How Economic Factors Affect Consumer Behavior
Are you losing customers and blame online sales?
When I visit businesses with slow sales I hear many excuses for why they have so few customers this month. It seems they are willing to blame online sales, the local government policies, or even the local council.
Their comments only serve to highlight the fact they do not understand that the current economic factors have more to do with the customers behaviour than any of those other factors.
Money is not spent if the customer is worried about their future
The single biggest factor for consumer behaviour spending patterns is how secure they feel their short-term future is regarding savings, employment and home payments.
The more insecure they feel about the economy, the more they will pay down debt or keep money for the rainy days. This ‘happiness’ factor is measured by the consumer confidence index which is reported daily showing how secure the consumer believes the future is. When the CCI goes over 100 points, customers will spend. If the CCI goes under 100 the customers stop spending.
How the economy affects the consumer behaviour
The consumer is bombarded with messages of doom & gloom from the newspaper and other news media telling them all about the problems in the world.
Currently we have concerns with;
- Eurozone debt and several countries in recession
- Declining natural resources and climate warning
- Instability in several governments causing public unrest & armed violence
- Over a 20% drop in Australian super and shares
- Loss of primary industries with large scale unemployment happening almost weekly since start of 2012
Business owners need to pay attention to these economical factors
Mortgage payments are often the largest expense a customer has and will not risk losing their home just to take a chance and buy your products. When there is uncertainty in the mortgage rates, sales will decline in most sectors.
The instability of employment in manufacturing, financial services and construction sectors will cause customers to focus on what would happen if they lost their employment. So they start saving money for their possible unemployment and spend it on career change prospects like training in new skills.
Due to the high costs of aged care and related retirement expenses many consumers are looking ahead to their future by investing in superannuation and/or shares to be financially secure. With the global recession and collapse of some international organisations thought to be secure from the economy wobbles, super funds have lost millions of consumers financial net.
What the current economy means to your customers
They are unsure if they will be able to keep the family home, pay for their retirement and even if they will have a job in the next six months.
So the consumer goes into survival mode by saving money and stopping all unnecessary spending. As a business owner or manager you need to pay attention to the local economic factors as they will mean the difference between meeting your sales targets or not.