BACKGROUNDER ON CONSUMERISM



BACKGROUNDER ON CONSUMERISM

Definition of consumerism

The theory that a progressively greater consumption of goods and services benefits

the economy.

Definition of consumer behaviour

Why consumers make the buying decisions they do for the products and services

they need or want

The U.S. Economy and Consumerism

• U.S. consumer spending accounts for around 70% of U.S. GDP.

• U.S. consumer credit as a percentage of personal income is very high.

• Many commentators consider that excessive consumerism, and the debt

that supports it, were major contributors to the U.S. sub-prime mortgage

crisis (2007/2008) and the foreclosure of thousands of homes because

Americans could not meet mortgage payments.

The Canadian Economy and Consumerism

Canadian consumer spending represents 60% of GDP

Consumer Behaviour

ASSESSING CONSUMER BEHAVIOUR

• Influence of individual or group behaviour; e.g., friends influence what

kinds of clothes to wear or people on the job make decisions as to which

products the firm should use.

• Consumer behaviour involves:

– use and disposal of products, as well as the study of how they are

purchased;

– services and ideas, as well as tangible products.

• Consumer behaviour’s impact on society; e.g., aggressive marketing of

easy credit may have serious repercussions for the national health and

economy, such as the sub prime mortgage crisis in the U.S. (2007/2008)

where banks and other financial institutions loaned money to

homeowners who had dubious credit.

MARKET IMPACT ON CONSUMER BEHAVIOUR

The market can impact my quality of life as a consumer; e.g., the rise in oil

prices:

• I cannot afford to drive as much;

• I cannot travel and see things I’d like to;

• I may have to work more hours to earn more money to pay for the extra

cost of gas.

HOW MY CONSUMER BEHAVIOUR IMPACTS OTHERS

If I am not spending money on gas, movies, restaurants:

• businesses, theatres, gas stations, supermarkets, hospitality industry are

affected. They may even fail;

• decline in available jobs. Employees are let go. Their disposable income

drops.

HOW MY CONSUMER BEHAVIOUR IMPACTS GOVERNMENT REVENUE

If I am not spending:

• sales tax revenue is reduced;

• the income of businesses is reduced, lessening their tax revenue to

government.

Government options:

• cut services;

• increase government debt;

• raise taxes.

WHAT ROLE FOR GOVERNMENT TO BENEFIT CONSUMERS?

• encourage a healthy economy through economic and monetary policies;

• assist consumers in making informed buying decisions; e.g., regulations

to ensure proper product labelling;

• consumer protection—Canada’s Office of Consumer Affairs puts out a

handbook on how the Government of Canada can help consumers.

CONSUMER BEWARE

In Canada, the counterfeit industry has grown tremendously over the past

few years:

• The RCMP conducts more than 400 investigations into counterfeit goods

each year:

– Canadian industry estimates the knock-offs cost it as much as

$30 billion annually;

– Canada has become a leader in producing pirated DVDs for worldwide

distribution;

– counterfeit goods may not meet Canadian standards.

CONSUMERISM AND THE ENVIRONMENT

• Concerns for recycling or otherwise disposing of excess packaging and

“throw away” products.

• The U.S. produces 100 billion pounds of plastic a year, but recycles

only 5%.

• Toronto used to ship its garbage to landfills in Michigan. In 2006,

Michigan refused more shipments and Toronto had to find alternatives.

One method was a city-wide composting program, where each household

puts its organic waste into a green bin. On garbage day, that organic

waste is taken to a plant where it is composted.

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