CONSUMER BEHAVIOR

FACTORS AFFECTING CONSUMER BUYING BEHAVIOUR

Submitted By
Jaya






CONSUMER BEHAVIOUR
According to Kotler and Keller, study of different ways of buying and disposing of goods, services,
ideas or experiences by the individuals, groups and organizations in order to satisfy their needs and
wants is termed as consumer buying behavior.
Personal
Psychological
Cultural
Social
Economical
One another factor that I feel is very important in altering the behavior of consumer is the
Situational factors. Situational factors (basically extrinsic in nature) like political instability, fiscal
consolidation and disasters have huge impact on the buying behaviors of consumers. Though there
are many other factors also but these three factors are big time initiators to affect consumer
behavior extrinsically. Disaster here are the both the natural disasters i.e. natural calamity as well as
man-made disasters like terrorist attacks etc.

Consumer demand varies with the situational factors. We will take each factor turn by turn and
discuss the overall impact of these factors on the behavior of consumer elaborated by examples.
Developed nations are known for their high rate of consumerism. Per capita income is very high so
people spend lavishly on basic as well luxury goods and services. They are ready to pay a little bit
higher for the better quality products and services. They have a kind of aggressive consumerism
prevailing in their economy. Nothing less than delightful is accepted by the consumers their and this
nature has been inculcated in them over the time. Fierce competition and large number of
substitutes and products made available by the firms are responsible for this nature. Awareness
Surge in
imports
level of consumers in the developed nation is very high and they keep a count on the quality of
product or service they purchase. To strengthen my above view point I would like to quote an
example here. In November 2003, US had a drastic power cut of about 15 minutes and it was a
blackout for the whole country for about 15 hours. For full 15 hours every major operation and
activity and business in the country stood still. Share market dropped down drastically. People went
on roads protesting against this unexpected power cut. Government efficiency was put to stake. This
shows that the consumers there are assertive and know how to get access to their rights. But if we
look at post 9/11 scenario, when world witnessed one of the most horrifying terrorist attacks on
World Trade Centre and Pentagon when US stood numb. Even the basic facilities like water,
electricity and telephone was not available for many days yet people didnt come up with strikes and
hefty complaints. It was more like mourning. All of a sudden consumers all over US became less
sensitive to quality of product and services.
We can say 9/11 had a psychological effect on the minds of consumer for a certain period of time.
U.S. economy lost 0.5% of real GDP growth in 2001 as a result of 9/11 tragedy. Consumer sector is
the most vulnerable sector in developed economies and in US 9/11 attacks it was the consumer
sector that was affected greatly. Below written lines have been taken from a report on disaster
management. The lines shows the nature of the lady when she herself denied to the process of
undergoing bureaucratic procedures to access relief fund. This was her psychological state at the
time when whole of the nation was dealing with 9/11 trauma.
NM was a temporary employee located in a World Trade Center office. She never arrived at work on
September 11th; she was trampled by the escaping crowd, which knocked her unconscious, broke
her collarbone, and badly bruised her legs and back.

At first, NM managed, on her own, to obtain Disaster Unemployment benefits, a months rent and
$50 for food from the Red Cross, as well as coverage for her prescriptions from the Crime Victims
Fund. She contacted CIDNY a week after the attack, asking for help in applying for Disaster Relief
Medicaid; at this point, she felt overwhelmed by the physical and emotional effects of her ordeal
and unready to navigate the bureaucratic process of seeking additional assistance. She had not
yet thought about long-term needs for health coverage, transportation, and finding new
employment.
(Source: CIDNY consumer case file)

The complaint forums which were earlier filled with consumer complaints experienced a decline as
people were deeply hurt by the surprise attack. People were filled with grief and pain. They were in
a highly transitional state of emotion and didnt had much relevance for quality of even the basic
needs like electricity, telephone etc.
Nevertheless US economy being highly resilient in nature retraced itself back on the normal growth
path in successive years. Yet for certain duration of time when whole of America stood bleeding yet
united the consumer behavior in the economy was deeply affected.
Next example we can talk about is the 26/11 Mumbai attacks when Indias most premiere hotel TAJ
was attacked by terrorists. Exceptional services were given by the employees to its customer when
they were still hostages in the hotel. This attack has been a topic of HBR case study. Exemplary
behavior of the employees, what we call as the internal customers, was witnessed. On 28 November
2008 Taj was captivated by terrorists and they started open firing inside the hotel. Employees
working in the hotel could have run away as they were aware of all the exit doors but they didnt
run. In an industry employees are called internal customers/consumers of the organization. The
guests (consumers of Taj hotel services) were rescued after 3 days of captivation and while the hotel
building was devastated partially due to blast, the guest were made to move to some other hotels
and the future bookings of the Taj hotel were either cancelled or accommodated at some other
hotel. At that time the guests had showed cooperation and accepted the solutions without firing any
case or complaints against the hotel. While India was flooded with patriotism and unity, world also
extended its condolences for the sake. At that time consumers accepted the products and services
as per the situation. The consumer threshold for product and services increased surprisingly at that
time and they accepted products and services having quality less than what they expected to be the
minimum.
With the time the adjusting nature of consumer dramatically changed toward skepticism which
showed their concern for personal security and risk aversion. The consumer which showed such
adjusting behavior at the time of disaster remarkably changed his stand over the time and become
more concerned about security and psychological satisfaction. Consumers around the word were
talking about the security breach that happened in the US as well as Taj hotel which led to many
deaths and injuries by the terrorist attacks.
Next issue is the fiscal consolidation during recession. In such times consumers show preserving
behavior and the investment in decreases. Consumers instead of spending as per their normal
spending and purchasing behavior start keeping or depositing the money though that recession may
not have led to any decrease in their disposable income but yet a psychological effect is maintained
in the mind of consumer and they save the money for future. The above mentioned situation is not
applicable for whole of the population because there is a wide segment of population whose net
income is affected by recession and upcoming unemployment. This change in the buying behavior of
consumer is a result inflation and recession in the economy. Due to this the trade relation of the
economy varies. To combat the situation the government comes up with monetary and fiscal
policies to adjust the price hike and low income rate prevailing in the economy. Consumers change
their spending behavior and try to optimize it. They reduce their want spending and try to
optimize further their must spending in order to save for future and uncertain times. Such
behaviors have been seen in the past at the time of fiscal consolidations when inflation occurs and
government increases taxes to rid of national debts. Among consumers, recession causes higher
degree of buyer remorse.
Political instability has a wide impact on the market as well as consumer behavior. According to one
of the Global Market Sentiment Surveys conducted by CFA institute in 2014, more than 53% of the
respondents see political instability as biggest threat to the economy. Due to political instability, be
it on a state level, national level or global level, the economy gets affected and so does the buying
behavior of the consumers. In a place where there is political instability, people tend to perceive a
sense of insecurity and uncertainty. According one research study by Tendai Chikweche, John
Stanton and Richard Fletcher, socio-economic status, unemployment, low income level, inflation,
product dearth, legal currency shortage and poor infrastructure widely impact consumer behavior.
Let's see the effects of politics on our stock markets. For this we take an example of post
liberalization phase in our country and talk on general elections of 1991, 1996, 1998 and 1999.

In 1991 and 1999, the stocks markets rallied. Liberalization in 1990's whereas advancement and
inclination toward technology in 1999 were the main reasons for this in stock market. But if we take
a keen observation, we will see that in 1991 and 1999 general election were held and the
government ruling the country for next five years was known. 1991 and 1999 had no political
uncertainty. Performance of stock market in 1996 and 1998 was not so good as in these years there
was political uncertainty. Despite strong economic growth in past years of the Congress was voted
out of power in 1996 though the party had strong economic growth in 1995 to 96. For next two
years i.e. 1997-98, political and economic scenario in India was uncertain.Till 1996 GDP was 7.3% but
in 1998 GDP fell to 4.3%.

As compared to performance of the economy, political uncertainty has a bigger impact on the stock
markets. In order to grow and prosper, an economy needs to improve measures and implement
policies that may bring fruit over the long term.
The survey found that eight out of ten members surveyed in India feel that political instability is a
major concern, while nearly everyone feels that rising crude oil prices will have a negative impact on
India and six out of ten people feel lack of ethical culture within financial firms as the main factor
causing the current lack of trust in the finance industry.
(Source: The Times of India, Dec 17, 2013, 09.59PM IST)

CONCLUSION
Consumer behavior is subjected to external factors which are not under his control and
these factors greatly alter their buying behavior.
At a particular time they may react in a different way for a situation but when time passes
by, their behavior as compared to their previous response changes dramatically in some
cases.
At time of situations related to disaster and losses the threshold of consumer for expected
quality of service or product lowers down. This is an emotional impact on their minds and
behavior.
For the brands or commodities the consumers perceives as very important and must have,
they end up buying those brands or commodities irrespective of what the economic
situation is but if the situation is inclined toward disaster then consumers give up those
choices.
It is not only the situation and the intensity of the situation, but also the time factor that
alters consumer behavior.
The political instability produces some sort of uncertainty in the environment which the
markets as well as consumer snuffs to be unsecure and vague and thus tends to save
maximum for his future.
It is the uncertainty and insecurity that makes the consumer skeptical.








REFRENCES
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