How Economic Factors Affect Consumer Behavior

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.


How Economic Factors Affect Consumer Behavior

Consumer behavior refers to the actions and decisions made by individuals when purchasing goods and services. These decisions are influenced by a wide range of factors, including economic factors. Here are some ways that economic factors can affect consumer behavior:

  1. Income: One of the primary economic factors that can affect consumer behavior is income. Individuals with higher incomes may be more likely to purchase luxury goods or services, while those with lower incomes may prioritize necessities. In addition, changes in income levels can impact consumer behavior. For example, during times of economic recession, consumers may cut back on spending due to reduced income levels.
  2. Employment: Employment levels can also impact consumer behavior. When unemployment levels are high, consumers may be more hesitant to spend money due to concerns about job security. Conversely, when employment levels are high and there is a greater sense of economic stability, consumers may be more likely to make discretionary purchases.
  3. Inflation: Inflation can impact consumer behavior by affecting the purchasing power of consumers’ money. As the cost of goods and services increases, consumers may be forced to prioritize their spending and cut back on non-essential purchases.
  4. Interest rates: Interest rates can impact consumer behavior by affecting the cost of borrowing money. When interest rates are low, consumers may be more likely to take out loans or use credit cards to make purchases. Conversely, when interest rates are high, consumers may be more hesitant to borrow money and may prioritize paying off existing debt.
  5. Consumer confidence: Consumer confidence refers to the level of optimism or pessimism that consumers have about the economy. When consumer confidence is high, consumers may be more likely to make purchases, as they feel more secure in their financial situation. Conversely, when consumer confidence is low, consumers may be more hesitant to spend money and may prioritize saving.

Overall, economic factors can have a significant impact on consumer behavior. By understanding how economic factors influence consumer behavior, businesses and policymakers can make informed decisions about pricing, marketing, and economic policy.

Liberty Magazine requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Prepare and write by:

Author: Mohammed A Bazzoun

If you have any more specific questions, feel free to ask in comments.


For More Article

Liberty Magazine – Economic Website

Liberty Magazine – English Website

Liberty Magazine


Follow us


Economic                   The Magazine                        Lebanon Magazine 


Leave a Reply

Scroll to Top