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.
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