CB7

Both personal and social conditions influence how we spend our money. Explain.

The field of behavioral economics studies how consumers decide what to do with their money.

Consumer confidence—the state of mind consumers have about their own personal situation, as well as their feelings about their overall economic prospects. It helps to determine whether they will purchase goods and services, take on debt, or save their money.

Overconfident consumers :We all try to be optimistic about the future. But overconfident consumers wear rose colored glasses when it comes to how they'll pay tomorrow for what they buy today. They have little or no savings and they often overestimate future earnings based on credit limits. An overconfident consumer is more likely to buy big ticket items.

Status seekers are willing to go into debt to achieve a desired standard of living. And if their income falls, they can't ratchet back their lifestyle. They always have to own the latest, greatest stuff, and they

figure that if their neighbors have a BMW, then they deserve one, too.

 Smart shoppers can easily differentiate between needs and wants, and mostly stick to buying what they need. Though they may splurge occasionally, they comparison shop whenever possible to get the best price.Smart shoppers also have their wits about them regarding the long-term effects of their purchases. They don't buy if they don’t know where the money will come from and it follows that they pay off

their debt monthly. Smart shoppers stockpile their extra cash in savings so they have a cushion for unexpected expenses.

People who occupy different positions in society consume in different ways, which helps create a unique lifestyle. Consumer demand for goods depends on their ability and willingness to buy.

Social class can have a profound effect on consumer spending habits. Perhaps the most obvious effect is the level of disposable income of each social class. Generally, the rich have the ability to purchase more consumer goods than those with less income, and those goods are of higher quality . There is also a distinction in the type of goods purchased. For example, the upper class tend to be the primary buyers of fine jewelry and often shop at exclusive retailers. The lower class, in contrast,are much more concerned with simply getting by; they focus more on necessities.

We group consumers into social classes that say a lot about where they stand in society. Briefly explain.

Social class is measured in terms of status; a person belonging to a particular class is said to hold status similar to members of that class. So social class is defined in terms of the amount of

status the members of a particular class relatively have, in comparison with members of other social classes. Broadly speaking, the stratification into varied social classes, is done on the

bases on three factors, viz., wealth (economic assets) power (ability to exert influence over others) and prestige (recognition received). However, marketing academicians and researchers, as well as consumer researchers, define status in terms of demographical variables like income, occupation and education; in fact, the three are interrelated and thus, used in conjunction to each other.

Social class is hierarchical in nature. The social-class categories are ranked in a hierarchy that ranges from low to high. Based on education, occupation and income, the society is divided into various ranks, such that people in a particular rank are similar to others in the same rank and different across various ranks. So members of a particular social class view themselves as a) having a status similar to others in their own class; and b) having a status high or low than members of the higher or lower class. Based on the social class, they view themselves equalto other (in the same social class), inferior to others (from higher social class), and superior to others (from lower social class).

The hierarchical structure holds relevance for a marketer.

- First, marketers can use this as a basis to segment the market; the various strata provide a

basis for market segmentation.

- Two, when people are “other-directed” or susceptible to social influence, they would buy such

products and services and/or brands that people from their respective social classes purchase.

This is because they look for social approval. So they would purchase certain products and

service offerings and/or brands because they are used and favored by members of their own

class.

- Third, people are class conscious and relate brands to their social class; thus, they would buy

brands which they feel relate to their “class”, and would avoid brands that they relate to “lower-

class" products. There are social-class influences on the actual consumption of products.

-Fourth, the higher social class or the upper social class also acts as reference groups, for

people in the lower class. The latter aspire to emulate the former and desire buying products

and brands which the former buy.

A person’s desire to make a statement about social class influences the products he likes and dislikes. Elaborate.

People within a social class are similar to each other. This similarity is not only witnessed in terms of their education, occupation and income, but also their thinking, values, norms, attitudes, lifestyle and behavioral patterns. There is similarity among members within each social class and dissimilarity with between social classes.

Social classes are defined as groups more or less homogenous and ranked against each other according to a form of social hierarchy. Even if it’s very large groups, we usually find similar values​​, lifestyles, interests and behaviors in individuals belonging to the same social class.
We often assume three general categories among social classes : lower class, middle class and upper class.
People from different social classes tend to have different desires and consumption patterns. Disparities resulting from the difference in their purchasing power, but not only. According to some researchers, behavior and buying habits would also be a way of identification and belonging to its social class.
Beyond a common foundation to the whole population and taking into account that many counterexample naturally exist, they usually do not always buy the same products, do not choose the same kind of vacation, do not always watch the same TV shows, do not always read the same magazines, do not have the same hobbies and do not always go in the same types of retailers and stores.
For example, consumers from the middle class and upper class generally consume more balanced and healthy food products than those from the lower class.
They don’t go in the same stores either. If some retailers are, of course, patronized by everyone, some are more specifically targeted to upper classes such as The Fresh Market, Whole Foods Market, Barneys New York or Nordstrom. While others, such as discount supermarkets, attract more consumers from the lower class.
Some studies have also suggested that the social perception of a brand or a retailer is playing a role in the behavior and purchasing decisions of consumers.
In addition, the consumer buying behavior may also change according to social class. A consumer from the lower class will be more focused on price. While a shopper from the upper class will be more attracted to elements such as quality, innovation, features, or even the “social benefit” that he can obtain from the product.