Literature Review 2.0 Spending Behavior

Nowadays, the marketers are facing great competition among themselves to market the merchandise and services to the consumers. The analysis of consumer spending behavior allows the marketers to comprehend how consumer thinks, feels and react to the subtle environment when buy a product(Wassana Suwanvijit, 2009). Hence, the marketer can predict the consumer spending behaviors and develop a proper marketing intend to address the merchandise to the consumers.

According to businessdictionary. com, consumer spending could be defined as "goods and services bought by households in the satisfaction of these needs and wants". In addition, Spending is thought as "the act of expending" and behavior is thought as "response of an individual to the action, environment, person, or stimulus. " While Kotler (2000) stated that consumer behavior studies "how individuals, groups and organizations select, buy, use and get rid of goods, services, ideas or experiences to satisfy their needs and desires. "

In our research context, spending behavior is thought as the act of disbursing money in reaction to an action, environment, or person in the satisfaction of needs and wants.

2. 1 Factors

Wilson, et. al, 2005 explained that consumer spending behavior is strongly influenced by four factors: Cultural factor (culture, sub-culture, social class), Social factor (groups, family, roles and status), Personal factor (Age and life cycle stage, life-styles, occupation, monetary situation, personality and self concept) and Psychological factor (motivation, perception, learning, beliefs and attitude). Understand these four factors may help to address customers' needs and wants and lastly increase sales. Furthermore, you can find another factor so-called economic factor which would affect consumers' spending as well.

2. 1. 1 Personal Factor

Wassana Suwanvijit, (2009) conducted a report to examine factors affecting consumer life-styles and purchasing behaviors. He found that consumer life-styles derive from and personal through social and cultural learning and consumer demographics will influence consumer's behavior.

In this study, Wassana Suwanvijit, (2009), administered a questionnaires to 300 consumers at Songkla province. The result indicated that demographic and socio-economic factors affecting the buyer life-styles and purchasing behaviors. In Songkla, average spending rate was approximately 550 baht per time and the factor affecting the spending per time was consumer income. The writer also discovered that consumer promotion will affect consumers spending behavior and sales.

Chetsada Noknoi, Sutee Ngowsiri, and Wannaporn Boripunt, (2009) also conducted a report to test the relationship between demographic characteristics and the consumer behavior. The study found that consumer behavior is dependent on the demographic characteristics such as income, age, marital status, occupations, etc.

Besides, predicated on the research paper done by Juma K. Salim, the researcher proved that various life cycle stages and socio-demographic factors such as region of residence, race of the reference person, and sex of the reference person were found to be substantial factors of the pattern of expenditures within each occupational group. The researcher's email address details are consistent with the results found by Abdel-Ghany and Sharpe (1997), Cage (1989), and Jacobs, Shipp, and Brown (1989). The researcher also proved that the occupation influence expenditure between teachers and non-teachers. Teachers spend a lot in only two types of expenditure, education and miscellaneous, in comparison to professionals and administrators or managers. Besides occupation, level of education also influences spending behavior. Income, education, and occupation are a few of the factors that influence one's position in society.

Vanessa G. Perry and Marlene D. Morris (2005) examined the relationship between consumer financial knowledge, income and locus of control on financial behavior. In this research, it suggested that consumers' propensity to budget, save and spending depends partly on their level of perceived control over outcomes as well as knowledge and financial resources. After that, race and ethnicity can also affect the consumer financial behavior. According to Rotter (1966), locus of control had been defined as a general, relatively stable propensity to see the world in a specific way, capturing general beliefs about the sources of rewards and punishments. The study showed that each self-concept influenced both financial and non-financial preference and behaviors.

Consumer spending behavior is also affected by someone's personality and attitude. Cordell et. all (1996) and Cadha (2007) explained that the individuals are drawn to buy counterfeits of luxury brands due to the desire of owning the prestige and status symbol that the trademarks brand shows. T. Min, P. Ian and Curtain had viewed the attitudes towards counterfeiting of luxury brands can be influenced by the person personality variable (e. g. value consciousness, integrity, personal satisfaction, trend tracking and the status consideration). They reviewed the theories established and examined their knowing that the desirability of buying the counterfeit products was influenced by the "value" of the brand name (which labeled on the counterfeit product and add value to the product). Below are the explanations of the personality variables which could reveal a person spending behavior.

i. Value consciousness

Human have curiosity to get variety and difference of a certain products/services and they try to devote to the news fashion products to be able to satisfy their curiosity. For those who can afford the branded products, they'll obviously spend big money in order to get the value of that product. Nevertheless, people will attempt to attain the value of the blissful luxury brand things by choosing the counterfeit product with lower prices.

ii. Integrity

If the consumers view the integrity as an important value, there will be less people

to purchase the counterfeiting of luxury brands which indirectly change their spending behavior to buy non-branded things with possess a cheaper prices-low consumption.

iii) Personal Satisfaction

Accomplishment, social recognition and desire to take pleasure from the valuable things are the personal satisfaction variables in their spending behavior where consumer will be more conscious of the looks and visibility by purchasing the style products. By shelling out for the new arrival of products which is more costly, they diluted their income and incurred more expenditure in their own saving-spending portfolio.

iv) Status consideration

Status consideration is refers to consumer who are both seeking self-satisfaction and recognition as well for showing to surrounding people. Because of this status recognition, people tend to spend more to buy the blissful luxury brand which indirectly changed their buying behavior.

2. 1. 2 Cultural Factor

M. Pierre, (1958) claimed that individual spending pattern shows a person class position despite from the person's income. He classified a person spending structure was afflicted by the influences from family, their colleague, voluntary association, age and gender. These influences variables on affecting a person spending behavior integrated together to be able to classify the individuals class position in his/her social unity. Pierre also mentioned that the ranked status system involved all the members of any society in term of hierarchy (from super-ordinate to sub-ordinate). Whereby, whether a person will or won't try to buy something are strongly related to his/her class membership, and depend on whether the person is mobile or stable. He specified that the consumption patterns included a several factors such as class replacement, choice of store, communications skills, save versus spend, and psychological differences.

In his studies, he realized that there are six-class system which is Upper-Upper Class (old families), Lower-Upper Class (newly arrived), Upper-Middle Class (professionals & successful business men), Lower-Middle Class (white collar salaries), Upper-Lower Class (wage earner & skill labor groups), and Lower-Lower Class (Unskilled labor groups).

i) Class Placement

M. Pierre explained that the class placement can be determined in three categories which included the occupation, income source and housing type (e. g. luxury apartment, banglo). In his research in metropolitan area (Chicago), he found out that the Upper-Lower class people have got expensive house and the house was equipped by the solid heavy appliance. While, the Lower-Lower class people have less property minded (lack of intention to buy or maintain a home) plus they intended to spend their income on their clothes or automobile.

ii) Choice of store

M. Pierre's studies revealed the relation between selection of store, pattern of spending and class membership. He described the people are very realistic in the form of spending in order to complement their values and expectations refer on which type of store they choose (e. g. high status branded shop-Nike, Addidas). He verified that the social status of the department store becomes the mostly basis to recognize the consumer class position. He mentioned that folks are not going to take action by entering to a store where he/she might not affordable.

iii) Communications Skills

The kind of super-sophisticated and clever advertising is nearly meaningless to Lower status people. M. Pierre mentioned that the lower class people might not comprehend the subtle humor in the advertisement(s) and they are difficult in extracting the art of the advertisement(s) information. There is also a new approach in identifying the information given. In other word, they insufficient intelligence and have different understanding in their communication skill. These indirectly defined the spending behavior between class positions of an person.

(iv) Saves versus Spends

M. Pierre clarified that the Middle-Class people will often have the financial knowledge put in place their thinking for the forms of saving whereby they have a tendency to choose the investment saving. While Lower-Status people designed to save in an almost low-risk funds (non-investment saving) which can easily converted to spend-able cash. This evidently showed that the lower status people have more spending habit. Pierre mentioned that the Lower-status people will spend on artifact-centered products (cheaper items) and the Middle-Class people will devote to experience-centered products (planned spending). But, Pierre stated that the spending behavior of any person still governed by class membership in his/her society.

(v) Psychological differences

M. Pierre explained that the spending-saving analysis has a very obvious effect in psychological implications to differentiate the classes.

Middle Class

Lower Status

Pointed the future

Pointed present and pass

More urban identification

More rural identification

Stress on rationality

Non rational essential

Greater sense of preference maker

Limited sense of preference maker

See themselves linked with national happening

Concern their own and family members

2. 1. 3 Psychological Factor

D. Ap & S. K. Pamela, (2005) argued that consumer behavior is often strongly influenced by the subtle environment and traditional perspective on consumer choices. They explained that people always occasionally purchase the things at that moment where they choose the merchandise at this time of awareness and occupied with things rather than thinking on selecting an inexpensive groceries to get. This led to troubling the consumers' spending habit.

Bargh(2002) described the consumer behavior are cast components of the cognitive psychology. While, Chaiken(1980) and Petty, Cacioppo and Schuman(1983) explained that, before people buy(or choose or decide), they may be less initiative to accumulate the products' information. Attitudes can be based on cognitive beliefs such as when a person finds a product which is very helpful or more benefit effect, or the product show and have symbolic meanings (Venkatraman & Mac-Innes, 1985).

Karen M. Stilley, J. Jeffrey Inman and Kirk L. Wakefield (2010) conducted two studies to research the consequences of promotional saving on both planned and unplanned spending, and how would it varies according to income level. To be able to test the hypotheses, Karen M. Stilley et al. interviewed 400 customers who entered two grocery stores located in a southwestern U. S. city. Every tenth shopper or one every five minutes was selected, whichever came first. In addition, respondents were first asked what items they planned to get and how much were they planned to spend in total. Then, In-store slack (ISS) was calculated by subtracting the itemized portion from the full total respondents planned to invest. Besides, respondents were required to indicate their household income before they exit the grocery shops. For the purpose of increase the respond to such sensitive question, respondents received seven choices of range rather than gave a specific figure of household income. The results of the study showed that the promotional on unplanned grocery items would attract customers to invest more which is increased with the higher income level.

Apart from that, Ajay Kalra and Mengze Shi (2010) also examined sweepstakes reward structures that maximize consumers' valuation. They claimed that consumers' value maximizing sweepstakes should effectively motivate consumers' participation and thus increase sales. From other perspective, sweepstakes and contests would increase consumers' spending on a certain products. Ajay Kalra et al. defined sweepstakes and contests as the promotional tools utilized by organizations to attract more customers, which gaining additional sales. Insurance agencies sweepstakes, consumers are have a tendency to spend more in order to raise the possibility of winning grand prize.

In addition, the introduction and increased use of electronic transfer systems has resulted in the likelihoods of your cashless society (Humphrey et al. , 1996; Humphrey and Berger, 1990; Olney, 1999). In the study paper done by Mohamad bin Ali (2004), the variables been developed are hedonic motivation, bank cards used, unplanned purchase, peer influence, TV viewing and shopping frequency. The results exhibited the positive correlation of hedonic motivation, credit card use and unplanned purchases with compulsive buying tendency. Many people spending release a stress and address it as retail therapy. Shoham and Brencic (2003) mentioned that people go to shopping as retail therapy are expect that shopping could reduce their stress. Visa or mastercard is encourages compulsive buying because mastercard eliminate immediate dependence on money to buy thing.

Furthermore, Fusaro (2006) argues that debit card users make more frequent and smaller withdrawals to control their spending behaviour. A cashless transaction will take off the pain of transferring 'cash' and could encourage consumers to invest more. From a 'hedonic perspective', a cashless transaction does not recap the very thought of the money spent at the time of purchase when compared with cash payment which recaps thoughts about costs or benefits of purchase during purchase (Prelec and Loewenstein 1998, p. 25).

D. Ap & S. K. Pamela, (2005) made a several statement on the factors of unconscious spending behavior of the consumers:

i. The options of buying the product are influenced by automatically response or

one person's attitudes

ii) Attitudes weren't really guide the behavior of the person's spending and

people tend to buy things on impulse and the impulse choices are strongly

affected by the subtle environment.

From these statements, they reviewed and discussed about their studies on consumer behavior. They described two important results on the understanding which:

Perception-behavior link is a mere perception of the social environment which

leads people to face in direct effect behavior. This imply that the behavior of a person is often imitative (follow others' action) and therefore this behavior is contagious (spread and affect others-ripple effect)

Automatic goal pursuit related to the goal-directed-behavior where the

consumer purchasing behavior is often unconsciously guided by the surroundings.

2. 1. 4 Social Factor

A person's spending may be influenced by his social group of people, which normally being called virtual communities. It really is defined as self-selecting sets of individuals engaged in sustained computer-mediated interactions around common interests or goals, governed by shared norms and values, and serving individual and shared needs (Bagozzi and Dholakia 2002; Dholakia, Bagozzi and Pearo 2004). Such characteristics of virtual groups as open, non-discriminatory participation, likelihood of anonymity, and low visibility of product use claim that virtual communities potentially employ mechanisms of influencing shopping decisions that are different from those of other reference groups.

Some virtual communities apply informational influence on shopping decisions by aiding the transfer of information among reference group members regarding product opinions (Deutsch and Gerard 1955). In virtual communities information can be spread through what other members post about their product and brand use, or shown through picture sharing and in occasional face-to-face meetings.

2. 1. 5 Economic Factor

Rex Y. Du and Wagner A. Kamakura (2008) examined how consumers allocate their discretionary income to meet different consumption needs and how the resultant consumption pattern will change in response to changes in prices and budgets. For example, how can escalating gas price affect consumers' spending on food and apparel. Rex Y. Du et al. had used the CEX family extracts made available by the National Bureau of Economic Research (NBER) for the 1982-2003 period. The CEX was collected from different samples every year and 66, 368 households were being examined in this research. Besides, Rex Y. Du et al. had conducted three policy simulations to test consumers' reaction to environmental shock. Those three policy simulations were reactions to shift in energy costs, a reaction to a tax rebate and welfare losses due to spiraling costs of prescription drugs. The result for the first simulation showed that consumers reduce their spending when the power costs increase, especially the poorer quintile. For the next simulation, the result showed that tax rebate would increase consumers' spending even though for those nonessential items, such as airline fare and charity. Going back simulation, the effect showed that consumers might have reduced their prescription drug expenditure by an average of 37% while maintaining the same degree of treatment. Indeed, economical condition would affect consumers' spending behavior.


Indeed, consumer spending behavior is strongly influenced by the factors such as personal, cultural, psychological, social and economical condition. Demographic characteristics such as income, age, marital status, occupations, etc. could have direct relationship to consumer behavior (Chetsada Noknoi et al. 2009). In the research done by Wassana Suwanvijit (2009), 300 questionnaires were distributed to the respondents in Songkhla. For your city with a population more than seventy a large number of people, it might be better if the amount of respondents could be at least 500 in order to draw a far more convincing conclusion about the results. Next, the influences from family, colleague, friends, etc. would affect a person spending behavior. Besides, it has to be based upon several factors such as class replacement, choice of store, communications skills, save versus spend and psychological dissimilarities as well (M. Pierre, 1958). Furthermore, the promotional savings, sweepstake contests, simple payments, etc would motivate consumers to invest more, which directly affect their spending behavior. In the research done by Karen M. Stilley, J. Jeffrey Inman and Kirk L. Wakefield (2010), they collected respondents' household income through provided choices of range to the respondents rather than asking a specific figure from them. This step was more effective in getting information from the respondents due to confidential problem. After that, virtual communities may affect a person spending behavior through the info given among reference group members (Deutsch and Gerard, 1995). Lastly, the financial factors such as changing in gas price, tax rebate, etc. would affect consumers to improve their spending as well.

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