Wikipedia describes consumer behaviour as the study of individuals, groups, or organisations and all activities associated with purchasing, using, disposing of goods and services. Simply, it includes the complete decision-making process, from initial product or service consideration to purchase and post-buy assessment. Understanding consumer behaviour is critical for organisations to create effective marketing strategies and produce products and services that match the demands and desires of their target customers.
What is the significance of customer behaviour to an organisation? The consumer behaviour analysis is essentially vital because it helps marketers understand what factors impact customers’ purchasing decisions. A company simply cannot successfully sell a product or service if they are not aware of their prospects’ thinking patterns that influences the buying decision making. Understanding how consumers choose a product allows them to fill a market gap and determine which items are required and which are outmoded.
Consumer behaviour is also manipulated by several external factors, including social, cultural, and economic conditions. Social influences can include family, friends, and peer groups, while cultural influences include values, beliefs, and norms that are unique to a particular society. Economic factors, such as general economic conditions and income levels can also play a role in consumer behaviour by affecting the types of products and services that a consumer can afford.
Cut back on spending
During a recession, consumers are more likely to cut back on spending and prioritise essential purchases, such as food and housing, over non-essential items such as luxury goods and leisure activities. This results in a decline in consumer demand for goods and services, which can negatively impact the economy.
A consumer behaviour analysis, particularly at this point in Sri Lanka, is exceedingly important because it can identify the ongoing change in the mindset of almost every consumer in Sri Lanka. At this moment, everyone looks for alternatives due to the extremely heavy price hikes in goods and services. Hence, the top players in the market are already rapidly adapting to the new behaviour of customers by introducing price friendly approaches.
In Sri Lanka and in the world, marketing campaigns have had an enormous impact on purchasing decisions. With the correct approach and the right message, marketers have persuaded consumers to buy, change loyalties, or opt for alternatives. These campaigns historically influenced impulse buying. Such fancy campaigns do not seem to be working anymore as people are enormously deprived of their disposable income.
The economy has altered many aspects of the consumer’s livelihood due the prevailing financial pressure. It also influences customer behaviour in terms of product consumptions and purchases. Consumers have reported various changes in behaviour connected to their buying activity, particularly with the existing gruesome conditions where the average citizen is experiencing significant hardships. During the ongoing recession, consumers adjust their shopping habits and reduce or limit their purchases owing to dire financial concerns.
They concentrate on specific goods that they believe are necessary for survival. Due to the current economic climate, customers are continually reducing their costs till they feel financially secure again in the future. Changes in the economy cause customers to transform their lifestyles to a more constrained one by altering their spending and purchasing habits.
Another trend that may occur during a recession is a shift in consumer behaviour towards more practical and value-oriented products. Consumers may focus on finding the best deals and the most bang for their buck, rather than simply purchasing the most expensive or luxurious products.
The purchasing power of consumers has a big impact on buying behaviour. Marketers must understand that no matter how good the product or how pressing the need, consumers will avoid purchasing goods if they are short on cash. Hence, the companies must do research on buying pattern changes and make product and price changes accordingly.
The prevailing inflation reduces a currency’s purchasing power and what that currency can buy. The decrease of purchasing power has the effect of an increase in prices. When the disposable income diminishes, households have less money to spend or save, which then forces consumers to consume less and spend money sparingly, only on essentials.
Purchasing patterns and habits
Purchasing patterns are not always the same as purchasing habits. Habits are developed as tendencies towards an action, and they become spontaneous over time, while buying patterns show a predictable mental design depending on the circumstances. Usually, buying patterns are collective based on market and economic conditions while buying habits are unique and subjective.
Customers may change their place of purchase, items they purchase, time and frequency of purchase, and method of purchase due to changes in purchasing capacity or ability. Marketers must be alert to such behaviour to survive a recession.
Historically, recessions are only transitory and every country in the world has confronted recession time and again but pull themselves out ultimately. However, a company’s failure to prepare in advance can have long-term consequences for its performance. As discussed, during a recession, consumers are more selective than ever. Furthermore, inflation raises the cost of raw resources, making it difficult to compete.
Therefore, companies must carefully assess their marketing tactics in order to avoid jeopardising their capacity to weather the recession. Also, it may be too late if a company is merely reactive to the situation. Spontaneous actions may not be adequate but the preparation to new market developments has to be addressed as early as possible. The preparation is not only to plan for the impending situation in advance but also to stay ahead of competition which equally be alert to the situation.
There is no better moment than now to begin gathering and organising first-party data or information collected directly from customers and perhaps the competition. By using this information, companies can personalise each customer experience and prepare their communication around specific interests, types of behaviour, preferences and locations that suits the recession conditions.
Upselling a current client costs a fraction of what it does to acquire a new one. And concentrating on the current reduced demands of clients leads to increased sales. Therefore, tap into current audiences to boost client lifetime value.
In a recession, consumers are exposed to marketing communication campaigns of all competitors who are also desperate for new business. This makes consumers’ decision-making complex. However, aggressive, and sales-focused campaigns may look insensitive when the people of the country struggle for survival. Hence, prospecting for consumers must be more empathetic than in a normal situation and the message must always carry a humane angle.
Beliefs are psychological in the sense that they are so deeply ingrained that they inhibit consumers from logically assessing alternatives. Therefore, they tend to continue existing habits and routines. Companies that try to influence customer behaviour by disregarding or disputing their beliefs face an uphill struggle. Hence, companies that are preparing to a downturn must concentrate on aligning all efforts and resources strictly considering the behaviour of their existing customers.
Finally, a recession can impact consumer behaviour by affecting their level of confidence and trust in the economy and businesses. Consumers may be less likely to make big purchases or invest if they have concerns about the stability of the economy.
Consumer behaviour during a recession is characterised by decreased spending, a focus on essentials, a shift towards value-oriented products, and an increase in savings. These changes can have a significant impact on the economy, as decreased consumer spending can lead to a slowdown in overall economic growth.