport goods (69 %), video games software, other software and upgrades (28 %) and e-learning material (8 %). •People aged 25-54 had the highest proportion of internet users buying household goods (49 %), tickets for events (40 %), electronic equipment (26 %), food or groceries (25 %), telecommunication services (20 %) and computer hardware (18 %). •The older (55-74) age group took the lead in buying travel and holiday accommodation (57 %), books, magazines EuroStat of Individuals
- 42. •This group will grow by more than one-third in number, from 164 million in 2015 to 222 million in 2030. It will generate 51 percent of urban consumption growth in developed countries and 19 percent of global urban consumption growth •These consumers spend more per head than younger people, largely because of heavy spending on healthcare. •People over 50 bought nearly two-thirds of the new cars sold in the United States in 2011 The retiring and elderly in developed economies
- 43. North America’s working-age population •MGI research finds that many younger consumers are under income pressure, are poorer than the previous generation, and are more cost conscious. •Compared with older cohorts, young adults are 10 to 20 percentage points more likely to consider and use sharing-economy services for everything from accommodation to car rental to furnishings.
- 45. •By 2020, in addition to the BRIC economies, Mexico, Indonesia, Turkey and Poland will rank in the world’s top 20 biggest consumer markets; •As the spending potential of consumers increases, there will be growing demand for higher-end fast moving consumer goods products leading to a gradual shift in spending patterns from basic necessities to discretionary items •luxuries, household durables and communications but demographic challenges will persist for consumer goods companies; Spending Pattern across Emerging Companies
- 46. Spending Pattern Analysis •Different countries have different spending pattern •Critical for companies to provide the right amount of services, so there •comes the need of Analytics, which give insightful to companies Customer analytics is becoming critical. To understand why, consider this: •Customers are more empowered and connected than ever. And becoming more so. •Customers have access to information anywhere, any time – where to shop, what to buy, how much to pay, etc
- 47. Analytics •That makes it increasingly important to predict how customers will behave when interacting with your organization, so you can respond accordingly. •The deeper your understanding of customers' buying habits and lifestyle preferences, the more accurate your predictions of future buying behaviors will be •Successful will be at delivering relevant offers that attract rather than alienate customers
- 48. Applications in Industry Verticals
- 49. With customer analytics, you can: •Increase response rates, customer loyalty and, ultimately, ROI by contacting the right customers with highly relevant offers and messages. •Reduce campaign costs by targeting those customers most likely to respond. •Decrease attrition by accurately predicting customers most likely to leave and developing the right proactive campaigns to retain them. •Deliver the right message by segmenting customers more effectively and better understanding target populations.
- 50. Thanks!!