Research on Consumer Behavior Changes and Corresponding Countermeasures in Financial Crisis

LI Ruihua School of Economics, Wuhan University of Technology, P.R.China School of Business, Inner Mongolia Finance and Economics College, P.R.China Abstract: This paper presented that the over-consumption was the direct cause of the US financial crisis. Based on the financial crisis, the author analyzed consumers expected decline in revenue leading to the lack of consumer confidence; rational consumer behavior was replaced by the blind, impulsive buying behavior; consumers price sensitivity was increased, and they also emphasized on cost-performances of products and services; in order to improve competitiveness, consumers psychology and behavior changed such as the developing consumption was welcomed. The author put forward countermeasures to address the financial crisis for government and corporate, in which the author particularly highlighted that the Government should promote consumer with correct concept of consumption, achieving civilized consumption; from the perspective of sustainable development to carry out consumer education; finally, the author took various measures to effectively contain foams. Keywords: financial crisis, over-consumption, consumer behavior, change, countermeasures

1.

Introduction

Since September 2008, the subprime mortgage crisis in the US triggered the financial "tsunami", has been sweeping across the world. The crisis is so ferocious that the world's major countries without exception are subject to impact in different extents, leading to a global recession. A number of scholars have done depth research in the causes of the US financial crisis, such as Wang Lei (2009) thought that "the US financial crisis broke out, to a large extent, is the release of conflict in world's political and economic order in the system and structure level." Liu Guoguang, et al. (2009) referred that the intensification of the basic contradictions in capitalism is the deeper reason of the US financial crisis. Zhou Diankun, et al. (2009) analyzed the causes of the financial crisis from the angle of the system evolution and consumption patterns. Jin Chengxiao, et al. (2009) explained that the root of the US financial crisis is the US economics distortional growth and imbalances in the economic structure, and analyzed the influence of the financial crisis on the global economy and economy of China, then, proposed countermeasures of the financial crisis for China. Shao Changbin (2009) analyzed the impact of financial crisis on consumers` buying behavior. Tang Yun (2008), Cheng Xiuhua (2009), Cheng Liang (2009) researched consumer behavior and marketing strategy during the financial crisis. From the research that has been on the financial crisis, most of the research focused on the analysis of the characteristics of consumer behavior, and proposed marketing strategies for enterprises. However, no academics involved in guiding the consumer response to the financial crisis, in addition to the enterprise, what responsibility the government should take, which is an important goal why the author wrote this paper.

2.

Over-consumption is a direct cause of the US financial crisis

In Mid-19th century, Europe and the United States have achieved major industrialized capitalization, which resulting in polarization of rich and poor and in a relative surplus in capitalist production. For consuming the surplus material wealth, the "consumerism" trend emerged to inspire people to lavish. Consumerism is a way of life that pursuit the unlimited possession of material wealth and the excessive consumption greedily as life value. Its characteristics are: greed - without limits on the demand for material goods, it seems that the world failed to meet the demands of consumerist; profligacy - the consumerist show off extravagance and waste as their own advantage; spread - consumerism has strong

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contagious, it can spread from one group to another group; fast - consumerism pursuit the stimulation of the first time sensory. If they can not be met in the first time they feel meaningless about life. This way of life dominated the consumerists that are to pursuit a decent consumption life, desire the material enjoyment and entertainment on the excesses of life. Since the 90s of last century, the United States entered into a "new economy" era, the trading of financial derivatives became more and more active, and the virtual economy has replaced the real economy that became to the entity of the economy. The economic bubble led to revenue growth continued, making the "consumerism "ideas spread to large areas. To use consumer credit to loan house and car become fashion, conspicuous, extravagant consumption behavior has become a social atmosphere. Now, the United States consumed about 2070 million barrels of oil per day, accounting for the total world daily oil consumption of 8700 million barrels, which is of 23.8%. So if the world 1 / 3 of the population is living as the current US. production and consumption patterns, the consumption of a day is 1.7 times on the current world consumption of oil, which is contrary to the requirements of sustainable development. US economic growth depends on its over-consumption. In US GDP, the highest proportion is consumer spending, about 70%, while the proportion of the production sector is small. From the 80s of 20th century, consumption gradually has become the main driver to promote US economic growth. Especially after 2000, the contribution rate of consumption to economic growth has been about 80%. In 2002, it even reached to 120%. To the end of 2008, the contribution rate of consumption increased by nearly 20%than in the early 80s of last century. In a consumption-driven economic growth, the government is bound to encourage consumption and expand the credit. According to Federal Reserve statistics, the total US national debt relative to GDP has increased from 255.3% in 1997 to 352.6% in 2007; which the ratio of real estate and financial products, respectively, has increased from 66.1% and 63.8%in 1997 to 99.9% and 113.8%. This led to the expansion of sub-prime mortgage market, resulting in a lot of foam. Meanwhile, the over-consumption has made the saving less, resulting in excessive deficit and current account deficit increased. Growing US current account deficits eventually lead to a decline in the exchange rate, which led to the increase in prices of imported goods, resulting in inflationary pressures. In order to maintain price stability, the US monetary authorities inevitably raise the federal rate, which led to the financial market bubble burst, triggering a financial crisis.

3.

Changes of consumer behavior in the financial crisis

In recent years, under the influence of Western culture, "consumerism" trend has spread in China. Some people blindly follow the extravagant consumption patterns of United States, such as, long-distance driving to work as live in rural areas, leading to urban road congestion, oil consuming rising, and air pollution increased; some high-income people interested in conspicuous and extravagant consumption, driving luxury cars and houses, overseas travel routinely; using public funds to enjoy, and so on. If we let them continue, the potential threats are very dangerous. Fortunately, most consumer advocates saving as our virtues, oppose extravagance and waste, so some scholars think that over-consumption has little influence as a direct trigger of the financial crisis on China's consumption. Indeed, from the surface, the impact of financial crisis on China's consumers is lower than the euro zone countries and Japan and South Korea, but if in-depth study of consumer psychology and behavior, we can easily find China's consumers psychology and behavior has changed greatly in the financial crisis. 3.1 Expected incomes decline in consumer, resulting in lack of consuming confidence The influence of the financial crisis has conducted from virtual economy to real economy, resulting in unemployment rising and consumer income reducing, thereby affecting consumption. In particular, it affects the expectations of consumer for future, such as consumers expect that revenue will continue to decline, job opportunities will decrease, which led to lack of confidence in consumer. According to Nielsen released first half of 2009 Global Consumer Confidence Index survey (survey time: 19 March-2 April) shows that the confidence index of global consumer has fallen from 84 points in September 2008 to 77 points. Indonesia topped the list with 104 points, the world's most pessimistic country is in South Korea, and the index is only 31 points. China's consumer confidence has fallen from 96 to 89. In those
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50 countries and regions that Surveyed, in addition to China Taiwan, all of the consumer confidence index fell. 3.2 Rational consumer behavior replaced Blindness, impulse buying behavior The financial crisis has made a lot of uncertainty factors to economic development, so consumers become more and more calm and rational, and purchasing decisions are prudent every time. Consumers will be strictly in accordance with: Cognitive Needs Looking for Information Compare and Balance Decision-making Buying Evaluation, the process to make decision. Irrational and random consumption has declined. Blindness and impulse consumption behavior that droved by victory purchasing motivation with psychological and mental vanity become less and less, which replaced by rational consumer behavior. Although the crisis led to commodity price fluctuate, on which consumer has had a strong holding capability. Consumers will analyze, compare and balance goods and services to make rational purchasing choices by their own consumption experience and a variety of consumer information. 3.3 The price sensitivity of consumers increased, emphasis on cost performance Financial crisis led to the price of goods and services fluctuated frequently, and with impaction of consumer expectations and rational consumption, the consumer is extremely sensitive to the price of goods and services. In the process of decision-making, in addition to search and compare the consumption information, the consumer will also make efforts in price decision-making. They will inquiry and bargain patiently, and strive to get the most suitable price of commodity and to accept the services at the most appropriate price. Meanwhile, they will highlight the effectiveness and durability of products as equally important with price. Therefore, the multi-functional products are more popular than that with a single function, durability and easy maintenance products are also welcomed by consumers. 3.4 In order to improve competitiveness, the developing consumption are sought after During the financial crisis, s economic growth has slow down; production is in relative surplus, unemployment problem is serious, unemployment rate is increasing. In such a grim situation, everyone has a sense of crisis, and they do not want to become a member of the unemployed. Thus, in order to have better performances to keep stability and development in career, the developing consumption that help to raise self-improvement value for consumer become the new hot spot. To improve their professional standards, knowledge and training, People seek opportunities to learning and studies actively. In bookstores, professional courses and research training in counseling, examination room, it is able to see more and more working-class figures, which aims to enhance their quality and competitiveness in the workplace and reduce the risk of being replaced. At the same time, this sense of crisis has affected investment in children's education. For a child's future, parents are increasing their child's education expenses. On every Saturdays, Sundays and winter and summer vacations, children are lantern-like shuttling between the various types of remedial classes.

4.

Countermeasures of the government and the enterprise in the financial crisis

Although scholars believe that the outbreak of the financial crisis has so many reasons from the social system, from the world's political and economic order, also from the US economic policy. But one thing is beyond doubt that is over-consumption as an important incentive lead to the US financial crisis. The way Government increase revenue is to advocate residents to consume more, such as make no tax of goods in the price system; through the improvement of the social security system to enhance consumer confidence and encourage more consumption. It is the policy of this series, together with other deep-rooted reasons, resulting in today's recession, which the US government has inescapable responsibility. Therefore, to response the financial crisis, the government should take the responsibility. They must base on changes in consumer psychology and behavior to develop countermeasures. Of course, in which enterprises have to choose reasonable measures to address the financial crisis. Only by this can they tide over the difficulties.
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4.1 Governments countermeasures 1) To advocate consumer with a correct concept of consumption, achieving civilized consumption United States has long history of over-consumption, which can be traced back to the earliest 1620, the British immigrants time, when immigrants took boat by installment payment, since then, the United States have had consumer credit. After that, the consumer credit got a rapid development. By 1970, the US consumer credit is roughly equivalent to 20% of personal after-tax income. Today, in the United States, consumer credit has become popular to purchase consumer goods. The consumption of this reckless expansion greatly exceeded the capacity of residents and the government, and lead to the crisis situation today. Therefore, the Government should take warning from advocating the consumer with the correct concept of consumption, widespread consumption knowledge in psychology and consumer behavior, and guide consumers to conduct consumption decisions scientifically, avoid excessive consumption, mindless consumption, and abnormal consumption, improve the consumption behavior, and realize civilized consumption. 2) From the perspective of sustainable development to carry out consumer education Over-consumption patterns are unsustainable. Because of the worldwide spread of this consumption, exacerbated the consumption of natural resources, especially in energy, which makes the world to face the danger of drying up oil after 40 years and natural gas after 70 years; this consumption lead to shortages in energy supply, caused international political and military conflicts; harmful gas emissions rise rapidly and increase the greenhouse effect, resulting in disaster-prone. Therefore, the Government must launch from the perspective of sustainable development to conduct consumer, highlighting the dangers of excessive consumption, warning consumers with moderate consumption (moderate consumption more than income) are healthy and sustainable consumption patterns, promote and encourage consumer to choose public spending and concentrated consumption patterns in order to improve the quality of consumption. 3) Take various measures to effectively curb various foams Although the over-consumption has its theoretical origin, such as Friedman's permanent income theory argument assumes that consumers can greatly exceed the current expenditures with current income; Morgans consumer decision-making affecting revenue assumption shows that consumer can completely seek to increase income with need of expenditures, so that at a period of time, the family has been spending more than the current income. But the reality has given us a hard lesson: If mishandled the "degree" of excessive consumption, not only can not achieve to expand demand and stimulate economic growth, it actually will cause a recession. The indisputable fact warns us that, as the market's rapid economic development, the virtual economy presents over-expansion trend apart from the real economy. The economy bubbles increase, such as the IT bubble, the stock market bubble, property bubble, asset bubbles, etc., sooner or later the bubble will be broken, once the bubble burst, it will inevitably be impact on the economy seriously. Therefore, in the same time of promoting economic growth, the Government must take a variety of measures, such as adjusting economic structure, strengthening infrastructure development efforts, increasing social protection and health and education expenditures, raising the tax threshold of personal income, reducing the corporate tax burden, increasing export rebate rate, and implementing a moderate monetary policy, to curb various foams effectively. 4.2 Enterprises countermeasures Financial crisis has changed the concept and behavior of consumer. The enterprise, who focuses the market demand as the center, must adjust marketing strategies promptly to adapt to the changes of consumers in mental and behavior. The enterprise must provide the products and services that are able to meet with consumer demand to improve their competitiveness, and win more market opportunities. Academic research has been put forward options to respond for enterprises, such as building consumer confidence, adjusting product structure, improving products` cost performance, expanding marketing channels and providing Value added services, I agree with scholars point of view, so will not repeat them here.

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5.

Conclusion

The financial crisis is thought-provoking, and it hit an alarm for the world economy. Further confirms whatever the social system, whatever the economic system, whether nation, corporate or individual consumers, everyone must respect the objective economic laws, all activities that disobey the objective economic law and practice will get the most severe punishment. Therefore, countries should be fully played guiding roles in developing economy; based on maintaining the national interest, enterprises must focus the consumers` demand as the center; the consumers behavior must towards sustainable development goals. To build a resource-saving society, an environment-friendly society, a harmonious society needs the state, enterprises and consumers work together. Author in brief: Li ruihua(1968- ), female, Mongolia, born in Inner Mongolia Chifeng City; Industrial Economics PhD in WuHan University of Technology, Inner Mongolia Finance and Economics College of Business Associate Dean, professor, mainly engaged in marketing, consumer behavior research.

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