How Economic Factors Affect Consumer Behavior

Are you losing customers and blaming online sales?

When I visit companies with slow sales, I hear a lot of excuses as to why they have so few customers this month. They seem willing to blame online sales, local government policies or even the local council.

Their comments only serve to highlight the fact that they do not understand that current economic factors have more to do with customer behavior than any of those other factors.

Money is not spent if the customer is worried about their future

The single biggest determinant of spending patterns on consumer behavior is how secure they feel about their short-term future in terms of savings, employment, and home payments.

The more insecure they feel about the economy, the more they’ll go into debt or keep money for rainy days. This “happiness” factor is measured by a daily reported Consumer Confidence Index that shows how secure a consumer’s confidence is in the future. When the CCI exceeds 100 points, customers will spend. If the CCI falls below 100, customers stop spending.

How does the economy affect consumer behaviour?

The consumer is filled with gloomy messages from newspapers and other media telling them all about the problems in the world.

Currently we have concerns with;

  • The debt of the eurozone and many countries is in recession
  • Natural resource decline and climate warning
  • The instability of many governments caused public unrest and armed violence
  • More than 20% drop in super and Australian stocks
  • Loss of primary industries with widespread unemployment has been occurring almost weekly since the beginning of 2012

Business owners need to pay attention to these economic factors

Mortgage payments are often the biggest cost to a customer and they won’t risk losing their home just for the chance and purchase of your products. When there is uncertainty in mortgage rates, sales will decline in most sectors.

Employment instability in the manufacturing, financial services and construction sectors will cause customers to focus on what would happen if they lost their jobs. So they start saving money for their potential unemployment and spending it on career change prospects such as training in new skills.

With the rising costs of aged care and related retirement expenses, many consumers are looking ahead to their future by investing in a pension and/or stocks to be financially secure. With the global recession and the collapse of some international organizations believed to be safe from a volatile economy, super funds have lost the net worth of millions of financial consumers.

What does the current economy mean to your customers

They are not sure if they will be able to maintain 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 local economic factors Because it means the difference between achieving your sales targets or not.

Source by Paul Baker

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