Consumer spending

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Consumer spending is simply about how much money families are ploughing into the economy by purchasing goods and services. A report in the guardian newspaper in May 2009 claimed that ‘consumer spending falls at fastest rate since 1980’. A report published by The Telegraph in December 2011 claims that the UK economy has been ‘held back by weak consumer spending’. Similarly, in India the consumer spending patterns paint a similar picture. The economic downturn coupled with the high inflation forced consumers to tighten their purse strings and cut unnecessary spending.

However, much of the consumer spending in India is seasonal and based upon the rainfall. Influence on McDonalds in the UK and how McDonalds has responded The factors outlined above all play a huge part in shaping the economic growth or the economic slow down in the UK. Currently, the economy is recovering from the recession of 2008/2009. McDonalds, just like many other businesses, suffered as a result of that recession. In July 2009, a report commissioned by McDonalds revealed how the recession impacted on the business.

The report claimed that “spending on eating out falls for the first time in 40 years”. The report also concluded that the impact from the recession will be ‘long-lasting’ which will lead to a change in consumer demands over time and businesses will only recover from this if they are able to meet new customer demands. As the inflation figures show an increase in inflation over the last 5 years in the UK, this would’ve affected the prices of McDonalds menu items too. Five years ago a Big Mac in McDonalds was costing on average i?? 1. 99, now it is costing on average i?? 2. 19.

Of course this would have an affect on the demand for heir products as customers choose not to pay the higher price. Due to the increase in unemployment figures within the UK in the last 5 years, the disposable income per family would’ve undoubtedly been reduced. As a result of this consumers were forced to stay at home and eat, rather that ‘eat out’. To respond to this slow down, McDonalds introduced its new ‘saver menu’ in 2008 along with deciding on many other changes to cater for the evolving consumer demands. They decided to undergo a ‘restaurant modernisation’ programme.

This included offering free WiFi in their restaurants, making new choices available on their menus, launching sustainable coffee and tea and promoting working for the business by giving its employees a boost. McDonalds invested very heavily in their employees by offering them recognised national qualifications so they have the necessary skills when the business was to emerge from the downturn. McDonalds also took account of the lifestyle changes that consumers were shifting to, for example being more health conscious, and they launched ‘healthier’ options for that group of customers.

They also ensured local sourcing of ingredients and ethical practices in the production of their food. As a result of the above response, McDonalds was able to see through the economic downturn period and maintain consumer confidence by responding to their needs. Influence on McDonalds in the India and how McDonalds has responded All the factors highlighted above have influenced the economic climate for McDonalds India. However, McDonalds India have used these factors as opportunities to ensure growth of the business overall.

The consumer spending figures, the rate of inflation and the increasing unemployment figures really provide a platform for sales in McDonalds India to have slowed down, however, McDonalds India have taken advantage of research that they have carried out to ensure they stay ahead and maintain demand for their products. The respect McDonalds India has shown for their local customs and cultural sentiments is the strategy that has enabled them to succeed in the difficult economic climate. Soon after the global financial downturn, McDonalds India introduced a menu to serve the Indian palette to sustain demand for their products.

They introduced products such as the McAloo Tikki and the Pizza McPuff which were instant hits amongst consumers. In addition to this, McDonalds India ensured their restaurant kitchens were designed to maintain sperate vegetarian and no-vegetarian food counters, again respect local customs. McDonalds India also launched a whole new brand communication and advertising campaign to send out a clear message of ‘indian values and culture’ so that they are able to attract various segments of the market during the difficult financial time.

As the Indian customers had perceived McDonalds as an expensive eating out option, the challenge for McDonalds was to overcome this option so they responded to this by introducing the happy price menu. The above strategies that McDonalds India used enabled them, as a business, to grow their operations and increase their branch offerings across India. Tesco has set out its own aims and objectives that they wish to achieve. These aims are to ‘retain loyal people’ and ‘create value for customers and earn their lifetime loyalty’.

Firstly there is retaining loyal people. These people are not described as customers but just people. This means that this mission statement is not solely aimed towards their customers. This is aimed at staff as they need loyal staff to create a working environment that thrives. No one wants to shop in a supermarket where the staff are unhappy, so keeping their staff happy adds to their customers and therefore their growth. They also wish to retain their shareholders, these are the people that keep Tesco going from the top end.

Keeping these people happy is primarily by keeping money going into their pockets. This too is done by retaining loyal customers and opening new stores, which are also beneficial to customers. All of these combined are great to keep their custom base but also great ways to keep their profits rising. More profits always mean more growth and therefore a more successful company. Their other objective that is to create value for customers and earn their lifetime loyalty. This is done by splitting this objective into the 4 P’s.

These are Product – having the right product range for the customers. This differs from store to store and area to area. Price – keeping their prices competitive. Place – accessible locations for customers. Public – thinking of their public. Their corporate and social responsibility is spoken about by their PR team frequently and they do give to charity and the local community out of their profits. Tesco can see buying patterns from their Clubcard information and this gives them the insight into what people want and what is in demand which helps achieve these customer led goals.

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