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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