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CONSUMER CLASSIFICATION AND CONSUMPTION PATTERNS 1

Consumer classification and consumption patterns

Ankit Verma

Aditya Srivastava

Rohit Sharma

Motilal Nehru National Institute of Technology, Allahabad


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Abstract

How the consumers consume and for what purposes, drives the producers as to how they

extract resources and create products. The consumers are classified on the basis of consumption

patterns which are ascertained by observing their actual behaviour in a market in various

purchase situations. These patterns are explained by multiple factors like tastes and preferences

of people, price of product etc. But the most crucial factor is the income of consumers.

During the last two decades, the norms and institutions all over the world have changed

in ways that has either encouraged or permitted higher inequality in incomes. Under the

conventional view, rising inequality is a side effect of economic progress as the growth rate is

different in different countries. The other reasons for differences in incomes are level of

education, priorities of people i.e. they prefer job profile with more money or status, politics and

policies of a country, say, different labor laws in different countries etc.

Apart from differences in incomes, another important factor influencing consumption

patterns is tastes and preferences of consumer. Though the taste is becoming international,

consumer’s choices and preferences still vary from place to place and hence the consumption

patterns. An example would be McDonalds being a global brand does not serve beef and pork

products in India.
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Introduction

Geert Hofstede said, “There is no such thing as universal rationality… what is rational or

irrational to a person depends on that person's value systems, which in turn is part of the culture

that person has acquired in her or his lifetime. What people around the world value vary

enormously?”

The consumers can be classified on the basis of their consumption patterns. Today’s

consumption is undermining the environmental resource base. It is exacerbating inequalities.

And the dynamics of the consumption-poverty-inequality-environment nexus are accelerating. If

the trends continue without change — not redistributing from high-income to low-income

consumers, not shifting from polluting to cleaner goods and production technologies, not

promoting goods that empower poor producers, not shifting priority from consumption for

conspicuous display to meeting basic needs — today’s problems of consumption and human.

The real issue is not consumption itself but its patterns and effects.

The evolution of consumption patterns can be (at least partly) explained by the interplay

of different historical driving forces. The literature offers many accounts of this evolution in

terms of technological innovation, demographic transition, socio-political changes or socio-

cultural transformation. Nowadays, it is more and more widely acknowledged that all these

trends should be considered together, i.e. in a systemic way, as parts of an encompassing process

of innovation.
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Consumer Classification

1. Loyal: These people are the ones who can and should influence the buying and

merchandising decisions. Nothing can make a Loyal Consumer feel better than

soliciting their input and showing them how much value is in it. Many times, the

more the producers do for them, the more they recommend them to others.

2. Discount: They shop the stores frequently, but make their decisions based on the

size of markdowns. This category helps ensure producers that their inventory is
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turning over and, as a result, it is a key contributor to cash flow. This same group,

however, can often wind up costing the producers money because they are more

inclined to return product.

3. Impulse: They do not have buying a particular item at the top of their “To Do”

list, but they purchase on a whim. They purchase what seems good at the time.

The producers would like to serve these types of consumers because they provide

the producers a significant amount of consumer insight and knowledge.

4. Need-based: They have a specific intention to buy a particular type of item.

People in this category are driven by a specific need. They buy for a variety of

reasons such as a specific occasion, a specific need, or an absolute price point.

Need-Based Consumers offer the greatest long-term potential, surpassing even the

Impulse segment.

5. Wandering: They have no specific need or desire in mind when they come into

the store. Rather, they want a sense of experience and/or community. Many

Wanderers shop merely for the interaction and experience it provides them.

Factors influencing consumption patterns

(A) Differences in incomes-

In seeking explanations for the widening spread of incomes during the last 2 decades,

researchers have focused overwhelmingly on broad structural changes in the economy, such as

technological progress and demographic shifts.


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Under the conventional view, rising inequality is a side effect of economic progress-

namely, continuing technological breakthroughs, especially in communications and information

technology.

Reasons for differences in incomes-

• Regional & rational differences:

1. Various researchers have explained that the regional and rational differences are one of

the reasons for the differences in incomes of people.


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2. People from Asia are comparatively paid less.

3. People from western countries are considered the best managers while the people from

India are the best engineers.

4. Still the professionals in India are paid less.

5. People of China are considered the hardest working in the world but still are considered

the cheapest “labor” in the world.

• Level of Education:
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• Politics, policies of a country:

1. Norms and institutions all over the world have changed in ways that either encouraged or

permitted sharply higher inequality. Where, however, did the change in norms and

institutions come from?

2. Recent empirical studies have demonstrated that the political opinions of the wealthy are

better reflected in the decisions of elected officials and in government policies compared to

the opinions of the poor.

3. Citizens with lower incomes are more likely to support increased spending on

redistributive policies such as aid to the poor and food stamps compared to citizens with

higher incomes and that these differences are larger than those based on education or gender.

Also citizens with low incomes are more socially conservative than the affluent.

• Priorities of people:

This is a very interesting fact and a factor creating differences in incomes of people. Let us

see how in the following points-

1. If we see in our own country, Indians take work as a duty to fulfill the family needs and

social needs. Earning a good amount brings out a respect in society for the family of an

individual.

2. Japanese consider work as worship. They enjoy work and consider it a learning process.

3. Americans enjoy work too but the top priority for them is money generally.
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Now, if we gather data and try to have a look over the salary pattern of these countries,

we will find a difference. Since Americans work more if paid well, they are actually paid well.

For Indians, getting a good job and earning decent is enough, they are paid comparatively less.

• Gender:

1. Historically, gender inequality has favored men relative to similarly qualified women.

2. Researchers have found that women tend to hold disproportionately lower positions than

men and receive remuneration of about 60 cents to the dollar compared to their male peers.

3. As women entered the workforce in larger numbers since the 1960s, occupations have

become segregated based on the amount femininity or masculinity presupposed to be

associated with each occupation.

4. Based on the census data, women occupy the service sector jobs at higher rates then men.

Effects of Difference in Incomes-

1. Different standards of living on the basis if their incomes.

2. Purchasing power varies.

3. Inequality in society.

4. Different consumption patterns.


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(B) Differences in prices-

The estimated marginal budget shares, income and price elasticity show marked differences in

consumption patterns of rural and urban consumers. The effect of food grains and other products

price rise on the demand for various items if analyzed, it is seen that consumers show different

patterns of consumption. Some people with lower income level may actually shift to different

cheaper products or may even decrease the consumption. Same is the case with fuel

consumption. There exist different energy mixes, different fuel use patterns, and different

consumption trends between developed and developing countries.

Similarly, the index of department store prices have fallen substantially since the early

1990s, in large part because global capital mobility and excess global labor supply has allowed

firms to depress wages and avoid paying environmental costs. Consumers have responded by

purchasing increasing numbers of these artificially cheap goods.

These trends suggest that achieving sustainable consumption is not only a technical issue

but will also involve fundamental changes in the global political economy to eliminate the

artificially low prices of imported goods.

(C) Tastes are becoming similar internationally-

Understanding of globalization has extended beyond economic processes and has sought also to

look at the cultural dimensions of globalization. The people of the world are becoming more

similar in terms of their tastes, values and expectations that businesses are increasingly pursuing
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the same kind of practices; and we are increasingly watching the same TV shows, eating the

same foods, shopping in the same shops.

Some would argue that cultural globalization is a process while the people are becoming

culturally similar or are being exposed to the same cultural values and products. One view of

cultural globalization equates with a process of universalization whereby our tastes are becoming

more and more alike. Some call it as westernization.

In cultures where the dietary domain includes plentiful food, such as in the United States,

taste is typically the most significant factor in selection decisions. Cost and convenience may be

important to some people, or on certain occasions. Foods are sometimes chosen for self-

expression (adolescents may eat fast foods; orthodox Jews may eat a Kosher diet; and

southerners may eat fried chicken, grits, and greens) or to promote well-being (vegetarians may

eat only fruits, vegetables, and grains for moral well-being; Hindus may avoid beef for spiritual

well-being; athletes may load carbohydrates or eat meat for physical well-being). Variety can

influence people who travel or eat often at restaurants. But in general, taste dominates choices

within the dietary domain.

This can be easily explained with the help of examples. Though the tastes and

preferences are influenced a lot by culture, age, gender etc. With the global brands becoming

more and more popular day by day, the taste is becoming international of the people. Still the

taste is influenced a lot by the local taste of regional people but the trend is changing.
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Nike has been selling shoes in China since 1984. Everybody knows that Nike shoes aren't

the cheapest, but they adjusted their prices for the Chinese market. Also, the sudden popularity of

basketball in China was the real boom for Nike. Basketball players wear Nike and people in

China love them so they love Nike shoes... This company found the right instrument to crack

into a tough market.

Know the market. Find the opportunity.

MacDonald's didn't have to change their recipes too much in Romania, but this didn't

work everywhere around the world. Entering into a foreign market is more than just knowing the

language. Knowing what tastes your customers prefer could be the key.

Hellmann's mayonnaise tastes differently in Brazil than in the UK. It's more lemony in

Brazil and more vinegary in Britain. Dreyer's modified their ice cream for the Japanese market
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since people in Japan prefer their frozen desserts to be less sweet. Japanese consumers prefer

their beef to be fatty, Koreans like the taste of cow's feet, and Hindu people do not eat beef at all.

In 2006, the global fast food market grew by 4.8% and reached a value of 102.4 billion

and a volume of 80.3 billion transactions. In India alone the fast food industry is growing by

40% a year.

McDonald's is located in 126 countries and on 6 continents and operates over 31,000

restaurants worldwide. On January 31, 1990 McDonald’s opened a restaurant in Moscow, and

broke opening day records for customers served. The Moscow restaurant is the busiest in the

world. The largest McDonald’s in the world is located in Beijing, People's Republic of China.

There are numerous other fast food restaurants located all over the world. Burger King

has more than 11,100 restaurants in more than 65 countries. KFC is located in 25 countries.

Subway is one of the fastest growing franchises in the world with approximately 39,129

restaurants in 90 countries as of May 2009, the first non-US location opening in December 1984

in Bahrain. Pizza Hut is located in 97 countries, with 100 locations in China. Taco Bell has 278

restaurants located in 12 countries besides the United States.


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