Factors Affecting Consumption

Consumption is the sole end and purpose of all production.  What restricts consumption? The factors which limit consumption are:

  1. The product and its limitations: This is a part of market research which is of great importance to product development and design.  Solution may be obtained too many important questions such as: Does the product possess all the functional requirements that are desired by the customer?  Would it be wise to expand its utility by modifying its design, and if so, how should this be done (design of attachments, the question of versatility, the problem of setting-up versus running times, etc)?  How should the design and specifications of the product affect the range of products to be produced, their sizes, the interchangeability of parts from one model to another and the effects of variety on the production schedule?  What would be the outcome of a simplification program?  Would the elimination of several products tend to enhance or to dampen the sales of other models or products of the company?  Quantitative data are required to facilitate a logical analysis of simplification plans.  What is the market’s attitude to the quality of materials used and the quality of workmanship in relation to its functional attributes and its price?  What is the effect of styling on the sale ability of the product, and to what extent is the periodic change of styling desirable? Would different packaging be more effective?  What are the implications of maintenance, breakdowns, repairs, availability and price of spare parts, and what conclusions should be drawn about the serving policy of the company?
  2. The consumer and his potential buying power: To prognosticate sales volumes, different kinds of data about consumer are collected.  First, who is the consumer – an individual, a family, a company?  What numerical facts should be known about him? What likely changes in the composition of population of customers can be foreseen?  Data about population structure, breakdown of wage earners, distribution according to ages and sex, distributions according to occupations and education, size and structure of families, rate of births and deaths and marriages, distribution of establishments according to size and main products – all are available.  Secondly, facts about buying power are required.  Useful ones are statistics about trends in the national wealth, the state of employment, industrial indexes, and level of savings in relation to earnings.  These are helpful in getting general trends in consumption.  Thirdly, the consumer’s attitudes, opinions and tastes have to be studied.  How does he spend his money, his leisure? What group of customers deviates favorable from the average consumer?  What do the customers want to have, and how do their wishes compare with what they can get? After sale surveys answer – What does the customer thin about the product?  What features gives him satisfaction or dissatisfaction with and for what reasons?
  3. Analysis of Competition: This is essentially a study in values and utilities.  Utility includes sense of prestige, pride of ownership, and feeling of achievement in addition to other attributes of the product.  Competition arises when several products or services have a claim to the consumer’s limited spending potentialities.  Hs is unable to purchase everything, and so he drawn up a list of preferences.  Cut into the list by lengthening it or by reducing the prices.  That is to push some other product out of the list.
  4. Saturation: Demand is known to be affected by the stock that has already been absorbed by the market in a given period of time.  Beyond a certain level of consumption demand tends to decrease as the supply increases. This is sometimes known as the Laws of Diminishing Utility. The Law of Diminishing Utility states that the utility of a certain product lessens in proportion to the quantity already purchased by the customer in a given period.  The more he gets of the product, the more his interest wanes in acquiring some more, until a point is reached when the utility derived from purchasing another unit is so small that the customer begins to prefer a different product altogether.  This is the point of saturation.
  5. Distribution and Promotion Methods: The distribution and promotion methods affect the sales volume. A proper evaluation of their effectiveness must be included.  Such an evaluation should cover an analysis of methods used in the past, appraisal of methods used by direct competitors, the possible application of new methods adopted from other fields, and the effect on the market of any change in the existing methods.  Analyses of distribution and promotion methods may fall into three categories: advertising, effectiveness of distribution channels, and terms of sale.