case study about consumer behavior

Understanding the ever-evolving, always-surprising consumer

For many consumers around the world, a return to normalcy feels so close, yet so far away, in light of the alarming spread of COVID-19 variants. Although it’s unclear what the next 12 to 24 months will bring, what’s almost certain is that consumers won’t simply revert to doing exactly what they did in 2019. In this episode of the McKinsey on Consumer and Retail podcast, three consumer-behavior experts share their insights into how consumers’ spending patterns and purchasing behaviors are changing, and what companies should do given those changes. An edited transcript of the conversation with executive editor Monica Toriello follows. Subscribe to the podcast .

Monica Toriello: Over the past several weeks, people in some parts of the world have resumed their prepandemic habits. Maybe you’ve recently seen a movie at a theater, or flown on an airplane, or even just stopped for a cup of coffee on your way to the office for the first time in over a year. But a return to “normal” won’t look the same for everyone. Today, we’ll hear from three people who intensively study consumer behavior. They’ll share fascinating insights into how consumers are changing and what companies should do about it.

Kari Alldredge is a McKinsey partner based in Minneapolis. Kari has been advising consumer-goods companies for more than 20 years on a variety of topics, and she leads McKinsey’s work in consumer-goods growth transformation. She is an author of several articles, including a recent one on COVID-19’s impact on demand and costs in the consumer-packaged-goods [CPG] industry .

Anne Grimmelt is a senior knowledge expert in McKinsey’s Consumer Packaged Goods Practice. She is based in Stamford, Connecticut. Anne has been one of the driving forces behind McKinsey’s consumer-sentiment survey , which was launched in 2008 and during the pandemic has expanded to 45 countries. It provides a rich fact base for how consumers are feeling about their finances and how their buying behavior is changing.

And our third guest is Anjali Lai, a senior analyst at Forrester. Anjali, who is based in New York, helps chief marketing officers [CMOs] and other business leaders to understand the shifts in consumer behavior and consumer decision making and then to figure out what these changes mean for the future of brands and industries.

[To comply with Forrester’s Citation Policy, this transcript excludes Anjali Lai’s comments. Listen to the full episode on McKinsey.com or on Apple, Google, and other podcast platforms.]

A ‘reversal of fortune’ for big brands

Monica Toriello: Kari, Anne, Anjali, it’s great to have you here today. All three of you have been keeping your fingers on the pulse of consumers, both before and throughout the pandemic. Have there been any surprises? Are consumers doing things that you didn’t expect? Or is there anything that seemed to be going one way in, say, March or April 2020 but is going in a different direction today?

Kari Alldredge: In 2019 or early 2020, the topic on the minds of large branded consumer-packaged-goods manufacturers was portfolio shaping: how to reimagine their portfolios, how to move away from center-of-store food products and big brands and instead engage with consumers in very different, more targeted, niche-oriented ways. The degree to which the pandemic pushed people back toward big brands in the center of the store, and toward cooking at home, has been a complete turnaround, a reversal of fortune, for large CPG companies.

Some of those changes could have been anticipated, but others are quite shocking: the notion that bread baking would become a phenomenon among millennials, or that pet ownership would skyrocket to the extent that it has, and that those same millennials would be willing to spend more than they spend on their daily Starbucks to feed their new pets.

So, many of those companies that were desperately searching for growth 18 months ago now have the opposite problem: their supply chains can’t keep up . The big question for all of them is which of those consumer behaviors are truly going to persist  and be “sticky” coming out of this pandemic? Certainly, the dog that you adopted is likely to stay at your home. But when you go back to ordering your daily Starbucks and spending $7 a day on a coffee, are you going to spend the same amount to feed your pet? Those are the questions that are on many company leaders’ minds.

Anne Grimmelt: As Kari said, we saw a complete shift. Prepandemic, the growth was in smaller, niche brands, but early in the pandemic, it was large CPG players that really gained scale because their products were available on the shelf. They were also brands that were trusted by consumers, so consumers felt good buying them. If you look at point-of-sale data from IRI or Nielsen, you see that large companies—those with more than $2.5 billion in retail sales in the US market—picked up most of the share growth early in the pandemic, whereas smaller and midsize companies, as well as private label, were really not picking up growth.

In the second half of 2020 and in early 2021, small and midsize companies are regaining their sales growth. And we expect that private label is going to be powerful again , because if you dive into the why—why did consumers pick a new brand, and why did they pick the brands they chose?—it was about availability, it was about purpose, but it was also about value . It was about price points. Going forward, value is going to be even more important, and private label will gain strength in the future.

Trust as a strategic imperative

Monica Toriello: All three of you to some extent have written about customer loyalty: how to win it and how to retain it, particularly in an environment where people are willing to try new brands. Anne and Kari, you found that 39 percent of consumers tried new brands during the pandemic. And Anjali, in your research, you found that small brands are particularly good at earning consumers’ trust and consequently their loyalty. In a recent blog post, you wrote, “Now is the time for companies to embrace trust as a strategic imperative.” What does that mean? How should companies do that?

Even relatively mundane CPG companies are thinking about the end-to-end consumer journey, including consumer experience pre- and postpurchase. Kari Alldredge

Kari Alldredge: I’m seeing two interesting things in response to the trends you just talked about, Anjali. One is the degree to which even relatively mundane CPG companies are thinking about the end-to-end consumer journey, including consumer experience pre- and postpurchase, as they try to understand how to serve their existing consumers but also look for new ways to better meet consumer needs. The notion that there is a pre- and postpurchase experience related to a can of soda or a can of soup is a relatively novel idea, right? But, increasingly, the most forward-thinking companies are doing research across that entire journey to be able to understand the needs of consumers as they’re considering the range of options that are available to them—all the way through to satisfaction with usage and even disposal of the packaging of products.

Another interesting thing I’m seeing is a recognition that marketing is a dialogue, and a recognition of the degree to which consumers now “own” or shape the narratives of many brands. This, too, was happening before the pandemic but was vastly accelerated during the pandemic. The notion that a marketer positions the brand and delivers a message and a promise to consumers is really becoming quite an antiquated one, I think, as consumers themselves—through reviews, ratings , blogs, videos, and social-media posts—shape the identity of many of these brands. Recommendations from friends and family become part of the brand’s identity and are critical to shaping both loyalty and consumer trust.

We found in our research that about 33 percent of millennial and Gen Z consumers say they choose to buy a brand from a company that has their values, versus about 12 percent of baby boomers. Anne Grimmelt

Anne Grimmelt: Our research corroborates that. We found in our research that about 33 percent of millennial and Gen Z consumers  say they choose to buy a brand from a company that has their values, versus about 12 percent of baby boomers. But every demographic group is leaning toward that.

Another finding from our research is the reasons why consumers change to a new brand. It is definitely the younger generation that more often indicates that it’s because of purpose. It’s because of what the company stands for, how it treats its employees, et cetera.

Purpose: More than just a buzzword

Monica Toriello: We’ve been hearing a lot about purpose and values, but I also hear some skepticism in certain pockets of the corporate world as to whether an emphasis on corporate purpose  actually pays off. Because there is an attitude–behavior gap, right? What’s your response to a CEO who says, “Consumers like to say they care about purpose and values, but when they’re at the point of deciding to buy something, they truly only care about convenience or price or quality. Purpose is just a buzzword.”

Kari Alldredge: It’s necessary but not sufficient. I think there’s an increasing recognition that alignment with a consumer’s values may put you in the consideration set but won’t drive you over the line to purchase. You still have to have product superiority, whether that’s taste superiority, functional superiority, or a price-to-value equation that works for that particular consumer.

We talk a lot about the pandemic, which definitely shone a light on health in general, but there are other crises—like social justice  and climate change —that have come to light over the past year and a half and that have really shaken the corporate community. These crises have helped companies understand that some of these factors are fundamental in how consumers perceive themselves and the world around them, to the point where we now actually see some change happening.

One of the things that I was struck by was the speed and seriousness with which many of the household-cleaning companies responded to the pandemic and the heroic efforts to convert production capacity to manufacture things like wipes and sanitizer. Yes, some of that was for financial gain, but I think there really was an almost wartime mentality that I saw companies get new energy from.

I think about center-of-store food manufacturers who, prepandemic, maybe viewed themselves as being a bit sleepy and not exciting in terms of attracting the best talent. Now when you hear them talk about what they do, there’s real pride in the fact that they fed America, or they kept America safe. It really changed the way they think about the importance of what they do.

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Sources of insight.

Monica Toriello: All three of you are experts in consumer behavior. But consumers are changing fast and they’re changing constantly. Anjali, in another recent blog post, you wrote, “Rather than expect consumers to settle into a defined postpandemic normal, CMOs should prepare for a constant evolution of consumer needs and expectations over the next 12 to 24 months.” So beyond reading the latest consumer research and analysis, what are the best ways for CMOs and CEOs to understand where consumers are and where they’re headed?

Kari Alldredge: One of the best sources of insights is their online channel partners and their own D2C [direct to consumer] sites . Companies should mine online data to get a quick pulse on the way consumers are thinking or feeling. They should look at ratings and reviews using advanced analytics to understand and see trends and what’s selling on sites like Kroger.com, Walmart.com, or Amazon.com. They could even develop products that they can quickly test in an online environment and then change and adjust, as opposed to thinking about mass development of a product that gets pushed out to thousands and thousands of brick-and-mortar retail stores.

Consumers don’t always know what they want, and they can’t predict how their behavior will change. So traditional consumer research—which asks consumers how likely they are to purchase something—is becoming less relevant or reliable than actual data in market. That’s why data from e-commerce sites can be so valuable.

Anne Grimmelt: Another very powerful way to understand consumers  is by looking at what your peer companies do. You can go to industry conferences like the CAGNY [Consumer Analyst Group of New York] conference and hear a company like L’Oréal talk about how they use their D2C and their online-sales platform to see what type of color lipstick people try—not buy , but try —on their online platform. That information is critical for them to know where to innovate. What are the colors that people want and what are the products that people like to try out on the digital platform?

Similarly, I think it’s very important to keep an open mind beyond your own borders, to realize what’s happening elsewhere in the world. Going back to the topic of purpose, for instance, it is very much alive in the US but it’s also very much alive in Europe. Learning about the power of what consumers demand and how purpose is driving consumer decisions about CPG companies—and what companies in Europe are doing to meet consumer demand—can be valuable, wherever you are in the world.

Kari Alldredge: I think we also shouldn’t underestimate the resilience of consumers and the gravitational pull of life as we knew it before the pandemic. One thing that surprised me even in the past several weeks is the degree to which behaviors have bounced back. If there’s anything I’ve learned over the past 18 months it’s that I don’t have a crystal ball, or if I did, it is certainly broken—because there is no part of this last 18 months that I ever could have in a million years predicted.

At the beginning of the pandemic, one company I work with asked every board member, “When you look back, what’s the one thing that will be blazingly obvious that we either should always have done or never have been doing?” And one of the things that came up was shaking hands: “We’re never going to shake hands again.” But I attended a graduation ceremony in the beginning of June—so, early into the recovery—and what was striking to me is that the dean of that school shook the hand of, and physically embraced, every single one of the thousand students who crossed that stage. And this was at an institution that had been, like most educational institutions, incredibly thoughtful and conservative about their public-health response. Literally days after restrictions were lifted, the urge to connect was so strong that it looked as if the pandemic had never happened.

People are resilient. Hundreds of years of behavior certainly have been meaningfully changed by the past 18 months, but I think a lot of the old behaviors will bounce back pretty quickly.

Monica Toriello: So if you could gather all the CEOs and CMOs of consumer companies in one room and leave them with one message, what would it be? What is the one thing they need to do to position themselves for success in 2021 and 2022?

Anne Grimmelt: My one-liner would be, “Be open to change and be agile .”

Kari Alldredge: I would say, “Listen; don’t tell.”

Kari Alldredge is a partner in McKinsey’s Minneapolis office, and  Anne Grimmelt is a senior knowledge expert in the Stamford office.  Monica Toriello is an executive editor in the New York office.

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Burberry Case Study about Consumer Behavior

15 Pages Posted: 10 Feb 2020

Chenoy Ceil

Independent

Date Written: May 12, 2018

Consumer behavior is an essential part of the marketing for brands that are trying to influence the purchasing behavior of consumers. Burberry as a brand has been able to influence the purchase decisions of consumers by utilizing motivational, perception, personality and lifestyle strategies. This paper looks at the various factors that are utilized by Burberry that act as marketing stimulus for influencing the purchasing decision of their consumers. Some recommendations dealing with the brand perception of Burberry are also provided to help Burberry improve their sales and create a unique fashion brand for itself. Motivation, personality and emotion are important factors that affect consumer decision making, especially in the case of high fashion products. Looking at all these various factors in detail, this paper concludes that motivation, perception, personality and lifestyle have been carefully utilized by Burberry to reposition its brand for the modern age.

Keywords: chenoy ceil, consult corportes, consumer behaviour, purchasing decision, fasion brand

Suggested Citation: Suggested Citation

Chenoy Ceil (Contact Author)

Independent ( email ), do you have a job opening that you would like to promote on ssrn, paper statistics, related ejournals, microeconomics: intertemporal consumer choice & savings ejournal.

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The goods on consumer behavior

Research by consumer psychologists aims to promote consumers’ well-being in sustainability, health, and money management

Vol. 52 No. 4

• Applied Psychology
• Marketing and Advertising

People’s decisions about how to spend their money can have a huge impact on their own lives and on the planet. Credit card debt, climate change, plastic pollution, dietary choices—all these and more, to some extent, depend on companies’ decisions about what to sell and consumers’ decisions about what to buy.

That’s why some consumer psychologists and researchers in related fields, like marketing and business, are interested in tackling these social issues through the lens of consumerism. Consumer researchers are working to understand how and why consumers make beneficial choices in areas including sustainability, health, and financial well-being. They’re also studying how to convince companies of the value of improving their supply chains or offering customers healthier, more responsible choices.

“Good, responsible scholars are trying to think about not only what is good for individuals but also what is good for society,” said Lynn Kahle, PhD, a consumer psychologist and director of the sports marketing program at Pace University in New York City.

Sustainable consumption

One big challenge facing society is switching over to a more ecologically sustainable way of life. Making sustainable choices can be a tough sell for consumers, said Katherine White, PhD, a consumer psychologist at the Sauder School of Business at the University of British Columbia in Canada. “It’s this really interesting trade-off between some kind of cost to the self in order to do something for others,” White said. (A trade-off not dissimilar to many of the public health interventions enacted during the COVID-19 pandemic.) The potential benefits of individual sustainable behaviors—recycling, choosing reusable goods, installing solar panels, eating less meat—are fuzzy and in the future, White said, and the status quo is largely set up to enable less-sustainable choices. But to tackle problems like climate change and environmental degradation, both systems and individuals will have to change, she said. “It’s probably the most challenging behavior-change question of our time.”

When consumer psychologists first began studying sustainable behavior in the 1970s, their focus was largely on how to identify consumers who were already prone to go green, said Remi Trudel, PhD, an associate professor of marketing at Boston University’s Questrom School of Business. Over time, though, researchers have begun to focus on how to influence more people. “The biggest question is, how do we nudge people into behaving more sustainably?” Trudel said.

In a 2019 review, White and her colleagues organized research on the topic into a framework they call SHIFT ( Journal of Marketing , Vol. 83, No. 3, 2019 ). SHIFT stands for social influence, habit formation, individual self, feelings and cognition, and tangibility—each a key factor in whether a consumer makes green (or not-so-green) choices. Social influence is one of the most powerful tools available, White said. For example, a study in California led by New York University Stern School of Business associate professor of marketing Bryan Bollinger, PhD, found that every installation of solar panels on a home in a given ZIP code increased the likelihood of another install by 0.78 percentage points ( Marketing Science , Vol. 31, No. 6, 2012 ).

Habits refer to everyday behaviors, like getting coffee every morning in a disposable cup rather than bringing one’s own mug, White said. Any way to make the greener choice easier can help break unsustainable habits, she said. Individual self refers to what resonates with any given person. It’s relatively easy to connect with individuals who already care about sustainability, White said. But sometimes advertisers, marketers, and companies need to work a little harder to link a person’s preexisting values to sustainability.

For example, religious and cultural values can play a role in how people approach environmental values, said Elizabeth Minton, PhD, an associate professor of marketing at the University of Wyoming. “Western consumers view what’s important as sustaining the family unit, sustaining the community, and sustaining the loved ones,” Minton said. Framing sustainability—protecting the environment—as a way to protect family and community, then, becomes a way for marketers to encourage demand for sustainable products.

Research into feelings and cognition has found complex patterns. Some research suggests that while negative emotions such as guilt can prompt environmentally friendly actions, guilt should be deployed with care. For example, after the United Kingdom instituted a policy of charging a small sum for disposable plastic grocery bags, mass communications researcher Sidharth Muralidharan, PhD, of Southern Methodist University, conducted an online survey that found that women who reported high guilt over forgetting to carry reusable bags were more likely to carry them more consistently, but men with high levels of guilt weren’t, suggesting women were more susceptible to “green guilt” than men. In a follow-up experiment, Muralidharan and his colleagues exposed consumers to guilt-inducing advertisements based around either saving the environment or saving money by carrying reusable bags. They found that the environment-based ads were less effective at inducing guilt than the savings-based ads ( Journal of Advertising Research , Vol. 58, No. 3, 2018 ). In other words, guilt must be directed toward an effective target—which is not always related to sustainability—to work.

Finally, tangibility in the SHIFT framework refers to the need to link an action to real consequences, given that the outcome of any behavior is uncertain, White said. Focusing on the near-term benefits of sustainability, such as preventing current environmental degradation, can help, according to research led by Audhesh Paswan, PhD, a professor of marketing at the University of North Texas ( Journal of Consumer Marketing , Vol. 34, No. 5, 2017 ).

One big question is how younger generations of consumers will approach sustainable consumption. Gen Z—the colloquial term for anyone born between the late 1990s and around 2010—tends to hold consumer brands to high standards, said Brent Coker, PhD, a lecturer in marketing at the University of Melbourne. They’re savvy to marketing strategies and don’t like empty platitudes, he said, which can lead to anger at brands they perceive as doing social (or environmental) harm. However, social media marketing can lead to impulse purchasing in Gen Z, according to research by marketing lecturer Elmira Djafavora, PhD, of Northumbria University Newcastle ( Journal of Retailing and Consumer Services , Vol. 59, 2021), which could feed overconsumption.

Promoting health

Another area where consumers might need to put aside their immediate impulses for long-term benefits is when making health choices. As with sustainability, consumers may well be aware that a choice—such as buying a sugary beverage—isn’t in their ultimate best interest, but still make that choice nonetheless.

“We know that incentives and information don’t always work as well as we would hope them to,” said Leslie John, PhD, who has a doctorate in behavioral decision research and is an associate professor at Harvard Business School. “What I’ve been trying to do is use insights from psychology to make these tools much more effective at actually changing behavior.”

In one study, John and her colleagues explored whether putting warning labels on sugary beverages discourages their purchase. In a real cafeteria setting, the researchers tested three different types of warning labels: One label simply listed the caloric content of the soda. Another read, “Warning: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay.” A third label contained the same text but with accompanying images of an obese abdomen, a person self-injecting insulin, and rotten teeth. The researchers found that only the graphic warnings had a statistically significant impact, reducing the share of sugary beverages purchased from 21.4% to 18.2% ( Psychological Science , Vol. 29, No. 8, 2018 ). At the same time, in a result that could incentivize firms as well as policymakers, the study also showed that the warning labels didn’t reduce drink sales overall, as consumers chose to buy bottled water instead.

“They’re still buying something; they’re just buying something healthier,” John said of the consumers in the study.

Food-labeling research often lands at the intersection of politics and science. Christina Roberto, PhD, the director of the Psychology of Eating and Consumer Health (PEACH) Lab at the University of Pennsylvania’s Perelman School of Medicine, focuses her research on what she calls “strategic science,” which means that she collaborates with policymakers to develop research questions. For example, in 2018, the Philadelphia Department of Public Health approached Roberto for insights on what kind of label they could use to educate consumers about foods high in salt. Roberto and her colleagues tested a variety of label options for the department, including a saltshaker inside a triangle as required on New York City menus, and a traffic light option with red representing high-salt items. The saltshaker performed the worst in tests of consumer understanding of the symbols, while the traffic light was the clearest. Unfortunately, the traffic light was a legal no-go, Roberto said, because the interpretation of which items got the red light could easily be challenged by food companies in court.

The researchers were also able to show in their data that putting text that read “sodium warning” next to the saltshaker symbol significantly boosted consumer understanding of the label. “We basically said, ‘Look, if you have to compromise and you have to use the saltshaker triangle, at least get the words ‘sodium warning’ next to it,’” she said.

That labeling strategy went into effect in September 2019 in Philadelphia restaurant chains with 15 or more locations. Boosting the potential effectiveness of the warning was a win, Roberto said, because if Philadelphia had used New York’s symbol without changes, that symbol likely would have become the standard for any other cities or states planning to institute sodium warning labels. Now, she said, there is an existing label with a stronger evidence base that new cities can choose to adopt in the future.

Money matters

Consumer psychologists are also tackling big-picture issues in the realm of money management, an area of great interest since many Americans are in precarious financial positions. According to a Congressional Research Service report, unemployment was elevated throughout 2020, peaking at 14.8% in April ( Unemployment Rates During the COVID-19 Pandemic: In Brief, 2021 ). Savings rates rose sharply, however, hitting 33% of people’s disposable incomes that same month as Americans halted their spending. As of February 2021, the savings rate had declined to 13.6% ( Bureau of Economic Analysis , 2020 ).

Researchers tackle consumer spending and saving in multiple ways. One strategy is to study what types of spending make people happiest. On that front, the research is clear: Buying experiences generally makes people happier than buying stuff. Experiential consumption also seems to trigger a greater sense of gratitude than material consumption, and it can even make people more generous to others in lab-based economic games, according to research led by psychologist Jesse Walker, PhD, an assistant professor of marketing at The Ohio State University ( Emotion , Vol. 16, No. 8, 2016 ).

“This is kind of cool because it suggests that these social benefits of experiential consumption don’t just apply to the consumers themselves but to those around them as well,” said Amit Kumar, PhD, a psychologist and assistant professor of marketing at the University of Texas at Austin’s McCombs School of Business, who coauthored that research.

Experiential consumption seems to make people happier because it strengthens social ties, Kumar said. People tend to bond over conversations about their trips to Italy more than they do about that new furniture set they bought at Ikea. That’s an important thing to know when weighing how to spend your hard-earned money, Kumar said.

But there can be a dark side to the glow of experiential purchases. People are more willing to go into debt for experiential purchases than for material purchases, according to research by Eesha Sharma, PhD, an associate professor of business administration at Dartmouth’s Tuck School of Business ( Journal of Consumer Research , Vol. 44, No. 5, 2018 ). This seems to be because experiences are often time-dependent, Sharma said. If you decide to delay the purchase of a dining room table from July until December, it doesn’t feel like you’ve missed out on owning the table. If you delay your summer beach trip from July until December? Well, then you’ve missed summer vacation altogether.

In general, consumers tend to maintain positive illusions about their own money management, said Emily Garbinsky, PhD, a psychologist and assistant professor of marketing at the University of Notre Dame. Garbinsky is researching ways to “gently shatter” these illusions at the point at which people make savings decisions, perhaps during the use of banking apps. There is evidence from other research that software nudges can boost real-world savings. For example, a field experiment using TurboTax’s free edition led by Duke University professor of psychology and behavioral economics Dan Ariely, PhD, nudged low- and middle-income tax filers to save a portion of their tax refunds. Compared with a control group that received no messaging, the taxpayers who were presented a message about the importance of emergency savings and given choices of ways to save their refund increased deposits to their savings accounts by 50% ( Behavioral Science & Policy , Vol. 3, No. 2, 2017 ).

Garbinsky’s work also zeroes in on how emotions affect money management decisions. She and her colleagues have found, for example, that couples who share bank accounts are more likely to make utilitarian purchases than hedonic ones, in contrast with couples who keep separate bank accounts ( Journal of Consumer Psychology , Vol. 29, No. 3, 2019 ). These results held in both lab and field experiments, as well as in analyses of real banking transactions. Other research under review suggests that couples who pool finances may have more relationship satisfaction, though the findings are correlational.

Often, consumer researchers study single decisions, such as how much money people save or how much debt they’re willing to take on—but money decisions don’t occur in a vacuum, Sharma said. If you’re borrowing money to save more for retirement, for example, it might look beneficial from a savings perspective but disastrous from a debt perspective.

“It’s really important for future research to look at multiple financial decisions together,” she said. “Research that integrates multiple financial decisions, looks at trade-offs, looks at decisions over time, will lead to a more nuanced and better understanding of these choices.” 

Further reading

Communicating sustainability for the green economy Kahle, L. R., & Gurel-Atay, E. (Eds.), Routledge, 2014

How psychological insights can inform food policies to address unhealthy eating habits Roberto, C. A., American Psychologist , 2020

Sustainable consumer behavior Trudel, R., Consumer Psychology Review , 2019

The elusive green consumer White, K., et al., Harvard Business Review , July/August 2019

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Consumer Behavior Research

Exploring the Depths of Consumer Insights for Strategic Business Growth

In an era where understanding consumer behavior is more than a competitive edge, it’s a survival imperative, NielsenIQ (NIQ) and GfK emerge as pivotal allies. This expertise is essential for businesses in B2C commerce, retail, and beyond, aiming to navigate the complex consumer landscape for informed, strategic decision-making.

Definition and Importance of Consumer Behavior Research

Consumer behavior research is the study of how individuals make decisions to spend their resources on consumption-related items. It involves understanding the what, why, when, and how of consumer purchases. This field is crucial for businesses as it sheds light on consumer preferences, buying patterns, and decision-making processes. By understanding these aspects, companies can tailor their products and marketing strategies effectively, ensuring alignment with consumer needs and market trends, ultimately leading to increased customer satisfaction and loyalty.

Overview of the Impact of Consumer Behavior Research on Marketing Strategies

The insights from consumer behavior research are instrumental in shaping targeted marketing strategies. By understanding consumer motivations and behaviors, businesses can create more relevant and engaging marketing messages, leading to improved customer engagement and retention. This research helps in segmenting the market, identifying potential customers, and understanding the factors that drive consumer decisions. It also aids in predicting future trends, enabling companies to stay ahead of the curve. Effective use of consumer behavior research can lead to the development of products and services that meet the evolving needs of consumers, thereby enhancing brand loyalty and market share.

Consumer and shopper insights

Understand consumer and shopper behavior, demographics, and loyalty with modern, representative consumer panels and customer survey capabilities.

Understanding Consumer Behavior

These diverse influences combine to form unique consumer profiles, which businesses must understand to effectively target their marketing efforts..

Factors Influencing Consumer Behavior

Consumer behavior is influenced by a complex interplay of psychological, social, cultural, and personal factors. Psychological factors include perceptions, attitudes, and motivation, which guide consumers’ emotional and cognitive responses. Social factors encompass family, friends, and societal norms that shape buying habits through peer influence and social trends. Cultural factors involve the broader societal beliefs, values, and customs that dictate consumer behavior in a particular region. Personal factors such as age, occupation, lifestyle, and economic status also significantly impact consumer choices. These diverse influences combine to form unique consumer profiles, which businesses must understand to effectively target their marketing efforts.

The Role of Consumer Behavior in Decision Making

Consumer behavior plays a critical role in the decision-making process. It involves understanding how consumers decide upon their needs and wants, choose among products and brands, and determine their purchase methods. This knowledge is vital for businesses to design and position their offerings in a way that resonates with the target audience. Understanding consumer behavior helps in predicting how consumers will respond to marketing messages and product features, enabling businesses to tailor their strategies to meet consumer needs effectively. It also assists in identifying opportunities for new product development and market expansion.

Consumer Behavior Theories and Models

Consumer behavior theories and models provide frameworks for understanding and predicting consumer actions. The Stimulus-Response Model, for instance, illustrates how marketing stimuli and environmental factors influence consumer responses. Maslow’s Hierarchy of Needs explains consumer motivation in terms of fulfilling basic to complex needs. The Theory of Reasoned Action and the Theory of Planned Behavior focus on the relationship between attitudes, intentions, and behaviors. The Consumer Decision Model outlines the cognitive process involving need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior. These models help businesses in developing strategies that align with consumer psychology and behavioral patterns. They also assist in segmenting the market and targeting consumers with personalized marketing approaches, enhancing the effectiveness of marketing campaigns and product offerings.

Research Methods in Consumer Behavior Research

Customer analytics is vital for businesses across various sectors, including FMCG, sales, and e-commerce. It enables companies to create personalized experiences, improve customer engagement, and boost retention, ultimately leading to increased revenue. By understanding consumer behavior through data analysis, businesses can make informed decisions that resonate with their target audience.

Quantitative Research Methods

Quantitative research methods in consumer behavior research involve structured techniques like surveys and questionnaires to collect numerical data. These methods are useful for gauging consumer attitudes, preferences, and behaviors across larger populations. Statistical analysis of this data helps in identifying trends, testing hypotheses, and making generalizations about consumer behavior. Quantitative research is valuable for businesses as it provides measurable and comparable insights that can guide strategic decision-making. It helps in understanding the magnitude of consumer responses to various marketing stimuli and in assessing the potential market size for new products or services.

Qualitative Research Methods

Qualitative research methods in consumer behavior focus on understanding the deeper motivations, thoughts, and feelings of consumers. Techniques like in-depth interviews, focus groups, and observational studies provide rich, detailed insights that are not typically captured through quantitative methods. This approach is crucial for exploring the underlying reasons behind consumer choices, preferences, and attitudes. Qualitative research helps businesses in gaining a deeper understanding of consumer experiences, emotions, and perceptions, which can be invaluable in developing more effective marketing strategies, product designs, and customer service approaches. It allows companies to explore new ideas and concepts with consumers, gaining insights that can lead to innovation and differentiation in the market.

Experimental Research in Consumer Behavior

Experimental research in consumer behavior involves manipulating one or more variables to observe the effect on another variable, typically consumer behavior or attitudes. This method is used to establish cause-and-effect relationships, providing insights into how changes in product features, pricing, or marketing strategies might influence consumer behavior. Controlled experiments, often conducted in laboratory settings or as field experiments, allow researchers to isolate the effects of specific variables. This type of research is particularly valuable for testing new products, pricing strategies, and marketing messages before full-scale implementation. It helps businesses in making informed decisions based on empirical evidence, reducing the risks associated with new initiatives.

Factors Affecting Consumer Behavior

Psychological factors.

Psychological factors play a significant role in shaping consumer behavior. These include individual motivations, perceptions, attitudes, and beliefs. Motivation drives consumers to fulfill their needs and desires, influencing their buying decisions. Perception, how consumers interpret information, can significantly impact their choices, as it shapes their understanding of products and brands. Attitudes and beliefs, formed through experiences and social influences, guide consumer preferences and loyalty. Understanding these psychological factors is crucial for businesses as they influence how consumers view and interact with products and services. By aligning marketing strategies with consumer psychology, businesses can more effectively influence purchasing decisions and build stronger customer relationships.

Social Factors

Social factors significantly influence consumer behavior, encompassing the impact of society, family, and peer groups. Family members and friends can influence buying decisions through recommendations or shared experiences. Social groups, including social networks and communities, also play a role in shaping consumer preferences and behaviors. The influence of social media has become particularly significant, as it not only connects consumers but also serves as a platform for sharing opinions and experiences about products and services. Understanding these social dynamics is important for businesses as they can leverage social influences through targeted marketing strategies, influencer partnerships, and social media campaigns. Recognizing the power of social factors can help businesses in building brand awareness and loyalty among consumer groups.

Cultural Factors

Cultural factors are deeply ingrained elements that influence consumer behavior, including values, beliefs, customs, and traditions. These factors vary across different regions and societies, affecting how consumers perceive and interact with products and services. Cultural influences can determine consumer preferences, buying habits, and brand perceptions. For instance, color symbolism, dietary preferences, and language can all vary significantly between cultures, impacting marketing strategies and product development. Businesses must understand and respect these cultural nuances to effectively cater to diverse consumer markets. Adapting products and marketing messages to align with cultural values and norms can significantly enhance a brand’s appeal and acceptance in different markets.

Personal Factors

Personal factors, including age, gender, occupation, lifestyle, and economic status, also significantly influence consumer behavior. These factors determine individual needs, preferences, and purchasing power. For example, younger consumers may prioritize trendy and innovative products, while older consumers might value functionality and durability. Lifestyle choices, such as health consciousness or environmental awareness, can also drive consumer preferences and choices. Economic factors, such as income and economic conditions, influence consumers’ ability to purchase and their sensitivity to price changes. Understanding these personal factors is crucial for businesses to segment their market effectively and tailor their products and marketing strategies to meet the specific needs of different consumer groups.

Consumer Purchase Decision Making

Stages of the consumer purchase decision-making process.

The consumer purchase decision-making process typically involves several key stages: problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior.

In the problem recognition stage, consumers identify a need or desire.

During the information search, they seek out information about products or services that can fulfill their need. In the evaluation stage, consumers compare different options based on attributes such as price, quality, and brand reputation.

The purchase decision involves choosing a product and making the purchase. Finally, in the post-purchase stage, consumers evaluate their satisfaction with the purchase, which can influence future buying decisions and brand loyalty.

Understanding these stages is essential for businesses to effectively influence consumers at each step, from raising awareness to ensuring post-purchase satisfaction.

Influences on Consumer Purchase Decisions

Consumer purchase decisions are influenced by a multitude of factors, including product attributes, brand reputation, marketing messages, social influences, and personal preferences. Product features such as quality, price, and usability are key determinants of consumer choices. Brand reputation, built over time through consistent quality and marketing efforts, also significantly impacts purchase decisions. Marketing messages and advertising play a crucial role in shaping consumer perceptions and driving demand. Social influences, including recommendations from family and friends, as well as online reviews and influencer endorsements, can sway consumer decisions. Personal factors such as individual needs, preferences, and financial constraints also play a critical role. Businesses must consider these diverse influences when developing products and crafting marketing strategies to effectively appeal to their target audience.

Impulse Buying Behavior

Impulse buying behavior refers to unplanned purchases made by consumers, often driven by emotional factors rather than rational decision-making. This type of behavior is typically triggered by external stimuli such as attractive product displays, promotional offers, or persuasive sales tactics. Emotional responses, such as excitement or the desire for instant gratification, also play a significant role in impulse buying. Retailers often leverage this behavior by strategically placing impulse items near checkout areas or using limited-time offers to create a sense of urgency. Understanding the triggers of impulse buying can help businesses in designing marketing strategies and store layouts that encourage such purchases, potentially increasing sales and customer engagement.

Online Shopping and Consumer Behavior

Impact of online shopping on consumer behavior.

The rise of online shopping has significantly impacted consumer behavior, offering convenience, a wider selection of products, and often competitive pricing. Online shopping has changed the way consumers research products, compare prices, and make purchasing decisions. The ease of access to a vast array of products and the ability to shop at any time have increased the frequency and diversity of purchases. Online reviews and ratings have also become important factors in the decision-making process, as consumers increasingly rely on the opinions of others. Additionally, the personalized shopping experiences offered by many online retailers, through targeted recommendations and tailored marketing messages, have further influenced consumer buying habits. Understanding these shifts in consumer behavior is crucial for businesses to adapt their strategies for the digital marketplace, ensuring they meet the evolving needs and expectations of online shoppers.

Factors Influencing Online Buying Behavior

Several factors influence online buying behavior, including website usability, product variety, pricing, customer reviews, and the overall shopping experience. A user-friendly website with easy navigation and a seamless checkout process is crucial for attracting and retaining online shoppers. A diverse product range and competitive pricing are also key factors in attracting consumers. Customer reviews and ratings significantly impact purchase decisions, as they provide social proof and reduce perceived risk. The overall shopping experience, including customer service, delivery options, and return policies, also plays a vital role in influencing online buying behavior. Security and privacy concerns are additional considerations, as consumers are increasingly aware of data protection and online fraud. Businesses must address these factors to create a compelling online shopping experience that meets consumer expectations and drives online sales.

Comparison of Online and Offline Consumer Behavior

Online and offline consumer behaviors exhibit distinct differences, influenced by the unique aspects of each shopping environment. Online shopping offers convenience, a broader selection, and often more competitive pricing, leading to different purchasing patterns compared to offline shopping. Consumers tend to spend more time researching and comparing products online, while offline shopping is often driven by immediate needs and sensory experiences. The tactile experience and instant gratification of offline shopping are not replicable online, but the online environment offers personalized recommendations and a wealth of product information. Offline shopping also provides opportunities for personal interaction and immediate problem resolution, which can enhance customer satisfaction. Understanding these differences is crucial for businesses to tailor their strategies for each channel, ensuring a cohesive and complementary shopping experience that meets the needs and preferences of consumers in both online and offline environments.

Consumer Satisfaction and Loyalty

Importance of customer satisfaction in consumer behavior research.

Customer satisfaction is a critical component of consumer behavior research, as it directly impacts repeat purchases and brand loyalty. Satisfied customers are more likely to become repeat buyers, recommend the brand to others, and provide positive reviews. Customer satisfaction is influenced by various factors, including product quality, customer service, and overall shopping experience. Understanding and measuring customer satisfaction helps businesses identify areas for improvement, enhance customer experiences, and build long-term relationships with consumers. High levels of customer satisfaction lead to increased customer loyalty, which is essential for business growth and sustainability.

Factors Influencing Customer Satisfaction

Customer satisfaction is influenced by a range of factors, including product quality, price, service quality, brand image, and customer expectations. Product quality is a primary determinant of satisfaction, as consumers expect products to perform as advertised. Price also plays a role, as consumers evaluate the value they receive relative to the cost. Service quality, encompassing customer service interactions and the overall shopping experience, significantly impacts satisfaction levels. A positive, helpful, and efficient service experience can enhance satisfaction, while negative experiences can lead to dissatisfaction. Brand image, shaped by marketing communications and past experiences, influences consumer expectations and perceptions. Meeting or exceeding these expectations is key to achieving high levels of customer satisfaction. Additionally, personal factors such as individual needs, preferences, and past experiences also influence satisfaction. Businesses must consider these diverse factors to effectively meet consumer needs and enhance satisfaction levels.

Relationship Between Customer Satisfaction and Loyalty

The relationship between customer satisfaction and loyalty is strong and direct. Satisfied customers are more likely to develop a sense of loyalty to a brand, leading to repeat purchases and positive word-of-mouth recommendations. Loyalty is not just about repeat buying; it also involves an emotional connection and a preference for the brand over competitors. Satisfied customers are also more likely to be forgiving of minor issues and are less sensitive to price changes. Conversely, dissatisfied customers are more likely to switch to competitors and share negative experiences with others. Building customer loyalty requires consistently meeting or exceeding customer expectations, providing high-quality products and services, and maintaining positive customer relationships. Loyal customers are valuable assets to businesses, as they tend to have a higher lifetime value, lower acquisition costs, and can become brand advocates, promoting the brand through their networks.

Consumer Research and Marketing Strategies

Utilizing consumer research to develop effective marketing programs.

Consumer research is a vital tool for developing effective marketing programs. By understanding consumer needs, preferences, and behaviors, businesses can create targeted marketing strategies that resonate with their audience. Consumer research helps in identifying market segments, understanding consumer pain points, and uncovering opportunities for product development or enhancement. It also provides insights into the most effective channels and messages for reaching the target audience. Utilizing consumer research in marketing program development ensures that strategies are data-driven and customer-centric, increasing the likelihood of success. It enables businesses to tailor their marketing efforts to the specific needs and preferences of different consumer segments, improving engagement and response rates. Additionally, ongoing consumer research allows businesses to adapt their marketing strategies in response to changing consumer trends and market conditions, ensuring continued relevance and effectiveness.

Targeting Specific Consumer Segments Based on Research Findings

Targeting specific consumer segments based on research findings is a key strategy for effective marketing. Consumer research provides detailed insights into different consumer groups, including their demographics, psychographics, behaviors, and preferences. By analyzing this data, businesses can identify distinct segments within their target market, each with unique needs and characteristics. Targeting these segments with tailored marketing messages and product offerings increases the relevance and appeal of the brand to each group. For example, a segment characterized by health-conscious consumers would respond more positively to marketing messages emphasizing the health benefits of a product. Segment-specific targeting allows businesses to allocate marketing resources more efficiently, focusing on the most promising segments with the highest potential for conversion and loyalty. It also enhances the customer experience by providing consumers with products and marketing messages that are more closely aligned with their individual needs and preferences.

Adapting Marketing Strategies to Consumer Behavior Trends

Adapting marketing strategies to consumer behavior trends is essential for businesses to stay relevant and competitive. Consumer behavior is constantly evolving, influenced by factors such as technological advancements, cultural shifts, and economic changes. By staying attuned to these trends, businesses can anticipate changes in consumer needs and preferences, and adjust their marketing strategies accordingly. This may involve adopting new marketing channels, such as social media or influencer marketing, to reach consumers where they are most active. It could also mean developing new products or services that align with emerging consumer trends, such as sustainability or personalization. Adapting marketing strategies to consumer behavior trends requires a proactive approach, with ongoing research and analysis to identify emerging patterns. Businesses that successfully adapt to these trends can capture new market opportunities, enhance customer engagement, and maintain a competitive edge.

Case Studies in Consumer Behavior Research

Analysis of real-life examples and their implications.

Real-life case studies in consumer behavior research provide valuable insights into the practical application of theoretical concepts and the effectiveness of different marketing strategies. For example, a case study in the automotive industry might analyze how consumer preferences for eco-friendly vehicles have influenced car manufacturers’ product development and marketing strategies. In the retail sector, a case study could examine the impact of online shopping on brick-and-mortar stores and how these businesses have adapted to the digital era. These case studies offer concrete examples of how businesses have successfully navigated changes in consumer behavior, providing lessons and strategies that can be applied in other contexts. They also highlight the importance of consumer research in identifying market trends, understanding consumer needs, and developing effective marketing strategies. By analyzing real-life examples, businesses can gain a deeper understanding of consumer behavior, learn from the successes and challenges of others, and apply these insights to their own strategies.

Examination of Successful Marketing Campaigns Based on Consumer Behavior Research

Examining successful marketing campaigns that are based on consumer behavior research can provide valuable insights into effective marketing practices. These case studies demonstrate how a deep understanding of consumer needs, preferences, and behaviors can be leveraged to create impactful marketing campaigns. For instance, a campaign that effectively uses consumer data to personalize messages and offers can result in higher engagement and conversion rates. Another example might be a campaign that taps into current consumer trends, such as sustainability or wellness, to resonate with the target audience. Analyzing these successful campaigns can reveal key strategies and tactics that businesses can adopt, such as the use of specific channels, messaging techniques, or promotional offers. These case studies also highlight the importance of data-driven decision-making in marketing, showing how consumer research can inform and guide successful marketing initiatives.

Motivating Consumers and New Product Adoption

Strategies to motivate consumers to adopt new products.

Motivating consumers to adopt new products is a critical challenge for businesses. Effective strategies for encouraging new product adoption include leveraging social proof, offering free trials or samples, and creating educational content. Social proof, such as customer testimonials or influencer endorsements, can reduce perceived risk and increase consumer confidence in trying a new product. Free trials or samples allow consumers to experience the product firsthand, reducing barriers to adoption. Educational content, such as how-to guides or product demonstrations, can help consumers understand the value and benefits of the new product. Additionally, businesses can use targeted marketing campaigns to reach early adopters and innovators who are more likely to try new products and spread the word to others. Creating a sense of urgency or exclusivity around the new product, through limited-time offers or exclusive access, can also motivate consumers to adopt the product more quickly.

Innovations in Consumer Behavior Research for New Product Development

Innovations in consumer behavior research are playing a crucial role in new product development. Advanced analytics and data mining techniques allow businesses to analyze large datasets and uncover deep insights into consumer needs and preferences. Social listening tools enable companies to monitor social media and online conversations, gaining real-time insights into consumer opinions and trends. Virtual reality (VR) and augmented reality (AR) technologies are being used to test consumer reactions to new products in simulated environments, providing valuable feedback before market launch. Behavioral economics principles, such as understanding cognitive biases and decision-making processes, are also being applied to better predict consumer responses to new products. These innovations in consumer behavior research provide businesses with more accurate and comprehensive data, enabling them to develop products that are closely aligned with consumer needs and preferences, increasing the likelihood of market success.

Social Media and Consumer Behavior

Influence of social media on consumer behavior.

Social media has a profound influence on consumer behavior, shaping how consumers discover, research, and share information about products and services. Platforms like Facebook, Instagram, and Twitter serve as important channels for brand communication and engagement. Consumers use social media to seek recommendations, read reviews, and gather opinions from their networks, which significantly influences their purchasing decisions. Brands leverage social media for targeted advertising, influencer partnerships, and content marketing, creating opportunities for direct interaction and engagement with consumers. Social media also facilitates the spread of trends and viral content, quickly influencing consumer preferences and behaviors. The interactive and dynamic nature of social media means that consumer opinions and trends can rapidly change, requiring businesses to be agile and responsive in their social media strategies. Understanding the influence of social media on consumer behavior is essential for businesses to effectively engage with their audience and influence purchasing decisions.

Role of Social Media in Shaping Consumer Perceptions and Purchase Decisions

Recap of the importance of consumer behavior research.

Consumer behavior research is essential for businesses seeking to understand and effectively respond to the evolving needs and preferences of their target audience. It provides valuable insights into why consumers make certain choices, what influences their purchasing decisions, and how they interact with brands. This research is crucial for developing effective marketing strategies, creating products that meet consumer needs, and enhancing the overall customer experience. By staying informed about consumer behavior trends and applying these insights, businesses can improve customer engagement, increase brand loyalty, and drive growth. In today’s competitive marketplace, a deep understanding of consumer behavior is a key differentiator, enabling businesses to create more personalized, relevant, and impactful marketing initiatives.

Future Directions and Emerging Trends in Consumer Behavior Research

The future of consumer behavior research is marked by rapid advancements in technology and data analytics, leading to more sophisticated and nuanced understanding of consumer preferences and behaviors. Emerging trends include the use of artificial intelligence (AI) and machine learning to analyze consumer data, providing deeper and more predictive insights. The integration of biometric data, such as eye tracking and facial recognition, offers new ways to understand consumer responses to marketing stimuli. The growing importance of sustainability and ethical considerations is also influencing consumer behavior, leading to increased demand for eco-friendly and socially responsible products. Additionally, the rise of the experience economy is shifting focus from product features to customer experiences, requiring businesses to create more immersive and engaging customer interactions. Staying abreast of these trends and continuously innovating in consumer behavior research will be crucial for businesses to remain relevant and competitive in the changing market landscape.

How NIQ and GfK Can Help

In the complex world of consumer behavior, NIQ and GfK offer the expertise and tools necessary to navigate this landscape effectively. With comprehensive solutions like:

• NielsenIQ’s Homescan : Track, diagnose, and analyze consumer behavior from more than 250,000 households across 25 countries.
• Consumer analytics : Go deeper and create more clarity around shopper behavior with custom surveys and segmentation.
• Consumption moments : Reveal the true motivations behind customer consumption behavior and usage to guide product innovation and marketing strategy .
• gfknewron marke t : Create the right opportunities with gfknewron market
• gfknewron predict : Plan your future using the world’s most comprehensive sales tracking data for Tech & Durables.
• gfknewron Consumer : Understand your consumers’ behavior to redefine your success

By leveraging these tools, businesses can gain a competitive edge, adapting to market changes and consumer trends with agility and precision.

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Consumer Behavior

Advertising, Consumerism, Materialism, Marketing

Reviewed by Psychology Today Staff

Consumer behavior—or how people buy and use goods and services—is a rich field of psychological research, particularly for companies trying to sell products to as many potential customers as possible. Since what people buy—and why they buy it—impacts many different facets of their lives, research into consumer behavior ties together several key psychological issues. These include communication (How do different people respond to advertising and marketing?), identity (Do our purchases reveal our personality ?), social status, decision-making , and mental and physical health.

• Why Consumer Behavior Matters
• The Psychology of Buying and Spending
• How Advertising and Marketing Work
• How to Appeal to Consumers

Corporations, political campaigns, and nonprofit organizations all consult findings about consumer behavior to determine how best to market products, candidates, or issues. In some cases, they accomplish this by manipulating people's fears, their least-healthy habits, or their worst tendencies. And consumers themselves can be their own worst enemy, making rash purchasing decisions based on anxiety , faulty logic, or a fleeting desire for social status. But consumers aren’t powerless: Learning more about the different strategies companies employ, as well as the explanations for people's often confusing purchasing decisions, can help individuals more consciously decide what, why, and whether to buy.

In developed countries, people spend only a portion of their money on things they need to survive, and the rest on non-essentials. Purchasing decisions based on want, rather than need, aren’t always rational ; instead, they are influenced by personality , emotion , and trends. To keep up, marketers continuously investigate how individuals and groups make buying choices and respond to marketing techniques.

Political marketing is, in many ways, similar to product marketing: it plays on emotions and people’s desire for compelling stories , rather than pure rationality, and aims to condense complex issues into short, memorable soundbites. Smart politicians use marketing research to tailor their messages, connect with voters who share their values, and counter their opponents’ narrative.

Humans are social animals. We rely on a group to survive and are evolutionarily driven to follow the crowd . To learn what is “correct,” we look to other people—a heuristic known as the principle of social proof . Fads are born because a product’s popularity is assumed to signal value, which further bolsters its popularity.

Natural or man-made disasters can trigger panic buying or hoarding behaviors, either before the disaster or after it has passed, usually of products deemed necessary for survival. In the weeks and months after a disaster, some evidence suggests that “hedonic purchases”—such as alcohol or unhealthy foods —rise as victims of the disaster attempt to cope.

After large-scale recessions, such as the Great Recession of 2007 to 2009, consumers typically become more frugal and sensitive to price. These changes become permanent for some consumers, especially for those who were particularly hard-hit; for others, behaviors revert back to baseline once the economy has stabilized and any personal financial challenges have been overcome.

It already has. Consumers are buying less , shifting more purchasing online, and spending less on travel and in-person events. Whether those changes will endure, though, is unclear. Some experts predict that most people will revert back to old habits post-COVID; a small few, it’s predicted, will become more frugal and less materialistic in the long term.

Much of what people purchase—like food, shelter, or medical care—is necessary for their health and security. But what compels someone to buy things that aren’t necessary, like the latest iPhone or an impractical pair of high-heeled shoes? The study of why people make such purchases—which are often irrational—is closely related to the field of behavioral economics , which examines why people deviate from the most rational choice available.

Behavioral economists, marketing professionals, and psychologists have concluded that extraneous purchases may be driven by a need to display one’s social status, or in response to an emotion like sadness or boredom . In other instances, retailers may successfully manipulate the desire for a “good deal” by making an unneeded item seem especially affordable or portraying it as being in limited supply.

Learning how to recognize common manipulation tactics may help individuals and families save money—and stress —in the long term.

Many human behaviors are driven by reward. Purchasing a new gadget or item of clothing triggers a surge of dopamine , which creates pleasurable feelings. Though the glow of a new purchase may not last long, the desire to once again be rewarded with a burst of dopamine drives us to buy more .

It depends. Some research suggests that experiential purchases like vacations bring more happiness than material goods, in both the short- and long-term . However, this rule may not apply universally. For lower-income people, spending on material goods that meet basic needs is often more conducive to happiness, especially if the items remain useful over time.

Consumers are often irrational. Instead of only buying things they need, they also buy unnecessary items—often because the purchase makes them feel good, soothes negative emotions, or boosts social status. A consumer may also buy something that has been framed by a marketer as especially attractive; “buy one get one free” offers, for instance, are hard to resist and encourage people to buy things they don’t need.

Certain buying impulses can ultimately be harmful , but they often serve a psychological purpose. Purchasing unhealthy foods or excessive alcohol, for instance, can temporarily offer comfort from painful emotions; buying a new pair of designer jeans might break the bank, but can also help the purchaser prominently display their social status.

Dissonant buying impulses—or purchases that conflict with one’s resources, needs, and goals —can be difficult to manage, especially when they’re driven by negative emotions. Learning emotional regulation skills —such as naming any negative feelings, redirecting attention to productive activities, or practicing mindfulness —or creating physical “barriers” (such as freezing credit cards so they can’t be used impulsively) can help.

Anxiety is known to spur impulsive purchases —in part because buying things offers a sense of control and can be used to self-soothe. Anxiety can also lead someone to prioritize products that promote safety or a sense of security—such as toilet paper, hand sanitizer, or canned goods.

In a word, panic. Anxiety and fear make the world appear frightening and senseless; stocking up on certain items like toilet paper is one way to restore a feeling of control. Panic buying is also driven in part by herd mentality; if people see that others are hoarding hand sanitizer, they assume they should too.

Impulse buying may be motivated by negative emotions, as purchasing something often temporarily boosts mood. It may also be driven by personality—the naturally more impulsive or less conscientious may be driven to more frequently purchase items on a whim. Marketing strategies, like advertising products as “limited time offers,” can increase the tendency to impulse buy.

Two vast, interrelated industries—advertising and marketing—are dedicated to introducing people to products and convincing them to make purchases.

Since the public’s desires tend to change over time, however, what works in one product’s campaign won’t necessarily work in another’s. To adapt messages for a fickle audience, advertisers employ focus groups, market research, and psychological studies to better understand what compels people to commit to purchases or become loyal to brands.

Everyone has heard the advertising maxim “sex sells,” for instance—but exactly what, when, and why sex can be used to successfully market a product is the subject of much debate among ad makers and behavioral researchers. Recently, some evidence has suggested that pitches to the perceived “lowest common denominator” may actually inspire consumer backlash.

Marketers regularly use psychology to convince consumers to buy. Some common strategies include classical conditioning —training consumers to associate a product with certain cues through repeated exposure—creating a scarcity mindset (suggesting that a product only exists in limited quantities), or employing the principle of social proof to imply that everyone is buying a product—so you should, too.

Marketers often exploit cognitive shortcuts , known as heuristics, to convince consumers to make purchases. One example of this is the anchoring bias , or the brain’s tendency to rely heavily on the first piece of information it learns. A savvy marketer may say, for instance, that a car costs $20,000, then quickly offer to take $1,000 off. Since the consumer “anchored” on to the initial $20,000 price tag, a $1,000 discount seems substantial and the consumer may leap at the offer. But if the car was truly worth $15,000, it would still be overpriced, even with the supposed discount factored in. 

Renowned marketing researcher Robert Cialdini found that advertisements are perceived very differently depending on consumers’ state of mind. Fearful consumers, for instance, are more likely to respond negatively to ads that promote standing out from the crowd. However, consumers in a positive state of mind respond well to ads encouraging uniqueness; thus, timing and context are often critical to an ad’s success.

Limited time offers trigger a sense of urgency and force consumers to make quick decisions. A product only being available “for a limited time” (either at all or at a lower price) creates a sense of scarcity. Scarcity—whether real or manufactured—increases a product’s perceived value, heightening the chance of an impulsive purchase.

Because the majority of humans desire and seek out sex, sexual stimuli naturally capture attention; thus, marketers often make use of attractive models or erotic imagery simply to make consumers take notice. Being “primed” with erotic content can change behavior, too; research has found that sexual priming can lead consumers to make riskier financial choices.

The effectiveness of sex in advertising likely depends on several factors, including gender and context. Women appear to respond more negatively to sexual ads than men, research finds. When the product is unrelated to sex, using erotic imagery in ads can trigger dissonance and trigger negative feelings about the brand.

In a crowded marketplace, anyone hoping to sell a product or service will need to stand out. To succeed at this, marketers often turn to psychological research to identify and target their most likely consumers, grab their attention, and convince them that a product will fill a specific need or otherwise better their life. Aiming to inform and persuade consumers—rather than manipulate them—is widely considered to be the most ethical approach, and is likely to help build brand loyalty more than cheap marketing tricks.

Both the message and the messenger matter for  persuasion . Marketing researcher Robert Cialdini has found that first impressions matter greatly—a company (or individual) that appears trustworthy and warm is more likely to gain their audience’s trust. Cialdini also coined the term  “pre-suasion”  to argue that marketers must grab consumers’ attention  before  making an appeal—by offering free samples, for instance, or couching a product pitch in an amusing commercial. 

Turning to psychology can help. Appealing to consumers’ emotions and desire for connection with others are often powerful marketing strategies, as long as they’re not interpreted by consumers as manipulative. Introducing novelty, too, can be effective—research shows that consumers respond to surprising ads, humorous ads, or even “experiential” ads (such as parties or events designed to promote a product). Repeating an ad enough times so that a consumer remembers it—but not so much that they become frustrated—is also a critical part of any effective ad campaign.

Humans are creatures of habit and slow to adapt to change. To spread a new message or idea,  advertisers  have learned that simplicity is key; overcomplicated appeals can be frustrating or confusing for consumers. Summarizing the benefits of a new product, service, or political campaign in pithy, memorable phrases or images—and then repeating the message as often as possible—is more likely to grab consumers' attention and convince them to take a chance on a new object or idea.

Customers trust businesses that are honest with them, sharing accurate information about everything from the benefits of using their products to how they run their business.  Other guidelines for ethical marketing  include clearly distinguishing ads from other types of content (news, entertainment, etc.), prioritizing the interests of children or other vulnerable groups (by not marketing unhealthy products to children, for example), avoiding negative stereotypes, and respecting consumers’  intelligence  and privacy.

Personal Perspective: Does the practice of diminishing the size of consumer products, but charging more, eventually erode trust in other areas of human life?

The cognitive and emotional responses associated with art acquisition and disposal are explored.

Too often, managers and team members misunderstand the youngest generations showing up at work today. Here's how to turn your frustration into fascination.

Advertising has been criticized for being pervasive, intrusive, distracting and annoying. But effective marketing utilizes ads that elevate mood and enhance well-being.

AI-driven personal digital assistants (PDAs) are uniquely influencing human behavior. The information analysis you need may be on your wrist or in your pocket.

The psychological mechanisms behind our love for sporting events.

Should families be worried about kids' compulsive gaming?

Do you rent or own? The question is an important one, with emotional and symbolic significance.

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Ever wondered why people are willing to spend $25,000 on a hoodie? Discover the psychological tricks brands use to create irresistible hype and why we fall for them.

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Impact of the new middle class on consumer behavior: a case study of Delhi-NCR

Journal of Asian Business and Economic Studies

ISSN : 2515-964X

Article publication date: 1 June 2021

Issue publication date: 29 August 2022

The paper examines the increase in annual income of the new middle-class (The NMC) of Delhi-NCR and its impact on their investment habits, consumption habits and lifestyle. The paper aims to look into the transformation of the new middle-class into the NMC in emerging economies and its potential to the companies and investors.

Design/methodology/approach

This study draws insight from 558 new middle-class consumers in Delhi-NCR. ANOVA, post hoc tests , and hierarchical multiple linear regression model are applied to test the proposed hypotheses.

The NMC living in India's megacities imitates the lifestyle of their counterparts living in the West. To maintain their status and present themselves different from those living in middle or lower-middle-class categories, they spend audaciously, even though the income is low. When they enter the new middle class, their consumption, saving and lifestyle diversify positively.

Research limitations/implications

This study has limitations. First, the authors do not apply any behavioral theory or marketing model such as the theory of reasoned action (TRA), Engel-kollat-Blackwell (EKB) model or theory of normative model of target markets. Second, the research is limited to the NMC of only one emerging economy, i.e., India. Third, the research sample is limited to only one megacity of India, i.e., Delhi. Finally, this research used only one factor, i.e., AI, to study the consumption pattern.

Practical implications

The results suggest that considering the buying habits and lifestyle of Indian the NMC, consumers would prove helpful to the companies in product decision-making. Furthermore, understanding change in investment habits across different income levels would be advantageous to financial institutions, investment planners and marketers while designing their products to attract investment.

Originality/value

The research holds significance from the point of view of understanding Indian consumers encompassing the the NMC and predicting their implications on consumer goods-producing industries, which shall, in turn, facilitate producers and government in formulating policies and strategies.

• New middle class (NMC)
• Middle class (MC)
• Consumer behavior (CB)
• Annual income (AI)
• Investment habits (IH)
• Buying/ spending habits (B/SH)
• Lifestyle (LS)

Chaudhary, A. and Khatoon, S. (2022), "Impact of the new middle class on consumer behavior: a case study of Delhi-NCR", Journal of Asian Business and Economic Studies , Vol. 29 No. 3, pp. 222-237. https://doi.org/10.1108/JABES-07-2020-0080

Emerald Publishing Limited

Copyright © 2021, Asiya Chaudhary and Sabiha Khatoon

Published in Journal of Asian Business and Economic Studies . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

In the last 2 decades, the developing economies have witnessed a remarkable shift in their growth and per capita income. Based on the surge in per capita income, the World Development Report (WDR) in 1978 introduced a grouping of “low income” and “middle income” countries using a threshold of $250 per capita income ( Prydz and Wadhwa, 2019 ). In 1989, a new category was introduced as a “high income” group ( Prydz and Wadhwa, 2019 ), which led to a remarkable change in the world economic scenario. With the swell in FDI during 2001–2018, countries categorized as low-income countries (hereafter LIC) entered middle-income countries (hereafter MIC) status ( Steinbach, 2019 ). Rapid economic growth, low poverty and increased real income trimmed the number of LIC to 31 in 2010 from 64 in 2001 ( Ravallion, 2010 ) and augmented the high-income countries to 80 ( Fantom and Serajuddin, 2016 ). The metamorphosis of LIC into MIC added new ranks between the rich and the poor by facilitating global mass consumption and shifted many households to the “middle class” (hereafter MC) in developing countries. Birdsall et al. (2000) encapsulate MC under the relative income approach as households with a per capita income range of 75 and 125% of the median household per capita income. Banerjee and Duflo (2008) wrap MC in developing countries under absolute approach as two groups of households: one with daily per capita expenditure between $2 and $4 and the other between $6 and $10. Besides income patterns, few scholars define MC as a class having access to different resources. Mainly concentrated in urban areas, MC consumers are well-educated and young ( Cavusgil et al. , 2018 ) whose motives are not accompanied by property but by other resources such as human capital ( Fernandes and Heller, 2006 ), education, organizational position or ownership of some exceptional occupational skill ( Dhawan, 2010 ).

1.1 New middle-class

Fernandes and Heller (2006) evidenced that the new middle class (hereafter the NMC) is a real and significant phenomenon and a “class-in-practice” whose boundaries are continually being defined and tested. Recently, there has been an eye-catching expansion in the radius of the NMC in emerging economies (hereafter EEs), particularly India and China, because of significant growth in annual disposable income ( Ozturk, 2016 ). Parker (2009) estimated that the NMC increased from nearly a third of the population in 1990 to more than half today in EEs. In India, the national economic policy 1991 scaled-down rural poverty from 94% in 1985 to 61% in 2005 and is projected to reduce further to 26% by 2025 ( Beinhocker et al. , 2007 ). According to a study conducted by McKinsey Global Institute (MGI), if India continues the same economic growth, the average household income will triple in the next 2 decades and will become the fifth-largest consumer market in the world by 2025 [1] . The new economic reform resulted in a boom in jobs and entrepreneurial opportunities for middle-class Indians ( Harriss, 2006 ) and improved disposable income. Not to mention, Delhi-NCR [2] , too, achieved an increase in annual disposable income (hereafter AI) which resulted in a voluminous change in consumption, savings and investment pattern of the bourgeoisie living there. Prime Minister Narendra Modi dubbed them the “neo middle class” as they helped the government move to power ( Mandhana, 2014 ). Delhi-NCR were chosen for the present study because Delhi is a “sui generis.” Being the national capital of India and a megacity with the highest share of inter-state migrants in its total population ( Kawoosa, 2019 ), Delhi continues to dominate the economy ( Beinhocker et al. , 2007 ). Jeelani (2019) quotes the report of economic survey of Delhi, which estimated that the capital's economy has grown at a rate of 8.60% in 2018–2019, and per capita income has increased to Rs. 3,65,529 (5336.72 US$), which is three times the national average, i.e., Rs. 1,25,397 (1830.79 US$). NCR, the first master plan of Delhi ( Nitesh, n.d. ), is rising briskly as a global economic hub, embracing a considerable percentage of the new urban middle class. In recent years, because of the increase in household consumption and expansion in the NMC, Delhi-NCR has become a hub of large, medium and small enterprises.

Some researchers affirmed that in India, economic reform expanded the radius of consumption and new desires for education, investment, employment and leisure, which revived the middle class as the “new middle class” ( Mathur, 2010 ; Varma, 2007 ) in megacities such as Delhi, Mumbai, Bangalore and Hyderabad, accounting for about 35% of the country's the NMC ( Ahmed et al. , 2016 ). In urban India, the NMC consists of the households having doctors, professors, engineers and entrepreneurs earning within a range of Rs. 55, 000.00 to Rs. 200,000.00 per month (US$ 781–US$ 2840) ( Beinhocker et al. , (2007) also support the researchers' observation), with at least one family member working abroad and at least one child studying in universities of the UK and US ( Khandekar, 2013 ). They practice a Western lifestyle ( Cavusgil and Kardes, 2013 ) and follow bourgeoisie values to distinguish themselves from those living in the middle-class. Parallel to this, there exists a group within the Indian the NMC that, in their lifestyle pattern, rejects bourgeoisie values and attitudes ( Fadaee, 2014 ). Class and status relationship has always been an issue in India ( Jaffrelot and van der Veer, 2008 ), leading to different consumption behavior across different income groups ( Kardes, 2016 ). Therefore, it would be interesting to know how far the increased disposable income impacted the consumer behavior of the Indian the NMC residing in megacities.

In this study, we took variables used in analyzing consumer behavior, including annual disposable income, investment habits, buying/spending habits and lifestyle. These variables are also relevant in assessing emerging markets' economic growth ( Belbağ et al. , 2019 ; Cavusgil and Kardes, 2013 ; Cavusgil et al. , 2018 ). Furthermore, income is one of the demographic factors which has a direct bearing on consumption patterns of different social classes ( Ahmed et al. , 2016 ; Durmaz and Durmaz, 2014 ; Isozaki et al. , 2017 ) and directly influences the living standards and decisions whether to spend or save for the future good ( Avadhani, 1968 ; Bishnoi, 2014 ; Kumarasinghe, 2017 ).

What is the difference in investment habits (hereafter IH), buying/spending habits (hereafter B/SH) and lifestyle (hereafter LS) of the NMC of Delhi-NCR across various income levels?

What is the impact of an increase in AI on IH, B/SH and LS of the NMC living in Delhi-NCR ?

The present study is structured on a sample of the NMC of one of India's megacities, Delhi-NCR. The study has applicability in the ambiance that aims to analyze the changes in IH, B/SH and LS of the NMC of Delhi-NCR because of the increase in their AI that they achieved due to the economic reform of 1991. Various scholars in different academic fields have extensively studied the consumption patterns of the middle-class in EEs, including India. However, limited work has been conducted to investigate the consumption pattern of the NMC living in megacities of India such as Delhi, Mumbai and Bangalore (e.g. van Holstein, 2019 ; Jana and Sarkar, 2018 ; Kaur et al. , 2016 ; Khandekar, 2013 ; Narayan et al. , 2015 ; Nijman, 2006 ; Schindler, 2014 ). There is a paucity of literature providing insight into the impact of the change in AI on the consumption pattern of the NMC living in Delhi-NCR (e.g. Schindler, 2014 ). The purpose of the current study is to fill the gap and add to the existing literature by measuring the impact of an increase in AI on the consumption pattern of the NMC of Delhi-NCR.

The paper's remainder is structured as follows: after presenting different definitions of MC and the NMC, we reviewed ( Section 2 ) the existing literature in the context of the NMC and its consumption pattern in EEs. In Section 3 , we discuss the sampling and data framework adopted in this paper. Section 4 justifies the methodology. In Section 5 , we present the results and discussion, and in the last ( Section 6 ), we discuss the conclusion, practical implications, limitations and future direction.

2. Literature review

2.1 characterizing the nmc in ees.

In EEs, the NMC is characterized by its Western lifestyle, high disposable income, discretionary consumption, consumption of leisure commodities, education, career orientation, profession/employment, cultural features and mentalities ( Cavusgil et al. , 2018 ; Chevalier, 2015 ; Fernandes, 2009 ; Iqani, 2017 ; Kharas and Gertz, 2010 ; Kaplan, 2013 ; Kapur et al. , 2002 ; Kardes, 2016 ; Krishnan and Hatekar, 2017 ; Varma, 2007 ). the NMC in EEs, such as India, China and Indonesia, is considered the offspring of economic development of the 1980 and 1990s ( Ansori, 2009 ; Tsang, 2014 ). They are often considered consumerist and politically anti-poor groups ( Fadaee, 2014 ; Nijman, 2006 ). Most EEs are characterized by their educated, growing new middle-class households, which have experienced significant enhancements in living standards and economic situation ( Belbağ et al. , 2019 ). They play a vital role in economic growth, wealth creation ( Goodman, 2012 ) and entrepreneurial development in EEs ( Cavusgil and Kardes, 2013 ). In China, they are called “new social strata,” consisting of professionals, managers, self-employed and private business owners − few of them with higher education and higher income ( Wu and Cheng, 2013 ). In Turkey, the NMC consists of the households that have attained increased disposable income and have experienced lifestyle changes since market liberalization reforms after the 1980s ( Uner and Gungordu 2016 ). Even though they experienced a decline in wages in Brazil, their discretionary spending surpasses their counterparts living in India, China and Russia ( Kardes and Chueke, 2017 ). In India, the economic growth allowed the NMC to adopt the change in lifestyle and learn to display the newly achieved wealth and confidence ( Brosius, 2012 ).

2.2 Consumption Pattern and annual income of the NMC

There is a significant difference in the IH (H1a), B/SH (H1b) and LS (H1c) across income levels of the NMC of Delhi-NCR.

There is a significant impact of change in AI (increase) on IH (H2a), B/SH (H2b) and LS (H2c) of the NMC.

3. Sampling and data

3.1 inclusion criteria.

The participants were randomly selected from banks, universities, professionals, self-employed groups, business people, etc., based on their annual income ranging from Rs. 4,50,000 to Rs. 25,00,000 (US$ 6391 to US$ 35508 as per 2019 average exchange rate) and the age group between 21 and 62 years. The selection criterion of income was based on the studies conducted by the National Council of Applied Economic Research (NCAER) [3] , McKinsey Global Institute (2007) [4] , Birdsall (2015) [5] and Isozaki et al. (2017) [6] . A total of 1,000 questionnaires were distributed, out of which 558 were found appropriate for analysis. Respondents were approached personally and through e-mail.

3.2 Measures

The constructs' definition and measurement were adapted mostly from existing literature to ensure the research quality. Each construct item was scored on a Five-Point Likert Scale (from “strongly disagree” to “strongly agree”). The questionnaire comprises two sections. The opening section included general questions to capture respondents' demographic profile, and the second section measured the constructs used in our study. Statements were modified as per the requirement of the current study ( Table 2 ).

4. Methodology

Model 1: Y = β 0 + β 1 GENDER + β 2 EMPLOYMENT + ε

Model 2: Y = β 0 + β 1 GENDER + β 2 EMPLOYMENT + β 3 ANNUAL INCOME + ε

5. Results and discussion

5.1 reliability and validity.

A preliminary data analysis was conducted first, wherein the accuracy of data, outliers, reliability and missing values of all the variables were checked. IBM-SPSS 20 has been used to derive the results, and the reliability of the measures was checked by using Cronbach's alpha ( Table 3 ). The validity of the model was measured by structural equation modeling (SEM), using AMOS 20. Cronbach's alpha of B/SH and LS surpasses the minimum threshold of >0.70, indicating the scale's relatively high reliability. IH's value was a bit low; however, in many studies, researchers have considered and accepted reliability of between 0.50 and 0.60 as minimally sufficient ( Peter, 1979 ; Shim et al. , 1989 ). Composite reliability (CR) for IH, B/SH and LS surpasses the widely agreed threshold of >0.7 for satisfactory convergent validity. Average variance extracted for IH and B/SH is greater than 0.5, indicating acceptable convergent validity, but AVE for IH is below the threshold. Fornell and Larcker (1981) suggest that CR alone can be used to conclude that the convergent validity of the construct is adequate ( Table 3 ). Correlation between factors is less than 0.7, indicating satisfactory discriminant validity.

5.2 Descriptive statistics

There are a total of 558 respondents, wherein 70.3% of the respondents are male, and 29.7% are female. Among them, 76.7% fall in the age group of 21–40 years. Further, 42.7% of respondents are graduates, 69% of them are in services, whereas 23.7% are self-employed. In the overall sample, 74.2% earn between Rs. 4,50,000–9,00,000 (US$ 6391–US$ 12783) annually, and 72% are married, while 28% are unmarried ( Table 4 ).

5.3 H1 : Measure of significant difference in the IH, B/SH and LS across various income levels

One way ANOVA results ( Table 5 ) showed that all three hypotheses ( H1a, H1b and H1c ) were rejected at 5% level of significance, it was needed to work out a post hoc test. Post hoc test ( Table 6 ) indicates that respondents of income category I and III and category II and III possess significantly different IH ( p  < 0.05) than their counterparts in other income groups. Respondents in income category II and III show significantly different B/SH ( p  < 0.05) in comparison to people in other income groups. People in income category I and II show significantly different LS ( p  < 0.05) than people in other income groups. To sum up, people in income category III have robust IH and B/SH than their counterparts in other income levels ( Table 7 ). People in income category I follow strong lifestyle patterns than people in other income levels.

5.4 H2 : Measure of the impact of change in AI (increase) on IH, B/SH and LS

For the development of the model, control variables are included in model 1 of IH, B/SH and LS ( Table 8 ). For IH, the model is statistically significant and explains 1.6% of the variance. The introduction of income in step 2 explains an additional 1% of the variance in IH after controlling for gender and employment. In step 1 of B/SH, the model is statistically significant and explained a variance of 4.8%. In step 2, the introduction of income with gender and employment explains an additional 1.3% variance in B/SH after controlling for gender and employment. In step 1 of LS, the model is statistically significant and explains a variance of 3.4% in LS. In step 2, when income is included, the model as a whole explains an additional 0.9% of variance after controlling for gender and employment. Gender and income are the statistically significant predictors of IH ( p  < 0.05), B/SH ( p  < 0.001) and LS ( p  < 0.001), while employment is a non-significant predictor. Gender proves to be the best predictor of IH ( β  = −0.08), B/SH ( β  = −0.22) and LS ( β  = −0.19) than employment and income. To sum up, gender and AI have more impact on spending patterns and lifestyle of the NMC than on investment patterns.

5.5 Discussion

As households persistently save a considerable portion of their disposable income, the sector always remains the net supplier of funds to the deficit sectors ( RBI, 2018 ). Our results confirm that investment decisions of the NMC change with change in AI depending on the preferences and priorities. The NMC, with relatively higher income, prefers to save more than their counterparts with low income. When annual income increases, they shift their investment choices from financial assets, e.g., shares, mutual funds, LIC, etc., to real estate, house and gold. Avadhani (1968) , Das (2012) , and NSO (2019) support our results that the NMC households prefer to invest in small savings, bank deposits, real estate and gold, followed by government securities and other financial assets. The results are also consistent with the studies of Bishnoi (2014) and Samudra and Burghate (2012) , which provided evidence that change in income brings inconsistency in investment behavior of the different income groups concerning the features of investment instruments.

The NMC consumers in megacities like Delhi are engaged in a shopping spree, spending on entertainment and merry-making. Respondents agreed that they prefer cars, brands or malls either because their peer groups did so or to symbolize their status in society. The rise in income affected their consumption of various categories of goods differently. They spend a large proportion of their increased income on “high-frequency” items, such as food, beverages, personal-care products, cars, entertainment, telecom products and services, in comparison to medium-frequency (apparel, home furnishings and tourism) and low-frequency items (such as consumer durables and appliances or any other luxury items) ( Singhi et al. , 2017 ). Hubacek et al. (2005) and later Narayan et al. (2015) reflected that economic success in countries like India and China has enhanced the middle class's annual income, resulting in a shift in consumption expenditure to more luxury goods. This shows evidence that the upper-middle class's preference in India's megacities such as Mumbai is mainly driven by credit card acceptance, shorter store distance and higher vehicle ownership. Thus, it is observed that as income increases, consumers get more open-handed, brand-conscious and aspire for anything that makes their life easier and comfortable.

There is a difference in the lifestyle of the NMC across AI, and our results verify that income impacts the lifestyle. Preference strengthens personal houses, branded cars, clothes, smart televisions, smart mobile phones, celebrity-endorsed products, etc. Respondents who moved to the layer of wealthy class plan vacations more vigorously. Our results are in conformity with the case study conducted by Brosius (2012) that vacations like a weekend trip to Thailand or Singapore, dining-out at five-star hotels and admitting children in elite private schools add to the quality of lifestyle. Hubacek et al. (2005) and Mathur (2010) show evidence that Indian NMC, within an AI range of Rs. 2,00,000- Rs. 10,00,000, prefer to enjoy higher-quality life as compared to their counterparts in a lower-income category. Many respondents favored imported products over domestic products, further supported by Lee et al. (2010) , concluding that Indian consumers prefer American brands over local brands for their uniqueness and good quality. As we checked on education preferences, Indian NMC is spending a significant percentage of their disposable income on good quality schools and colleges for their children. Our finding is similar to previous studies' results and confirmed that the importance of education for Indian NMC has increased in past years ( Roche et al. , 2011 ; Varma, 2007 ).

6. Conclusions

It is evident that consumption pattern varies with change in AI across cities and economies. When people move to the upper-income bracket, they spend a large portion of their disposable income on improving the quality of living standards and save some for a better life for their offspring ( Javalgi and Grossman, 2016 ). Given the lifestyle and consumption pattern, our results conform with the lines of Sheth (1999) quoted by Jaffrelot and van der Veer (2008) that membership of today's NMC is associated with new lifestyle patterns, ownership of economic assets and self-consciousness of belonging to the middle class. The NMC living in India's megacities enjoys a lifestyle similar to their counterparts living in developed countries. Based on the results, we could observe that high-income individuals in the NMC spend robustly on discretionary consumption and save a portion for the future than individuals with low income.

6.1 Practical implications

Our study's main contribution is that increase in AI after the economic reform resulted in a transformation of the MC to the bourgeois class and shifted their consumption behavior to discretionary items. The rapidly expanding radius of the NMC in EEs such as India has been attracting Western companies' focus ( Belbağ et al. , 2019 ; Kardes, 2016 ), which are well prepared to grab this augmented class to give tough competition to domestic companies. The positive factor with domestic companies is that they have the advantage of already established relations with local consumers and an understanding of their nature, which international companies might lack. Therefore, managers of domestic and international companies are required to strategize and innovate in the light of the diverse consumption behavior of the NMC in emerging economies ( Cavusgil and Kardes, 2013 ; Cavusgil et al. , 2018 ). In megacities, Delhi, in particular, there is a crisis of proper housing societies. There are mainly two reasons behind this crisis, either the houses are very distant from the workplace, or the prices are beyond the pocket of the NMC. At the same time, housing developers are also facing financial losses as the stock remains unsold. Therefore, to fill this gap, developers should come with housing schemes that match the priorities of the NMC. Our results should inspire corporate and policymakers. For a sustainable market economy, the policymakers cannot overlook the the NMC's role as entrepreneurs, teachers, professors, doctors, engineers, skilled workers and their role in bringing political parties into power. The policymakers should consider the effects of monetary and fiscal policies on those residing in the middle strata in EE. Hence, in the Indian context, the corporate sector and policymakers need to focus on two critical aspects: megacities' unique urbanization pattern and the fast-growing the NMC consumer market. Both play a pivotal role in reducing poverty and enhancing the country's economy.

6.2 Academic implications

For the academic implication, the researchers should consider that increase in income is one of the factors that directly influence the consumer behavior and lifestyle of people of different income categories. Therefore, researchers should be clear about making a distinction between the middle-class and new middle-class consumers. It should also be considered that an increase in income is an indicator of the growth of the NMC in EEs. Ozturk (2016) , in his study, mentions that growth in consumption in EEs is due to an increase in income of the upper-middle class.

6.3 Limitations and direction for future research

Our study has limitations. First, we do not apply any behavioral theory or marketing model such as the theory of reasoned action (TRA), Engel-Kollat-Blackwell (EKB) model or theory of normative model of target markets, which may be applied to study consumer behavior of THE NMC in emerging markets. Furthermore, we do not apply any social class theory, such as the Marxist theory or Weber's theory of class. This may prove to be a potential direction for future research. Second, the research is limited to the NMC of only one EE, i.e., India. Third, the research sample is limited to only one megacity of India, i.e., Delhi. Future researchers could consider the NMC of other megacities like Mumbai, Kolkata, Bangalore and Chennai and might compare their consumption patterns. Moreover, the NMC living in the countryside could also be considered for future studies.

Finally, in our study, the value of R 2 is low. In our study, we added gender and employment as control variables, which did not contribute much to improve the model, but as per the study's requirement, we have to stick to the same predictors only. However, previous studies show that the value of R 2 might be low (e.g., Kara et al. (2018) ). There may be other relevant variables that may be included in future studies as control variables to improve the value of R 2 . The use of more than one predictor might improve the value of R 2 ( Nau, 2014 ; Frost et al. , 2017 ). However, other factors such as age, qualification and marital status might influence consumer behavior and could be considered as control variables for future studies.

Hypotheses summary