Are factors influencing a purchase decision always economic?
Head of Business Programmes at Newman University Taimur Sharif, discusses whether factors influencing a purchase decision are always economic.
We often focus too heavily on economic factors (e.g., product price) while analysing major influencers of consumer decision-making on potential purchases in various industries. For example, in the tourism industry, it’s usual to see high temptation of a middle-class consumer to an economy package price for holidaying overseas, offered by an airline company (e.g. easyJet, Ryanair, flydubai, etc.). Similarly, consumers planning to switch to a Smart TV would wait for a Black Friday or a Boxing Day sale, conventionally offered by large retailers (e.g. John Lewis, Currys, etc.). Likewise, even in cases of purchases that require bigger budgets or involvement of a substantial amount of money (e.g. property market), a buyer with fixed monthly income would rush into the market when there’s a drop in the property price and/or mortgage rate. A related example could be the sudden boom the UK market had witnessed in a relatively stable property market following the declaration of a limited period stamp duty exemption prior to the pandemic (saving £3000-£7000 of an average buyer).
On the contrary, we come across situations when price goes unnoticed on a likely purchase. The recent pandemic has been a great example when consumers rushed to shops to ensure/secure larger stakes of essentials such as groceries, grains, sanitising products, masks, medicines, etc. (in the more recent time, a similar behaviour of immobile Ukrainian consumers can be expected during the ongoing war between Russia and Ukraine). Moreover, online purchases skyrocketed as consumers either didn’t want to get exposed to people outside their bubbles or weren’t allowed to go outside due to lockdowns or quarantine restrictions, and so on (in a similar fashion, on the contrary, although flight services could be availed on much cheaper rates, consumers stopped following air fares due to uncertainties and/or the hassles and extra expenses associated with the journey, e.g PCR, mandatory quarantine, etc.]. Recently people came across an energy crisis due to disruptions in the oil supply chain inside UK and went for extra buying of petrol and diesel, without monitoring the prices on the digital boards. In these cases, consumers’ major concerns had been to safeguard their life, not saving money, given that prices of the said products were way higher than those of the normal period of time. In all these scenarios, businesses behaved the way they were expected to behave, many considering these as opportunities to make extra profits, some taking undue advantage of the situations and quite a few of them appearing to be caring in nature (i.e. mostly charities and public service providers).
The third type of consumer behaviour is associated with the psychological motivators that arise in various forms and dimensions. For example, an average Smart phone user wouldn’t often think of upgrading to a superior model unless there’s a promotional offer or stock clearance sale. In contrast, consumers at large are seen to go for an upgraded version of a product (e.g. iPhone 13) due to ‘demonstration effect’ – a behaviour a consumer displays to reflect self-esteem and social identity. One other example would be the buyers’ post-pandemic behaviour in the property market in major cities in the UK. Although an economic behaviour of a fixed income-earning buyer would be to slow down when there’s a rising tendency of property prices, the current market behaviour is showing an opposite trend. Law of demand that ‘a consumer would demand more when there’s a fall in price’ is failing here due to a number of possible reasons: (a) first time buyers who had to hold their excitement to be in the property market due to pandemic-led disruptions rushed into the market, irrespective of the rising tendency in property prices; (b) property agents have switched to organising open days (instead of one to one appointments for viewing), hence creating a competitive environment and a panic factor among buyers to rush on to the purchase; (c) existing owners who intend to invest in the property market may have counted the current rise as an indication of a booming market in near future, hence buying a new property as a source of substantial capital gain in near future.
 The opinions shared in this blog are outcomes of the author’s own observations and experiences.