Consumer Economizing Tactics For Ten Product Categories

ABSTRACT - In this study, consumer economizing tactics for ten product categories are investigated. Consumers with a high level of product involvement, a lower age, optimistic expectations, and high social class are less likely to discontinue their product use but employ more diverse economizing tactics, such as price, quantity, quality, and life-style tactics. Differences between product classes and among consumer characteristics are observed. Longitudinal data will be needed to ascertain an order effect in the economizing tactics.

Citation:

W. Fred van Raaij and Goos Eilander (1983) ,"Consumer Economizing Tactics For Ten Product Categories", in NA - Advances in Consumer Research Volume 10, eds. Richard P. Bagozzi and Alice M. Tybout, Ann Abor, MI : Association for Consumer Research, Pages: 169-174.

Advances in Consumer Research Volume 10, 1983      Pages 169-174

CONSUMER ECONOMIZING TACTICS FOR TEN PRODUCT CATEGORIES

W. Fred van Raaij, Erasmus University Rotterdam

Goos Eilander, Inter/View Market Research, Amsterdam

ABSTRACT -

In this study, consumer economizing tactics for ten product categories are investigated. Consumers with a high level of product involvement, a lower age, optimistic expectations, and high social class are less likely to discontinue their product use but employ more diverse economizing tactics, such as price, quantity, quality, and life-style tactics. Differences between product classes and among consumer characteristics are observed. Longitudinal data will be needed to ascertain an order effect in the economizing tactics.

INTRODUCTION

The present economic recession has a strong impact on many consumer segments and product categories. Consumer income does not rise as it has been in the past. Aspirations people have are not as easily fulfilled as has been in the seventies. Unemployment, high interest rates, and a pessimistic economic outlook create a climate in which many consumers curtail their expenditure, think twice before engaging in major outlays, and save more for an uncertain future. In this study, we investigate how consumers economize and curtail their expenses.

Most consumer research so far has been done in the context of affluence, rising income and expectations. In this period of recession, however, new interests in consumer behavior arises: How do consumers economize? Consumer curtailment is probably not simply the reverse of consumer increase in expenditure. The last addition to consumer welfare (e.g., a winter vacation) is not always the first to be dropped. Consumers may also economize on basic necessities, such as food and clothing.

Which segments of consumers are hurt by the economic recession and stagflation? Caplovitz (1979) finds that lower social class consumers are hurt more severely than consumers of middle and higher social classes. Lower social class and especially minorities have higher rates of unemployment. Basic necessities constitute a longer proportion of their household budget, and price increases of the basic necessities hurt them more than other segments. Minarik (1979), however, argues that inflation (price increases) hurt the middle class more than others. Real income of the middle class has declined with a higher proportion as compared with other social classes. The income of lower class consumers is secured by social security, and governmental programs tend to protect the 'minimum wage households, at least in Western Europe. Middle-class consumers are not only frustrated by a decline of real income but also by expectations and aspirations that will not realize. Shama (1980) concludes that "the middle class feels more adversely affected by stagflation as compared to other social classes. The middle class sought affluence and believed it to be within reach. Better jobs, higher incomes, better homes have been the adrenaline of the members of the middle class, some of whom did reach such goals, thus heightening the expectations of others. The poor, on the other hand, never really believed that the American dream would become a reality.

The economic recession has not only a differential effect on social class and income segments, it also influences consumer confidence. Katona (1975) argues that not only income (--ability to buy--) but also consumer confidence ("willingness to buy--) is < determinant of consumer expenditure, especially for durable goods. At least two components of consumer confidence should be distinguished (Van Raaij and Gianotten 1982): Confidence in the general economic situation of the nation and confidence in one's personal household finances. Between 1972 and 1978, most consumer_ in The Netherlands had more confidence in their household finances than in the general economy of the nation. Since 1979, however, both components of confidence declined dramatically (Van Raaij and Gianotten 1982). It is expected that consumers with a low confidence will curtail their expenses more than consumers with a high degree of confidence.

Consumers of different age groups may react to the economic recession in a different manner. Younger persons may have more opportunities for do-it-yourself alternatives, e.g., repairing their own car and organizing their own vacation.

A fourth factor is product involvement. Consumers with a high degree of product involvement will more likely find ways to keep the product, while consumers with a low degree of product involvement will probably discontinue the use of the product. For instance, consumers highly involved in photography will not stop making pictures but try to reduce costs by having cheaper prints, do the developing and printing themselves, or having fewer pictures. Consumers not involved in photography will be more likely to discontinue their hobby.

In this paper we describe the curtailment tactics for ten product categories, including durables, such as do-it-yourself equipment, living-room furniture, the automobile, and semi-durables, such as a winter coat and jersey/sweater. Energy use is included as a non-discretionary (necessary) product/service category. Important services include restaurants and vacation, while photography is included as a hobby with a segment of highly involved consumers. Only one nondurable, coffee, with limited potential for economizing, has been included in the set of ten products/services.

Economizing Tactics

Several options exist to cut back expenses. Consumers may search for lower prices, use products more economically, and/or discontinue using the product or service. We distinguish four economizing tactics based on price, quantity, quality and lifestyle changes. These tactics are ordered in Table l. The order is from continuous to discontinuous changes, from easy to difficult adaptations. Some economizing tactics, such as postponement of replacement (5) and sharing/borrowing (9), especially pertain to durables, while most price strategies apply to nondurables as well. Do-it-yourself replaces commercial services.

Economizing tactics are not only related to products and services, but also to consumers. Some consumer segments accept the voluntary simplicity life-style (Shama, 1981) and can live without, for instance, a private car; others try to maintain their consumption level as best as possible.

TABLE 1

TEN CONSUMER ECONOMIZING STRATEGIES

We expect that socio-economic characteristics (age, income, social class), consumer confidence and involvement contribute to the explanation of the different economizing strategies for ten products and services, such as the automobile, vacation, energy. photographs. and clothing.

For clothing, all tactics are feasible, even buying second-hand clothes, sharing and borrowing, and making clothes yourself. ,or energy, price tactics are impossible, due to a fixed tariff; the only possibility is switching to night rates.

In general, it may be hypothesized that the ten tactics (Table 1) have a Hierarchical order. This could be tested with panel data over a long time period. Price tactics are easy to adopt. In principle, one may obtain the same quality of the product in a cheaper store, or buy a generic or store brand instead of a national brand. Quantity tactics have some impact on the consumption level. One tries to ration one's purchase quantities of meat, coffee, beer, etc. and to use the car less often. Durable goods have the option of a later replacement; their replacement has a discretionary character. Katona (1975) states that the consumer has a powerful influence on the economy due to these discretionary decisions. Quality tactics contain a paradox: One may either increase quality (durability) or decrease quality ( lower price). A high-quality product may have a longer lifetime and may be cheaper per year. Life-style changes have the strongest impact or one's consumption and arc thus the last we expect to occur. Household production, do-it-yourself replaces professional service; one may share newspapers and magazines and even one's car. Voluntary simplicity (Shama 1981) is the change to a more ascetic life-style, e.g., without a car or other modern luxuries. Younger people tend to have a less materialistic outlook (Inglehart 1977) and are more likely to adopt a voluntary simplicity life-style.

Hypotheses

Economizing tactics are determined by product class and consumer characteristics. Consumers with a high degree of product involvement will try to continue their product use as long as possible. The enthusiastic photographer will not easily stop making pictures but will instead try to continue his hobby using price, quality, and quality tactics. We expect:

H1: Consumers with a high level of product involvement are less likely to stop their product use and are more likely to employ more diverse tactics.

Younger consumers are in a better position to shop around, search for bargains, and have more physical abilities for do-it-yourself production, repairs and maintenance, as compared with older consumers. We expect:

H2: Younger consumers are less likely to stop their product use and are more likely to employ more diverse tactics.

Consumer confidence, based on expectations about household finances, is a determining factor for consumer expenditure . Confident consumers, with optimistic expectations about the future, continue buying durable and luxury goods, use more credit and save- less, as compared with pessimistic consumers. Confident consumers are less fatalistic about the future. Thus, we expect:

H3: Consumers with a high level of confidence are less likely to stop their product use and are more likely to employ more diverse tactics.

Consumers of high social class will have more knowledge and experience about products, and perceive more economizing tactics that they may use. High social class correlates with high income and, thus, to more discretionary expenditure. Consumers of high social class are not much forced to change their consumption patterns as consumers of middle and lower social class. We expect:

H4: Consumers of high social class are less likely to stop their product use and are more likely to employ more diverse strategies, if any.

Research Design

In order to test the above hypotheses, a questionnaire has been developed with questions on the economizing tactics for ten product categories. The general question is: "If you should have to economize on product x, how would you to so? The respondents can select one or more alternatives f a number of economizing tactics, including an open alternative "otherwise."

For each product category the most likely economizing tactics are formulated, e.g., for the automobile:

a. Buy a cheaper car (price, life-style)

b. Take a cheaper car insurance (price)

c. Drive less (quantity)

c. Drive more fuel-efficient (quality)

e. Less maintenance (quality)

f. Do-it-yourself repairs/maintenance (life-style)

g. Stop driving (life-style)

Similar questions were asked about the other nine product categories: do-it-yourself equipment, energy for space heating, visits to restaurants, living-room furniture, vacation, coffee, winter coat, jersey or sweater, photography. These questions were part of an omnibus survey of Interview Market Research, Amsterdam. Other questions in this survey were the expectation of the general economic situation of the nation for the next twelve months (favorable-unfavorable); the expectation of personal household finances for the next twelve months (favorable-unfavorable); more or less than f 100 of expenditure on a product category; involvement in a produce category (much-less attention); perceived product necessity (necessary-unnecessary); and supermarkets and department stores visited regularly.

The field work was done in February 1982. The net sample size was 1253 respondents, age 16 years and older. Some samPle characteristics are:

a. 628 male and 625 female respondents.

b. 46 percent 34 years and younger; 24 percent between 35 and 49 years; 30 percent 50 years and older.

c. 30 percent from large metropolitan area; 25 percent from smaller cities; 45 percent from rural areas.

d. 48 percent high social class (upper, upper middle); 52 percent low social class (lower middle, lower).

Results

Consumer expectations for the next 12 months are shown in Table 2. Consumers are less pessimistic about their household finances than about the general economic situation, especially the young respondents. Pessimism is high for respondents of high age and Low social class. The same difference between own financial expectations and general economic expectations has been obtained by Van Raaij and Gianotten (1982). The question on expectations about household finances has been used in the explanation of economizing tactics (Hypothesis H3). Confidence in this study is related to their own household finances and not to the general economic situation.

TABLE 2

CONSUMER EXPECTATIONS ABOUT THE GENERAL ECONOMIC SITUATION AND HOUSEHOLD FINANCES

Respondents were asked whether they spent f 100 or more on a product category during the last year. In another question the level of attention to a product has been assessed: How much attention do you spend on this product category? In a third question the degree of necessity of a product category has been assessed: Do you think this product category is really necessary (you cannot do without)? The results of these three questions have a similar pattern (Table 3).

TABLE 3

EXPENDITURE, IMPORTANCE, AND NECESSITY OF PRODUCT CATEGORIES

Groceries, clothing and energy are considered to be necessary and create most product attention. These non-discretionary categories are also highest in the expenditure; 78 percent or more of the respondents spent f100 ($37) or more on these categories. Second in expenditure, attention and necessity are vacation, the home, and the automobile. These three discretionary categories have a high symbolic value; consumers do not easily give up their vacation, home, and car. The least necessary are photography and restaurant visits. Attention and expenditure is also lower. If consumers have to curtail their expenses, photography and restaurants are probably the most likely candidates for a cutback.

Involvement

Product involvement has been defined as follows. Respondents with a high score on the attention question and a high score on product necessity and an expenditure of f 100 or more, have been classified as highly product involved. The size of the high-involvement group differs for each product category (n=1253):

TABLE

Many consumers are highly involved in coffee, energy, and clothing; less consumers are involved in discretionary items such as vacation, furniture, do-it-yourself equipment, and the car. The number of consumers highly involved in restaurant visits and photography is only four percent for both.

In Table 4, the economizing tactics are given for consumers with high and low levels of product involvement. We expect that consumers with a high level of product involvement are less likely to withdraw and more likely to employ more diverse strategies (Hypothesis H1). For only four products withdrawal is a mentioned tactic. For three of these four products, high-involvement consumers indicate a lower degree of withdrawal (restaurants, vacation, and automobile). Highly involved consumers do not stop visiting restaurants but visit less frequently and order less (quantity tactic). They also do not stop having a vacation, but have a less expensive vacation (price tactic), a shorter vacation and no second vacation (quantity tactic), and more self-organized vacations (life-style tactic).

TABLE 4

ECONOMIZING TACTICS FOR HIGH AND- LOW INVOLVEMENT WITH THE PRODUCT CATEGORY

They generally do not sell their car but drive less (quantity tactic) and drive more energy-efficiently (quality tactic). Hypothesis l is supported for three of the four products.

Highly involved consumers are more engaged in energy conservation; they reduce the number of hours of heating their home (quantity tactic) and maintain a lower temperature (quality tactic). No differences are observed between highly and lowly involved consumers in quality improvement (home insulation, more efficient heater).

Consumers with a low level of involvement with regard to living-room furniture, more often postpone replacement (quantity tactic), while consumers with a high level of involvement tend to purchase higher quality furniture.

Hypothesis H1 is not supported for photography. High and low involvement consumers discontinue their hobby in an equal way (19 and 17 percent). Highly involved consumers tend to visit a cheaper store (price tactic), use more black and white and smaller prints (quality tactic), and do more themselves (life-style tactic). Low-involvement consumers, instead, shoot less pictures (quantity tactic).

Age

Three age groups are distinguished: Young (< 34 years), middle (35-49 years), and old (> 50 years). The second hypothesis states that young consumers are less likely to discontinue their use of a product or service, and use more diverse strategies to maintain their product use at a lower cost. The results can be found in Table 5.

Withdrawal is an economizing tactic for only four products. In three of these four products younger people are less likely to withdraw: visits to restaurants, vacation, and photography. No significant differences exist for the automobile.

TABLE 5

ECONOMIZING TACTICS FOR THREE AGE GROUPS

Whereas younger people are less likely to discontinue their restaurant visits, they tend to go less often (quantity tactic). Persons in the up to 49 years age bracket do not generally drop their vacation trip; younger people have a cheaper vacation (price tactic) and middle-age consumers stay at a shorter distance from home (quality tactic). Consumers who do not stop their photography hobby, tend to visit a cheaper store (price tactic), take less pictures (quantity tactic), and do more themselves (life-style tactic).

Hypothesis H2 is not supported for the automobile. We observe that younger people tend to buy a cheaper car or cheaper car insurance (price tactic), repair their car themselves (life-style tactic), and drive more energy-efficiently (quality tactic). Persons in the 35-49 age group tend to drive less (quantity tactic).

Differences are also observed for other product categories. Younger and middle-age people buy less do-it-yourself equipment (quantity tactic) and borrow their -tools more often (life-style tactic). Younger people tend to invest in home insulation (quality tactic). With regard to coffee, younger people buy a cheaper brand or visit a cheaper store (price tactic), rather than reducing the number of cups of coffee (quantity tactic). Older people invest in a high-quality winter coat for many reasons (quality tactic). No differences between age groups are found for living-room furniture and the jersey/sweater.

Confidence

Optimistic and pessimistic consumers differ in their curtailment tactics. Pessimistic consumers tend to discontinue their restaurant visits, vacation and photography more often than optimistic consumers. Hypothesis H3 is thus supported for three of the four products. No differences are obtained between optimistic and pessimistic consumers with regard to the automobile (Table 6).

Whereas pessimistic consumers tend to drop their restaurant visits, optimistic consumers visit less often (quantity tactic). Whereas pessimistic consumers do not have a-vacation, optimistic consumers have a cheaper vacation (price tactic). Whereas pessimistic consumers discontinue photography or take less pictures (quantity tactic), optimistic consumers visit a cheaper store (price tactic) and have more black and white or smaller prints (quality tactic).

TABLE 6

ECONOMIZING TACTIC FOR OPTIMISTIC AND PESSIMISTIC EXPECTATIONS (CONFIDENCE)

Some differences between optimistic and pessimistic consumers are observed for other product categories. Pessimistic consumers purchase cheaper do-it-yourself equipment (price tactic). Optimistic consumers invest in home insulation and efficient heaters (quality tactic). Pessimistic consumers postpone the replacement of living-room (quantity tactic). Optimists drink less coffee (quantity tactic), while pessimists substitute a jacket for their winter coat (life-style tactic) and buy a cheaper jersey or sweater (price tactic).

Social Class

Consumers of high and low social class are different in their curtailment behavior. Consumers of low social class are more likely to stop visiting restaurants, having a vacation, and taking pictures. Again, no differences are observed for the automobile. Hypothesis H4 is supported for three of the four product categories.

(Table 7 about here)

Whereas consumers of low social class stop visiting restaurants, consumers of high social class visit less often (quantity tactic). People of high social class tend to have their vacation but save on the price (price tactic), have a shorter vacation. or no second vacation (quantity tactic), and/or select a destination at a shorter distance (quality tactic). High social class photographers are rather changing to less color and smaller prints than discontinuing their hobby.

Interesting differences are obtained for the other product categories. Consumers of high social class tend to curtail their expenses by buying less do-it-yourself equipment (quantity tactic). They reduce their car expenses by driving less (quantity tactic) and more energy-efficiently (quality tactic). Consumers of high social class are also inclined to buy a cheaper jersey or sweater (price tactic) or knit one themselves or borrow one (life-style tactic). No significant differences are obtained for living-room furniture, coffee, and the winter coat.

Summary and Discussion

Consumers indicate a number of economizing tactics, when asked "If you should have to economize on product x, how would you do so?" Consumers with a high level of product involvement are less likely to discontinue their product use, at least for three of the four product categories. In a similar manner we observe that younger consumers, consumers with optimistic expectations, and a high social class are less likely to discontinue their product use. Again, for three of the four product categories, automobiles are the exception.

Consumers with a high level of product involvement find more diverse ways to curtail their expenses. They employ price, quantity, quality, and life-style tactics. More diverse economizing tactics are also observed for younger consumers, consumers with optimistic expectations. and high social class.

Several explanations may be brought forward for these results. First, product involvement means a high level of invested interest in the product category. Consumers are unwilling to give up these investments in interest, knowledge, and identification. Thus, other ways are tried to curtail expenses but to maintain the product use. The total proportion of economizing tactics may be an indication of involvement. The total proportions are greater than 1.00, because respondents mention more than one economizing tactic. The number of economizing tactics is especially high for energy conservation, although almost only quantity and quality tactics are mentioned.

Second, younger people (age) may have high aspirations for their future. They are unwilling to give up discretionary activities, such as vacation, restaurant- visits, and photography. Thus, they try to find other ways to cut back their expenses. They are also better able to change their life-style and to do their own repairs and maintenance.

Third, consumers with optimistic expectations (confidence) are not willing to give up discretionary consumption. They adapt to the altered economic conditions by price, quantity, and lifestyle tactics. For them these reactions are more attractive than withdrawal. Another explanation is that they are less hurt by the adverse developments and do not yet consider withdrawal.

Fourth, consumers of a high social class may be less affected by the economic recession and find diverse ways to curtail their expenses. Their educational level might be higher, and they may perceive more opportunities for curtailment.

With these data, it could not be checked, whether withdrawal is an ultimate tactic after all other tactics have been tried. After reductions in price, quality, quantity, and life-style change, no other possibility remains than withdrawal. Longitudinal data are needed to study this temporal effect. In the same study, the hierarchy of Table l could be tested, that the order of economizing tactics is price, quantity, quality, life-style, and, finally, withdrawal.

Another theme for research is the order of product categories. Curtailment, thus, should start with discretionary (and luxury) items, such as restaurant visits, vacation, and photography. Then durables, such as the car, furniture, and clothing items, should be the subject of curtailment. Energy and food will come last, because they are largely nondiscretionary. The order of product categories may be obscured by the different economizing tactics. A consumer may start with price tactics for many categories, and then go on with quantity tactics, in a lexicographic way.

In this study, economizing intentions have been measured. The intentions should be compared with actual economizing behavior. Curtailment means a reduction of the consumption level and is not attractive to consumers. This means that these intentions will only be realized under the coercion of an adverse development. Consumers are actually not willing to realize these intentions, if the situation does not force them. We expect a strong situational effect in the intention-behavior relationship.

REFERENCES

Caplovitz, D. (1979), Making Ends Meet: Families Copes with Inflation and Recession, Beverly Hills: Saga.

Inglehart, R. (1977), The Silent Revolution. Changing Values and Political Styles Among Western Publics, Princeton: Princeton University Press.

Katona, G. (1975), Psychological Economics, New York: Elsevier.

Minarik, J.J. (1979), "Who Wins, Who Loses from Inflation?" Challenge, 22, 26-31.

Van Raaij, W. F and H.J. Gianotten (1982), Consumer Confidence, Expenditure, and Curtailment," Proceedings, Esomar Congress, Vienna.

Shama, A. (1980), Marketing in a Slow Growth Economy: the Impact of Stagflation on Consumer Psychology, New York: Praeger.

Shama, A. (1981), "Coping with Stagflation: Voluntary Simplicity," Journal of Marketing, 45, 120-134.

----------------------------------------