Consumer behaviour can be loosely defined as how people and groups spend their money and the choices they make in doing so. Advertisers, economists, politicians and others all study consumer behaviour to understand the past and predict the future. Underlying factors of the public's attitudes, priorities and tendencies must be recognised to understand how consumers form their purchasing habits.
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Advertising affects how consumers make their decisions by shifting market shares in competitive industries and suggesting the excitement or necessity of certain purchases. Marketing campaigns can adjust the public's preference for one brand over another or encourage frivolous or indulgent spending. It's used, too, to remind consumers of the importance of a less exciting product such as life insurance or vitamins. Successful marketing efforts stir people to make purchases and create a public attitude in favour of a certain buying habit.
A general feeling about the well-being of the economy at large influences consumers' spending habits, especially on housing, vehicles, large appliances and other significant purchases. One key element of this matter is the Consumer Confidence Index, released monthly by the non-profit Conference Board. The index describes market confidence based on survey results across the United States. Key questions cover the job market, stock market and feelings about business conditions. When consumers feel more confident about the economy, they feel more willing to spend regardless of personal finances.
On the individual level, consumer behaviour is influenced by nuances of morals, values and priorities, according to Lars Perner, Ph.D., of the University of South California's Marshall School of Business. For many industries like fashion, restaurant dining and personal care products, the individual's opinion about what's fun, stylish and desirable can be the overwhelming factor. While advertisements can appeal to these aspects, people intrinsically bring certain preferences to the market. For instance, some people will always pay more for speciality products like organic produce or cruelty-free hygiene products.
Population Group Attitude
Regional and national population groups also exhibit influences on consumer behaviour, Perner writes. The market feels shifts gradually over time from the public's changing attitudes, such as a movement from embracing fast food to preferring home cooking or a change in preference from minivans to sport utility vehicles. These group attitudes can often be tied to scientific revelations, technological breakthroughs or momentous events in culture or history.
Major events in one part of the economy can influence consumer purchases in many other areas. When an inelastic good like gasoline or energy decreases in cost, consumers feel more willing to buy extra goods and services. As in the Great Recession that began in the late 2000s, a crippling problem in the housing market spelt trouble for the stock market and led to lower consumer confidence and decreased spending. In these cases, market behaviour can be seen as cyclically affecting itself by limiting or expanding the possibilities for disposable income.
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