The Recession and the Consumer Behaviour Theory

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
Impact of the Recession on Consumer Behaviour
Impact of the Recession on Marketers
Conclusion
Reference List

Introduction

In every business, consumer behaviour plays a pivotal role in shaping the business operations. It is important for every organisation to understand consumer behaviour in order to be able to make appropriate decisions.

A clear understanding of consumer behaviour is of great significance especially in marketing activities in an organisation (Anonymous 2011). It is also important to note that all the products end up on the hands of consumers.

It is the consumer who will determine the amount of goods and services produced. It is therefore necessary to understand human behaviour.

Impact of the Recession on Consumer Behaviour

There are several factors that affect consumer behaviour. One of these is recession. Recession is an economic problem which is characterized by low level of production and hence financial difficulties. Recession has an adverse effect on consumers and will therefore have a significant impact on their behaviour.

In most cases, a recession affects the consumer consumption habits. It is also feared that recession may have some permanent impacts on consumers which may significantly affect their spending. Recession can affect consumers both emotionally and psychologically (Shama 1993).

According to the report by Decitica, recession can have different impacts on different people. For instance, this report indicated that in America, women were more affected by the recession than men (Slideshare 2009). Generally, more women felt worried, scared, and depressed.

As a result of these effects, women will tend to change their consumption behaviours significantly. After recession, this information indicated that more women appreciate frugality, and will most probably be affected by recession (Slideshare 2009).

In other words, their spending will significantly be affected since the effects of recession will force them to act accordingly.

Through recession, some of the people are likely to lose their jobs. Therefore, such people will have to reduce their spending on luxury as well as on basic things. However, the luxury part of spending is likely to be more affected than the level of spending on basic goods.

Again, by seeing people in danger and become worried that they may themselves be in the same danger; they may be tempted to spend their money in a more careful way (Memesponge 2009). Therefore, recession will not only cause a reduction in spending on the affected individuals, but also those who may fear that they may also become victims.

Recession also affects consumers’ sensitivity to prices (Slideshare 2009). The more the consumers are sensitive to prices, the more they react to any change in price. Recession acts by increasing consumer sensitivity to changes in prices. Since recession is characterized by high financial difficulties, it is more likely going to reduce consumer spending (Slideshare, 2009).

In most cases, consumer behaviour is displayed in terms of savings or consumption. The prevailing economic conditions can significantly affect consumers’ behaviour in this perspective. For instance, people may decide to save more and consume less if they expect recession in the future as a way of preparing to face such problems.

Therefore, in case consumers expect recession in the future, then they are more likely going to reduce their current consumption. Again, if consumers are very optimistic about the future, then they will be more reluctant to save (Reynolds not dated).

This is because it will not be important to save if they expect things to flow smoothly in the future. In other words, people will tend to save less if they feel that they will always have money. Such behaviour will increase the level of consumption (Harrison 2009).

In other words, when the economic situation is favourable, people will tend to be too optimistic about the future such that they don’t care much about saving for the future.

In this case, marketers can easily maximize their sales because the level of spending is relatively higher. As Harrison (2009) puts it, if times are good, the optimism bias will tell us that times will always continue to be good.

Impact of the Recession on Marketers

As already noted, recession is an economic situation which is characterized by low demand for raw materials, products and services. Therefore, recession requires the marketers to make necessary modifications on their marketing strategies as well as their actions in order to retain their profitability as well as remaining consumer responsive (Avraham 1993).

There are several ways through which marketers can react to the recession in order to retain their profitability. Marketers can either choose to change their target markets and adapting the marketing mix (Avraham 1993).

Again, the reaction to a recession will largely be determined by how the marketers perceive the recession affects their business activities. It is important to note that recession may have varying impacts on different companies depending on their differences on their environment.

Since the demand for their services drops in a recession, marketers usually tend to apply strategies to stimulate consumer demand (Perriman 2011). In most cases, marketers tend to lower their prices in order to stimulate consumption (Avraham 1993).

Although consumers are discouraged from spending by a recession, marketers can stimulate spending by lowering prices. As already noted, even those people who are not adversely affected by the recession will tend to spend their money more sparingly for fear that they are also susceptible to similar problem.

By cutting down prices, a company may encourage such people to buy their products. According to research conducted by McKinsey Company, most of the consumers tended to buy lowly priced brands rather than expensive brands (Bohlen, Carlotti, and Mihas 2009).

Similarly, marketers tend to react to recession by offering cheaper products. By so doing, marketers are able to increase their sales since their products will be affordable to many people despite of their financial difficulties.

According to Shaw (2011), marketers also tend to retain their customers by maintaining consumer loyalty. By enhancing consumer loyalty, marketers manage to win and retain their customers.

Conclusion

In conclusion, this discussion has clearly shown that the recession has had a significant impact on the consumer behaviour as well as those of marketers. Under recession, the level of production is usually very low. As a result, the level of employment is relatively lower.

Therefore, the households’ disposable income will be significantly affected. As a result, people will tend to cut down on their expenditure on both luxuries and basic goods. In other words, the recession will tend to reduce the overall level of spending.

On the other hand, marketers will tend to apply measures in an attempt to increase their sales. Since the demand for their products will tend to be lower in a recession. They will change their strategies accordingly.

Reference List

Anonymous. 2011. Consumer Behaviour. Web.

Bohlen, B., Carlotti, S. and Mihas, L. 2009. How The Recession Has Changed US Consumer Behaviour. Web.

Harrison, P. 2009. The Recession and Consumer Behaviour. Web.

Memesponge. 2009. Top 10 Emerging Consumer Behaviour Trends in Recession. Web.

Perriman, H. 2011. The Impact of the Global Financial Crisis on Consumer Behaviour. Web.

Reynolds. Consumer Behaviour. Web.

Shama, A. 1993. Marketing Strategies during Recession: A Comparison of Small and Large Firms. Journal of Small Business Management. Vol. 31, P62-p72.

Shaw, C. 2011. The Global Recession = Global Impact on Consumer Behaviour. Web.

Slideshare. 2009. Emotional and Psychological Impact Of The Recession On Consumer Behaviour Gender Differences. Web.

Click Here To Order Now!