The Recessions Effect On Consumer Behaviour Commerce Essay

The Recessions Effect On Consumer Behaviour Commerce EssayA recess is a negative declivityline in scotch activity over a period of time. This is usu exclusivelyy defined as a decline in Gross domestic product for two or more than consecutive quarters. GDP is a measure of the countrys over either economic performance over a period of time. It is made up of consumption, investment, large medication spending, and exports minus present moments. Consumer deportment is the study that looks at all the reasons why populate bribe products and where and when they corrupt them.The realisation crunch commencement started with the ground forces owe mart and the collapse of the global housing bubble. Individuals were taking turn up mortgages that they could neer afford to pay back. It all went wrong when the ho commit prices in the USA started to travel by. This in turn caused the value of securities connected to house prices to fall. The monetary institutions all over the wor ld were damaged. This put uncertainty regarding banks ability to pay its debts. The banks s elevator c ard and there was a rapid decline in credit availability. The investors presumption overly declined and this had an impact on global stock markets. It was argued that investors did not accu rankly put a price on the risk involved with mortgage-related financial products. This causing the whole finance market to fail. The receding has caused banks to tighten credit availability. This has caused massive problems to secure credit for big just the ticket items such(prenominal) as cars and holidays. 1The fadeout has had a major military group on many hatfuls consumer doings. on that point ar many industries that encounter been hit by the ecological niche. One principal(prenominal) sector hit by the receding is the car industry and a knock on egress to companies that supply the car industry. Due to citizenry finding it hard to secure finance they argon un equal to(p) to purchase new cars. So the sales of new cars have dramatically declined. An usage of this is the Japanese car manu itemurer Toyota. It has always been at the top of its mettlesome for many years. It has been producing exceptionally reliable cars and always at the cutting abut of technology. objet dart in the recession the chief of Toyota Mr Katsuaki Watanabe resurrectd the final annual cast which fateed a loss of $4.4 billion. This was the companies first loss since 1950. This shows just how bad the car industry has been hit by the recession with many early(a) firms in the industry achieving even bigger losses. 2Another bea that has been hit is the portion out associated with the housing market. Due to problems with getting a mortgage flock are unable to purchase new houses. So the development of new properties has fallen. some(prenominal) house edifice companies such as Redrow and Barretts real stopped building new houses on their sites when they realised they could n ot sell them. So all the labour associated were now unemployed.The Steel industry has also been hit hard. This is due(p) to the car industry and house industry not indispensabilitying the amount of tick off name they used to demand.With the recession affecting the whole sparing the government has weary to use monetary policy to fix our situation. The government has tried to deepen the supply of money by rejecting the interest rate. notwithstanding in doing this it has touch on other sectors of the population. It depart have a massive effect on passel who rely on good returns from money they have invested. An example of this is the older population using their savings to give them an income to survive on. At the moment the interest rate is at 0.5% compared to 4.5% in 2006. So the return they will receive on their investment has declined. The consequence of this is that their disposable income will fall causing them to purchase less. The government has also trim back Val ue added tax from 17.5% to 15%. This is a monetary policy that aims to amplify the purchasing of consumers in the economy. The recession has also caused the exchange rate to fall against the pound. This means that the price of imports join on and price of exports decrease. This in turn has caused the import of raw materials for manufacturing to increase for many businesses. Due to the fact that the UK does not produce a lot of goods we rely heavily on imports. These now be more than what they did before. This means that the consumer is getting less value for their money.The recession has had change effects on different demographics inside the economy. How people are touch depends on age, gender, occupation and location. The amplyest unemployed age appears to be the 18-24 category. This may be due to their lack of experience. A company would prefer to employ people who are skilled in doing their job. The older workers (45-64) will find it harder to agree a new job if they are made unemployed. The current unemployment rate is at 7.8%. During a recession unemployment is a serious factor that affects consumers behaviour. so far if the individual consumer is not facing unemployment themselves they will still be affected psychologically. This is because other people around them such as family and friends may be affected. It will give them a thought that it may actually pass by to them soon. It will affect their consumer confidence. With people having less consumer confidence they are more possible to notwithstanding money rather than spend. So this delivers the recession worsened because it will reduce GDP more if consumers are not spending.Consumer behaviour is related to consumer pauperization. Motivation is a basic concept in tender behaviour. There is retrieved to be tension that arises as a result of unfulfilled needs that we have. The needs that are unfilled will move a consumer away from homeostasis balance. The Homeostasis See-Saw shows that a consumer needs a balance between deal satisfaction and Deprivation. The balance between these two is believed to be the homeostasis state. There are four stabs that take us away from this equilibrium. Biogenic drives are such things as hunger and thirst that we automatically think we need. Psychogenic drives which drive us to achieve a certain status. These will depend on social and cultural environment that a person is used to. cognitive motives are those that stimulate people to adapt to the environment and achieve a sense of meaning in society. Affective motives are associated with the need of obtaining delirious goals and the ability to achieve a satisfying feeling state. In a recession all these motives would be affected. great deals purchasing pattern and ability to purchase certain products would follow a different pattern. In a recession when times are hard it could be potentially difficult to strike the homeostasis balance.3An impact the recession can have on consumer behaviour is the lip rouge Effect. When times are hard within an economy a consumer will stop spending money on big ticket items such as Expensive holidays or a new car. In value to achieve the feeling shop brings consumers simply trade down to cheaper items to shamble them feel happy and core. The recent sales figures from cosmetic companies such as LOral and Revlon show that the lipstick effect is in operation within our economy at the moment. LOral showed sales growth of 5.3% in the first part of the year when the recession started. It shows that when consumers budgets are tightened that people just renewal larger luxury goods such as a new fur coat for small luxuries such as expensive makeup. 4Some consumers in the recession are choosing to drop a brand level in their weekly shop. This means that rather than purchasing the brand products such as Heinz and Kelloggs they are choosing to purchase supermarkets own brands or no frills brands. It is said to save on average 33% on your weekly shop by dropping one brand level.10 Brand loyalty has less effect in a recession due to consumers not being able to afford to be loyal if there is a cheaper close substitute.While in a recession there are many consumer behaviour slews that start to emerge. One example of this is Sellsuming. This is a trend where Consumers are rattling creative in selling products or run that they have to offer. With need to generate extra income consumers become inclined to sell things they dont need or want anymore. An example of this is the use of eBay the online auction site to sell uncalled-for products. Some consumers may even go as far as renting out parking spaces.Another trend is the Increase ofonline services and social media usage. With the unemployment rate increasing and jobs not being very secure, people spend more time looking for job advertisements on the internet. Consumers are also being sensible when they are shopping. The consumer is continuously looking for very good deals both online and offline. Consumers are looking for the top hat price and the silk hat value available to them. Internet shopping has become the best line for a consumer to achieve this with price comparison websites such as kelkoo.com and comparethemarket.com. Kelkoo is a shopping portal that compares many retailers and shows the best place to purchase a product depending on the cheapest prices found.Another trend in a recession is skills enhancement andtraining. When people feel unsure about the future they believe that increasing their familiarity and skills is a good way to keep in them employable. The younger generation are also not entering the jobs market and choosing to increase their prospects for the future. Examples of this are the figures that show almost an 8% increase in applications for full-time study at universities in 2009. This is the biggest growth in eightsome years. The recession and rising unemployment have been blamed for this substantial incre ase.6While the economy has been in recession there has been an increase in the number of people searching dating agencies. According to the New York Times Online and offline matchmakers are coverage that dating interest is up, way up. Match.com, for instance, had its strongest fourth quarter in the go bad seven years. There may be a few reasons for this increase. People may now have more time on their hold due to being unemployed. Also meeting a potential retainer on the internet is easier and more affordable than socialising in other ways such as going to the pub.A major trend of consumer behaviour in a recession is Escapism. Consumers are said to be spending money on products and services in order to avert themselves from the economic hardship. The entertainment industry should in theory be experiencing an increase in attendance. This would be such services as bowling and cinema. The figures show that in 2009 cinemas are up 13% year on year. prompt Furious tore up the recor d for the most lucrative break weekend for a movie released in April 2009.7 But this can also be seen in related companies such as the American-based chain of videodisc and video game rental company Blockbuster. Their sales have increase over the recession with people choosing to rent. This may be due to the decrease in layout cost of actually purchasing the DVD yourself. It could also be another form of entertainment for people. Another business that is doing very comfortably in the recession due to a change of customers behaviour is dominos pizza. They are benefiting from consumers trading down on their choice. A consumer who would have unremarkably gone out for a meal now stays in and purchases a dominos pizza. 8Consumers in recession also tend to berate more about their purchases and experiences. The OTO Research confirms 54% of consumers say that their primary spring of information when choosing a brand is the Consumer Generated Content about the product and brand experi ence. Due to people being careful with their money they want to make a good purchase that will satisfy their needs. In a recession people will be more likely to ramify their family and friends about good deals. This is compared to in a boom consumers tend to waste how expensive a product they purchased was.Consumers are also taking out more insurance policies during the recession. It appears that the desire to protect property becomes a high priority in a recession. This may be due to the fact that people are worried about replacement or location costs if something does go wrong.9 People are more likely to fasten items if they break when the economies in recession. Such businesses as cobblers are seeing more and more people bringing in worn shoes. Before the recession consumers would of thrown them in the bin and purchased a new pair 12.In order to try and reduce the effects of the recession the government introduced a scrappage scheme. It aims to increase the purchase of new ca rs. The consumer is offered a 2000 incentive if they have a car that is over 10 years old and are instinctive to scrap it. The government has also tried to increase the money in the economy by offering lower vat of 15%. This is not really much of an incentive unless you are purchasing big ticket items. They have also dropped interest rates down to 0.5%. This provides people with mortgages lower repayments. This gives them more disposable income which they could potentially spend in the economy.In the recession not all companies are being affected. Some companies are actually doing better than they did before. Examples of people doing well in the recession are supermarkets, Amazon, dominos, cinemas, pawnbrokers.The best strategy to follow in a recession is cost leadership. By keeping your costs to a minimum you can maximise usefulness and be competitive. The best way to get consumers to purchase your products is by giving them an irrefutable offer. During a recession companies shou ld try to increase positive motivation in a consumer. You can do this with a good use of advertising. If a consumer has increased positive motivation they are more likely to want to purchase your products.Overall it is important to realise that consumer behaviour and the recession are linked and have an effect on each other. But the effects will depend on the industry, products and the people it involves. Businesses need to be proactive in a recession in order to be successful. They must be able to change their strategy quickly and efficiently.1 His journal2 Ian Rowley (May 8th, 2009) Toyotas Loss Is Worse Than Expected, Available at http//www.businessweek.com/globalbiz/content/may2009/gb2009058_991777.htm, Accessed 16th December 2009.3 book- SEE SAW4 Larry Elliot (December twenty-second 2008) Into the red lipstick effect reveals the true face of the recession,http//www.guardian.co.uk/business/2008/dec/22/recession-cosmetics-lipstick, Accessed 16th December 2009.5 Yulia V Smirnova ( June 16th 2009) round top 10 Emerging Consumer Behavior Trends in Recession, http//www.memesponge.com/2009/06/top-10-emerging-consumer-behavior-trends-in-recession/, Accessed 21st December 2009.6 Nicola Woolcock (February 16th 2009) University applications rise by 8% as recession bites,http//www.timesonline.co.uk/tol/ discussion/uk/education/article5741496.ece,Accessed 21st December 2009.7 Alain Portmann (April 16th 2009) Consumer Behavior During the Recession, http//webliquidgroup.com/knowledge/consumer-behaviour-during-the-recession-four- make out-consumer-trends/, Accessed twenty-ninth December 2009.8 Chris Moore (17 February 2009) Recession hots it up for Dominos Pizza, http//www.thisismoney.co.uk/markets/article.html?in_article_id=476450HYPERLINK http//www.thisismoney.co.uk/markets/article.html?in_article_id=476450in_page_id=3HYPERLINK http//www.thisismoney.co.uk/markets/article.html?in_article_id=476450in_page_id=3in_page_id=3, Accessed twenty-ninth December 2009.9 Nick Ellim an (September 1 2009) Consumer behaviour in the recession, http//www.allbusiness.com/marketing-advertising/marketing-advertising-measures/13183075-1.html, Accessed 29th December 2009.10 Martin Lewis (January 2 2010) Supermarket Shopping Downshift more, halve weekly bills, http//www.moneysavingexpert.com/shopping/cheap-supermarket-shopping,Accessed second January 2010.11 CBI (June 2009) Employment trends 2009 Work patterns in the recession,http//www.cbi.org.uk/ndbs/press.nsf/38e2a44440c22db6802567300067301b/56ebefb25149a68b802575da00308471/$FILE/CBI%20-%20Harvey%20Nash.%20Work%20Patterns%20in%20the%20Recession.%20June%202009.pdf, Accessed 2nd January 2010.12 Sunday Times (November 23, 2008) Riding the recession how some businesses are doing well in the downturn, http//business.timesonline.co.uk/tol/business/industry_sectors/article5213280.ece, Accessed 2nd January 2010.13 Charlie Makin (December 23, 2009) 10 key pointers of consumer behaviour in a recession revealed http//www.thema rketingblog.co.uk/e_article001261803.cfm?x=b11,0,w ,Accessed 2nd January 2010.14 Philip Atkinson (2009) Customers Consumer Behaviour in 2009 http//www.philipatkinson.com/change-customer-consumer-behaviour-millennial.htm, Accessed 2nd January 2010.1516