Consumer buying behaviour is a complex phenomenon, which is comprised of a bundle of decision-making processes, economic determinants and market stimuli. Consumer purchasing behaviour has been attracting the interest of a great number of academic and commercial parties for many years. The complexity of the processes with which consumer purchasing can be associated has made the phenomenon considerably difficult to be predicted and controlled. However, as consumers are the most essential source of revenue for business organisations, therefore their behaviour is of significant importance for achieving market survival and financial prosperity.
This is the reason why the present dissertation is focused on researching and analysing the phenomenon in the present financial crisis. As the current crisis is already recognised to be having a major effect on many economic and social aspects of the United Kingdom, the researcher concentrates specifically on revealing the effects the present economic downturn has on the buying behaviour of consumers.
The author is highly interested in revealing the disturbances that can be identified to occur and thus provide valuable insight to commercial and academic parties in the context of predicting and controlling consumer purchasing patterns. The dissertation is specifically focused on analysing the buyer behaviour changes from a marketing perspective. The author provides a number of suggestions, which were extracted from the conducted secondary and primary investigation. The developed propositions outline the various considerations companies should integrate in their marketing campaigns in order to perform successfully, despite the financial crisis and economic downturn.
Buying behaviour can be described as the set of attitudes that characterise the patterns of consumers’ choices. Buying behaviour is a phenomenon that varies depending on a wide range of factors, such as: demographics, income, social and cultural factors. Apart from the essential internal factors, which can be recognised as influential to buying behaviour, there are a number of situational contexts that can be suggested to affect consumer choices. In this respect it can be proposed that consumer behaviour is a combination of customers’ buying consciousness and external incentives which are likely to result in behaviour remodelling (Dawson et al., 2006). This is why researchers in the field of consumer buying patterns conclude that it is derivative of function that encompasses economic principles and marketing stimuli (Hansen, 2006).
As buying behaviour is a key factor for companies’ profitability, it is a phenomenon that has been attracting the attention of researchers for many years. One of the fields most significantly interested in consumer choice, is the field of marketing (Kotler, 2000).
Marketing is the discipline focused on extracting knowledge on consumers’ characteristics to enable companies to respond to customers’ expectations and facilitate organisations in providing high quality customer service (Groucutt et al., 2004). This is why it can be suggested that the context of the present dissertation could be of significant importance for marketing researchers and professionals.
As the present project aims to analyse the financial crisis effects on consumer behaviour it can be suggested that the in depth scrutiny which the current examination would establish could transform into a valuable source of marketing direction. In other words, the present dissertation is likely to transform into a valuable source of marketing comprehensiveness as it would reveal knowledge on the likely changes in buying behaviour which the current financial and economic downturn is causing and thus provide commercial organisations with a piece of research that could stimulate greater appropriateness and integrity in companies’ business performance during a volatile period (Churchill and Peter, 1998; Iacobucci and Calder, 2003).
Today’s financial crisis, which has resulted in an economic downturn, could be recognised as a major challenge for the profitability and even survival of many global companies. The financial crisis, which was the result of the sub-prime mortgage crisis in the USA, has transmitted internationally and caused disturbances in a wide range of powerful economies. Many countries are seen to be on the brink of recession if not already plunged into it (Deutche Welle, 2008).
As the present dissertation is specifically evaluating the financial crisis impacts on consumers’ buying behaviour it can be recognised that some of the challenges which consumers are currently facing and are likely to experience in the near future can be divided into two categories – direct and indirect. The direct factors can be recognised as the decreasing disposable income, job insecurity and credit financing hurdles (Office for National Statistics, 2008). On the other hand the indirect aspects of the credit crunch on customer behaviour can be outlined as the challenges of credit financing and investment capability which commercial organisations face and which make these organisations unable to continue with producing high quality products and customer service (The Economist, 2008).
The research question the current project aims to answer is: ‘What type of consumer buying behaviour has been most significantly affected by the financial crisis in the UK?’. As it can be observed, the question the researcher focuses on addressing can be used for outlining the research parameters of the dissertation (Bell, 2005). In order for a research to yield credible results it should be frame-worked in a manner that clearly structures the contextual boarders of a project. This can be achieved only through the identification of a set of research variables, to be explored, tested and synthesised in a logical flow (Saunders et al., 2003).
In the present context, the research focus and the variables which can be recognised are: ‘The United Kingdom’; ‘the current financial crisis’; ‘consumer buying behaviour’ and in particular ‘non-business consumers’; and ‘retailing’. As it can be observed the research variables outline a clear framework to guide the researcher through the development of a consistent and coherent research process. Once recognised, the research variables can be addressed through the application of sub-questions and research objectives (Easterby-Smith et al., 2002). In this respect the objectives which the dissertation incorporates for responding to the research question are: the evaluation of buying behaviour characteristics, which would reveal various buying behaviour characteristics and patterns; analysis of the financial crisis impacts on consumers and in particular the effect on buying behaviour characteristics; and the identification of current buying trends of products in the UK.
In the context of forming a clear framework and outlining clear objectives to address the set research question, this dissertation can be divided into six chapters to guide the research process flow.
Chapter 1 introduces the readers to the topic by outlining the aim of the dissertation, the primary research question, the research objectives and the value of the examination.
Chapter 2 provides a critical literature review of the topic. The literature review is structured by the application of a funneling strategy, depicted in ‘Figure 1’. The funneling strategy aims to provide greater clarity in the research boundaries as it gradually tightens the research focus by outlining the specific research variables to be explored and examined.
Chapter 3 provides the research methodology employed in the current investigation. The section also reveals the research philosophy, strategy, objectives and sources, which were employed for the successful exploration of the topic.
Chapter 4 outlines the research findings, which are achieved through a multi-source strategy of secondary and primary research.
Chapter 5 provides a discussion on how or whether the research findings address the research question.
Chapter 6, the final chapter of the dissertation, offers a conclusion to the research. This chapter is followed by a list of references.
CHAPTER 2: LITERATURE REVIEW
2.1 Consumer Behaviour
Consumer behaviour can be described as a process in which individuals or groups purchase a tangible or intangible product to satisfy needs or preferences (Perner, 2008). Nowadays, the role of the consumer is of great macro and micro-importance as the consuming power is an essential economic driving force. The great significance of the consumer’s role can be recognised from the fact that most contemporary consumers spend a great amount of time and energy on buying behaviour and decision-making activities. This is why consumer behaviour can be identified as a process, which comprises all activities related to the process of purchasing, such as: information gathering; information exchange; selecting; buying and consuming (Hansen et al., 2004). As buying behaviour is identified to encompass a wide range of a priori and post-buying activities, therefore it can be recognised as a significantly complex phenomenon.
Buying behaviour is determined by two main factors – internal and external. The internal factors that determine consumer buying behaviour are presented by the various consumer segments. In other words, the particular set of characteristics a segment possess (i.e. demographic, social, cultural, life style, etc.), can be described as essential determinants of the segment’s buying behaviour. On the other hand, there is a set of external factors that can play a significant role in determining consumer behaviour, such as: promotions; advertising; customer service, economic and market stability, etc. In this respect, it can be concluded that buying behaviour is significantly determined and influenced by the highly interdependent combination of customers’ buying consciousness and external stimuli (Dawson et al., 2006).
2.2 Types of Consumer Behaviour
The literature recognises four distinctive types of consumer buying behaviour. They differ with respect to the frequency of occurrence, emotional involvement, decision-making complexity and risk. In this context there are four distinctive buying behaviour patterns which can be outlined, such as: programmed behaviour; limited decision-making buying behaviour; extensive decision-making buying behaviour and impulsive buying (Arnould et al., 2002).
Programmed behaviour, also known as habitual buying behaviour, is the buying pattern which can be characterised as the routine purchasing of low cost items, such as: coffee; daily newspaper; tickets, etc. It is a process that involves little search for information and low complexity of decision-making (Learn Marketing, 2008).
Limited decision-making buying behaviour can be characterised as a buying pattern that involves moderate levels of decision-making and comparatively low amounts of required information to trigger purchasing. It is a buying behaviour, which can be related to the purchasing of clothes – the consumer can easily obtain information on the quality of the product and often spends short time on selecting and securing the purchase (East, 1997).
In contrast to the limited decision-making buying pattern and the programmed purchasing behaviour, the literature identifies extensive decision-making buying behaviour (Foxall and Goldsmith, 1994). This type of behaviour is characterised with complex decision-making, where the buyer needs a comparatively longer period to make a decision and greater amounts of information gathering. It is buying behaviour usually provoked by expensive and infrequent purchases, which involve higher levels of economic and psychological risk (Peter and Olson, 2007).
The fourth type of buying behaviour, which is observed in the literature, is the impulsive buying. Impulsive buying is characterised as a buying process that does not involve any conscious planning. It is a short-term phenomenon, which is usually provoked by an external stimuli and irritation, making particular products irresistible to consumers at a given short period of time (Wells and Prensky, 1997).
As it can be observed in the literature on the different types of buying behaviour, a significant determinant, which accompanies each of the described behavioural choices, is the consumer’s emotion. The consumer’s emotion as suggested by Hansen et al. (2004) is a fundamental determinant of buying behaviour. It is a component of the purchasing decision-making, which can be recognised to be both influential to, and influenced by, a number of internal and external factors (Chaudhuri, 2006; Laros and Steenkamp, 2005).
Deriving from the significant importance of consumer emotion in purchasing and the great determining value it possess, the research would suggest a new framework of buying behaviour in order for the researcher to address the initial research question adequately.
The framework is adopted from the phenomenological literature and theoretical concepts, which were identified during the research process. In this respect the continuum proposed encompasses all of the buying behaviour types and the consumer’s emotion as their most significant determinant. At each extreme of the continuum, there can be recognised two distinctive types of buying behaviour – planned and unplanned – which are to be researched and discussed in the succeeding section of the present literature review.
Although emotion is a subjective phenomenon, which significantly varies according to individual traits and situational particularities, the researcher suggests that emotion is the most essential determinant of planned and unplanned buying behaviour (Havlena and Holbrook, 1986). In other words, as unplanned buying behaviour is the attribute of impulsive buying, it can be suggested that unplanned buying behaviour is greatly affected by greater emotional drives.
On the other hand, as planned behaviour usually involves complex decision-making, greater information gathering and a longer time period for selection, it can be concluded that planned buying behaviour is rather resulted by rationality than emotionality. Although it is a fair clarification that many complex decision-making processes may initially occur through emotional attraction and impulse, the particular features of the buying process are the variables which are evaluated in the present research and therefore, it can be suggested that planned buying behaviour is less emotional than unplanned.
2.2.1Planned Buying Behaviour
Planned consumer buying behaviour is best described by the theories of planned behaviour (TBA) and reasoned action (TRA) (Hansen, 2006). The theories reveal that planned behaviour can be determined by the consumer’s perceptions of complexity or in other words how difficult it is for the consumer to select and secure a particular product (Ajzen, 1991). The concept of perceived complexity is described by Keen et al. (2004), to comprise of the situational variables of channel tradeoffs and transaction costs. In other words, the level of complexity of a particular transaction, it is suggested, is determined by the opportunity cost of the alternative channels that exist and transaction costs, such as time, money and effort.
Furthermore, the theory of planned behaviour specifically introduces the concept of ‘perceived behavioural control’ as an essential determinant of the process of planned behavioural intention (Posthuma and Dworkin, 2000). In this respect, the TBA not only does explain the importance of the consumer’s perception of the levels of complexity with which a particular purchase can be associated, but also outlines the essential role of the buying risk which consumers are likely to bear during purchases.
The perceived risk perspective can be recognised as a multidimensional construct. High perceived risk can result from the consumer’s expectation of experiencing a negative outcome from a buying interaction (Lim, 2003). In this respect if any situational determinants of the process of purchasing reveal a possibility of negative outcome, it can be suggested that this is likely to increase the levels of consumers’ perceived risk. In this context, situational determinants of these types can be recognised to be the transactional costs, which are associated with every purchase consumers make. In other words, the higher the transactional costs (i.e. money, time, effort, etc.) the greater the likelihood of higher levels of perceived risk (Hansen, 2006).
On the other hand, perceived risk is not only determined by the transactional costs, which consumers identify. Contrary, perceived risk is often influenced by situational variables and outcomes, which the consumer fails to recognise. In other words, if a consumer is unable to clearly identify the possible outcome of a particular buying transaction, the consumer would be less inclined to purchase. In this respect, it can be concluded that another significant determinant of buying risk is uncertainty (Shim et al., 2001). This is why planned behaviour is associated with complex decision-making processes, which is characterised by extensive information gathering (Peter and Olson, 2007).
2.2.2 Unplanned Buying Behaviour
As it was already identified, there are four distinctive types of buying behaviour, which can be recognised in the literature and which can be categorised in two distinctive categories of planned and unplanned buying behaviour. Each of the categories can be identified as encompassing different decision-making processes, characteristics, complexity and length (Arnould et al., 2002). Moreover, consumers’ decision-making goes through a number of transformations at different stages in the buying process: problem recognition; information search; evaluation of alternatives; and purchase decision (Peter and Olson, 2007). In this respect, it can be suggested that the purchasing determinants vary according to the stage at which the particular consumer is situated in the buying process at a given time.
There are two distinctive but highly interdependent sources that can be identified as influencing the buying behaviour of consumers. They can be recognised as internal and external buying behaviour factors (Brassington and Pettit, 2007).
The internal factors that determine consumer buying behaviour can be divided into the categories of: personal (i.e. age, life style, occupation); psychological (i.e. wants, motivation, perceptions); social (i.e. needs, social class, group and family influence); and cultural (i.e. common sense, background, beliefs, knowledge) (Groucutt et al., 2004; Iacobucci and Calder, 2003).
On the other hand, the external buying behaviour factors can be identified as the marketing approaches of companies to attract consumers by advertising and promotions. Another external factor that may be recognised as highly influential to the purchasing behaviour of consumers is the micro and macro-economic stability within the particular market environment (Churchill and Peter, 1998).
As it can be observed, purchasing behaviour is mainly determined by internal factors (i.e. economic principles – disposable income, status, social class) and external stimuli (i.e. marketing – promotions and advertising; economic environment) (Dawson et al., 2006).
Moreover, it can be proposed that these factors are highly interdependent as, for example, the economic stability within a market environment can be suggested to be significantly influential on the internal purchasing determinants of lifestyle, occupation and disposable income, which is likely to have subsequent effect on wants, motivation and perceptions.
2.3.1 The Financial Crisis Factor
The Western world is currently facing a significant economic challenge in the face of the current financial crisis. The financial crisis, which is experienced by the majority of the developed G7 countries and in particular the UK, was the result of the US subprime mortgage crisis in August 2007 (Toussaint, 2008).
The US mortgage crisis was caused by the bad quality of loans which were issued in the market at that time. For a period of seven years, some of the US financial institutions had been providing numerous credits to consumers with ‘bad’ credit history, which subsequently resulted in a pool of credits with a lowered possibility of repayment (Cecchetti, 2008). There are several explanations for the occurrence of the crisis, which can be recognised in the literature but are not discussed in the present dissertation as the research question is more interested in the outcomes of the crisis than the factors that caused it.
The burst of the real estate mortgage bubble had a contagious effect on the rest of the well-developed Western economies (Horta et al., 2008). Many EU countries experienced the shock in their banking sectors as the provision of credit financing became a great challenge. Banks were suffering from lack of liquidity, which caused both business and non-business consumers’ financial hardships (The Economist, 2008).
The effect of the financial crisis unfolded over a wide range of other economic aspects. The wide scope of the crisis caused a downturn in many industries, the bankruptcy of leading organisations and overall economic recession to countries like the UK, Germany and France (Deutche Welle, 2008; Hopkins, 2008; Office for National Statistics, 2008).
The multi-dimensional characteristic of the financial crisis is identified to have negative impacts both on business and non-business consumers. Some of the major impacts the current financial crisis has on consumers are: job uncertainty and unemployment; decreased disposable income; decreased saving rates; fewer credit financing opportunities; greater consumption risk; higher product and service prices, etc (Allen and Gale, 2007; Gramley, 2008).
The UK retailing market is recognised as one of the markets that has been most severely affected. Consumers are seen to be purchasing very carefully as they focus on efficiency buying and cutting back on waste and premium products, but consumers are not predicted to be reducing their regular consumption. Buying behaviour is seen to be shifting to products with comparatively good quality and low price (Hawkins, 2008).
Furthermore, the current economic sluggishness is likely to predispose to greater consumer interest in hard discounters, which makes such retailers believe in market share expansion and prosperity. Moreover, food retailing, on which the present research question is focused, is seen to be the most stable part of the retailing industry and it is predicted to be gaining market share by the production of efficient marketing strategies. However, the failure in providing good buying experience and low variability of products, which are common for hard discounters, are predicted to be the factors that are likely to impede their market growth (Mintel Oxygen, 2008).
UK consumers are also recognised to be spending more time at home (Euromonitor International, 2008). This shift of buying behaviour can be considered to promote the use of online buying channels through which consumers can compare prices and gather information for their purchasing decisions but at the same time are likely to face buying risk which is usually associated with online purchases.
CHAPTER 3: RESEARCH METHODOLOGY
The research methodology of the present dissertation is influenced and structured by the research process ‘onion’, which was developed and introduced by Saunders et al. (2003). In this respect the ‘Research Methodology’ section of this dissertation is divided into five sub-topics, each of which aims to provide a detailed explanation of the research process.
Knowledge is a complex phenomenon influenced and developed by various contextual variables. In this respect, a research philosophy represents a researcher’s perception of the way knowledge is constructed (Saunders et al., 2003).
There are three research philosophies recognised in the literature – philosophies of positivism, interpretivism and realism. Each of these philosophies provides a distinctive view on the way knowledge is developed. It is important for a research process to clearly establish its research philosophy as it has a significant impact on the methodological framework applied.
For example, positivism applies scientific reasoning and law-like generalisations in the process of knowledge construction (Remenyi et al., 1998). The research methodology influenced by this philosophy is characterised with a highly transparent structure to facilitate replication (Gill and Johnson, 1997). On the other hand, the research philosophy of realism identifies the existence of a number of external social objectives, which influence people’s interactions and respectively the creation of knowledge. Realism can be recognised to be close to the philosophy of positivism but at the same time possesses clearly distinctive characteristics as the philosophy highlights the inappropriateness of exploring people’s interactions in the style of natural science (Saunders et al., 2003).
The philosophy, which is incorporated in the context of the present dissertation, is the research philosophy of interpretivism. Interpretivism is chosen to be the philosophical framework of the study, as the researcher believes that knowledge is a complex phenomenon, which cannot be generalised in a value-free and detached manner. Furthermore, the researcher focuses on exploring the topic by the application of critical interpretations and gradually establishing research conclusions (Remenyi et al., 1998).
3.2 Research Approach
The literature outlines two distinctive research approaches, which can be applied in the present dissertation – deductive and inductive. A deductive research approach is suggested to be suitable for scientific research, where the researcher develops a hypothesis, which is tested and examined to establish a theory (Hussey and Hussey, 1997).
In the present context, as the researcher aims to gradually formulate the research theory through the critical evaluation of the research variables, and as the inductive research approach follows research data to construct theory, therefore it can be suggested that the present research approach is inductive. Furthermore, the inductive research approach, which provides greater flexibility, provides the researcher with the opportunity to modify the research emphasis depending on the accumulated findings throughout the research process (Easterby-Smith et al., 2002).
3.3 Research Strategy
A research strategy can be explained as the tool or tools the researcher employs for addressing the research question. There are six research strategies, which can be identified in the literature, such as: experiment; survey; grounded theory; ethnography; action research and case study (Saunders et al., 2003).
The present dissertation employs the research strategy of grounded theory. The researcher primarily focuses on extracting knowledge through research in the phenomenological literature. The present research strategy is appropriate as it is described in the literature to be suitable for inductive reasoning or in other words, applicable to research contexts which aim to gradually establish research assumptions and propositions (Husey and Husey, 1997).
Although the present dissertation is essentially influenced by the research strategy of grounded theory, the researcher subsequently employs a primary research strategy of in-depth interviews to collect data. This primary research method is described in greater details in the ‘Data Collection’ section.
3.4 Time Horizon
Another important characteristic of the present research process is the time horizon. There are two time horizons recognised in the literature – longitudinal and cross-sectional. A longitudinal research process examines particular phenomenon over a given period of time, whereas cross-sectional is focused on a particular moment.
The present dissertation has a cross-sectional time horizon as it is recognised to be appropriate to the research aim and the researcher’s resources. Firstly, the researcher was given a limited period of time which constrained the ability to conduct a longitudinal examination. Secondly, the present research question is not interested in analysing the variance of the research variables over a period of time but focused on exploring and revealing new contextual insight by suggesting new interpretations and theoretical assumptions (Robson, 2002).
3.5 Data Collection Method
The present research process can be described as an exploratory one. It aims to reveal new insight and evaluate the researched phenomena in a new light. Furthermore, the research has a flexible approach to establishing its theoretical propositions, which does not mean that the research lacks clear direction and framework (Adams and Schvaneveldt, 1991).
As exploratory research processes share the common research strategy of exploring the phenomenological literature and extracting expertise from specialists in the field and focus group interviews, similarly the present dissertation incorporates the research strategy of grounded theory and in-depth interviews. In this respect, it can be concluded that the present study is built on a combination of secondary and primary data.
3.5.1 Secondary Data
The secondary data employed can be described as multiple source secondary data. Multiple source secondary data can be divided into two categories – area based, which comprises of academic sources and time series based, which focuses of commercial issues (Saunders et al., 2003). The use of multiple source data provides the researcher with the opportunity to develop a balanced and analytical dissertation. The academic literature is used for outlining the academic context of consumers’ buying behaviour, whereas the commercial sources are used for identification of the current conditions, which are likely to challenge the academic constructs.
3.5.2 Primary Data
The present dissertation incorporates a multi-method research process, where the researcher combines secondary and primary data in the same study. This strategy is chosen as the researcher believes that both methods are significantly dependable on each other in the present research context, and that secondary data provides solid theoretical foundation, whereas primary data contributes to the researcher’s ability to address the most important issues in the present context (Robson, 2002). The primary data is extracted through the conduction of in-depth interviews.
18.104.22.168 In-depth Interviewing
In-depth interviews, also known as unstructured interviews, are recognised as an appropriate data collection method as the information they reveal corresponds to the researcher’s aim of analysing, interpreting and responding to new contextual insight rather than reaching any law-like generalisations. This is why in-depth interviews are a common data collection method in exploratory research projects.
Furthermore, in-depth interviews provide greater flexibility as they can be conducted both face-to-face and over a telephone, which is recognised not to affect the interview outcomes differently (Ghauri and Gronhaung, 2002). This can be considered as a significant facilitation especially with respect to the time constraints, which the researcher experiences.
In the present context, each sub
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