Proposal. Impact of Recession on Buying Behaviour of Ethical Consumers
1. Proposed Working Title
Impact of the Recession on the Buying Behaviour of Ethical Consumers in the UK food industry
2. Research Background
According to the National Bureau of Economic Research, an economy is said to be in a recession when there is a decline in Gross Domestic Product (GDP) for two successive quarters.
The recent economic downturn which commenced in 2007 has hit UK in a huge way. The recent recession is described as the worst recession to have hit the country since the Second World War, with GDP declining up to 3.8% in 2009 and unemployment having risen to its highest point in sixteen years. The credit crunch has undoubtedly has had a significant impact on consumer trends and behaviour. With many households facing unemployment, there has been a major cut back in consumer spending. The areas where consumers were found to cut back on spending are personal durables (e.g. clothing), indulgences (e.g. premium coffee), household durables (.g. electronics) and services (e.g. salon treatment). Alongside alterations have also been found in consumer preferences and purchase behaviour.
Numerous studies have found that consumer behaviour during the recession is characterised by an increased sensitivity to price, marking a shift to lower cost products. Studies have also found that there is an increased focus on quality during the recession period, implying that consumers are increasingly looking for products that are of good quality, yet affordable. With retailers facing increasing cost of production during the economic downturn, to make a profit it is necessary for retailer to push the increase in prices to customers. This may prove to be an even greater challenge for ethical goods producers. In line, Carrigan et al state that “it is all very well asking people to spend a little more to save the planet while everyone is rolling in and times are good, but once things turn sour and people start tightening their belts then things may be a little different”. The credit crunch is bound to pose the biggest challenges ever for ethical consumerism. In this context, it is highly relevant to study the impact of the recession on ethical consumer behaviour.
This research will focus on evaluating the impact of recession on ethical consumer behaviour in the food sector. Specifically, the study will focus on ethical retailers in the food industry in the UK. Gaining a good understanding of how consumers are responding to the prolonged economic downturn in regard to ethical purchase behaviour is crucial in leading both ethical and non ethical companies in making changes to their fundamental business model in order to ensure success. Although there are signs that the economy is improving, which might question the relevance of this research, it is important to note that changes in consumer behaviour caused by a recession are likely to remain for a long period. So whilst economists may signal that the recession has ended and recovery has begun, consumers are unlikely to reflect this in their buying behaviour immediately.
3. Research Aims
The aim of this research is to evaluate the impact of the recent recession on the buying behaviour of ethical consumers.
4. Research Questions / Objectives
The most important question that this research proposes is: How does the economic downturn impact ethical consumer behaviourThis question in turn provokes us to find answers to other significant questions such as: What challenges does the recent recession present to consumers wishing to consume sustainably and ethicallyDoes price factor outweigh ethical values during the recessionWhat challenges does the recent recession present to marketers in the food industry to produce sustainable and ethical goods?
The primary objective of this research is to evaluate the impact of the economic downturn on the purchasing behaviour of ethical consumers. Other key objectives include –
1. To evaluate the impact of the economic downturn on marketers of ethical goods
2. To explore ways in which ethical retailers can engage consumers with social responsibility attitudes and retain their loyalty during and after the recession
5. Literature Review
The Ethical Consumer Researcher Association (ECRA) describe ethical consumerism in its truest sense as purchasing goods or services which do not harmful to the environment and society, and are made without harming the environment or exploiting workers. Consumers can express their ethical values and feelings of responsibility towards society by either buying products for their positive ethical qualities (e.g. free trade, organic etc) or by boycotting products for their perceived unethical characteristics (e.g. products produced using child labour).
Ethical consumerism has been a growing trend globally and particularly in the UK. Cooperative Bank’ 2009 Ethical Consumerism Report revealed that the total sales of ethical products in the UK has grown almost threefold in the past ten years. The ethical market in the UK was worth 13.5 billion pounds in 1999 and in 2008 was estimated to be worth 36 billion pounds. The growth in ethical consumerism during the last decade has been in the 2005 – 2007 periods and primarily in the food and finance sectors. The report further highlights that there is a significant rise in Britons holding socially responsible attitudes and this growth has not been affected by the recession. However, Carrigan et al caution that this picture is not very encouraging as firstly reality is far from how it is pictured, describing it as the 30:3 syndrome. According to Carrigan et al, while a third of consumers admit to care about companies’ social responsibility and sustainability initiatives, it is important to note that ethical goods rarely achieve more than 3 per cent of the market share. Carrigan et al note that even though the idea of ethical consumerism is better understood by customers today and they hold more socially responsible attitudes, it does not necessarily mean that these attitudes are translated into ethical purchases. The findings of some researches suggest that except among a minority of consumers, ethical values and principles hold third stand in purchase decisions, with factors such as price and quality holding the greatest priority. The cause for this substantial gap in between consumer attitude towards ethical purchases and actual purchase of ethical products is that consumers consider several product attributes jointly when making a purchase decision, such as, price, quality, attitude and brand knowledge. When evaluating an ethical product, consumers are influenced by several relevant product and marketing attributes. These can be divided into three categories. Firstly, consumers are faced to choose between different types of ethical claims. Second, their purchase decision will depend upon the credibility of the brand and third marketing efforts and advertisements will influence consumer purchase decision.
Thus clearly ethical consumer behaviour like all other attributes of consumer behaviour is exposed to the risks of recession and can be highly unpredictable. Although the Ethical Consumerism Report highlights a consistent growth in the ethical market in the last ten years, it is forecasted that the value of the ethical sector would slow down until 2012 owing to the sluggish economy with price being the most important factor influencing consumer purchase decisions. The ethical market is expected to pick up again in 2012 as the economy becomes more favourable. With some surveys revealing that in the context of the recession, consumer ethical behaviours are being limited by cost as people are less likely to pay a premium price for goods produced ethically, some other survey findings reveal that consumers are willing to pay more for ethically produced goods and services during the recession period. A major limitation of these studies is that they have not focused on any one particular sector.
The proposed research is guided by the philosophy of positivism. According to logical positivism the world simply consists of observable empirical regularities and science should restrict itself to describing these in the form of objectives, falsifiable propositions.
The nature of the proposed research is exploratory in order to develop deep insights and ideas about the underlying nature of the research topic and in turn generate a hypothesis. The exploratory research will begin with a study of the reported findings of other researchers. This process is called literature review. For conducting the literature review, Hart’ six step process will be employed. The six steps for conducting the literature review are –
Begin general reading to define the topic
Establish the scope of the research topic and locate major themes
Establish objectives for the literature search
Plan the structure of the literature search, including codes and cross referencing
Plan sources to be read
Begin reading of selected sources
In addition to helping gain deep insights into the research topic, the literature review is also used for evaluating the research methods selected for the recent research. The main sources of the literature review will be core marketing textbooks and professional journals from online databases such as Emerald and JSTOR.
Stemming from the deductive nature of positivist researches, both quantitative and qualitative methods of data collection will be used. Specifically, semi structured face to face interviews will be used for gathering data from key respondents of the selected ethical retail firms in the food industry; and survey questionnaire will be used for gathering data from consumers. Interviewing is selected for gathering data from the ethical retail firms as it stands out as the best method for gathering rich and holistic information quickly from a relatively small sample. A list of topics to be covered will be prepared to help ensure that important points are not overlooked and that the interview follows a logical progression. Survey method is the technique of gathering data by asking questions from people who are thought to have the desired information. Survey method is chosen for gathering data from customers because compared to other primary data collection techniques, questionnaires help gather data from a large sample with lesser cost and time. In addition, questionnaires also provide participants the chance to submit thoughtful responses, since they have time to look up information and reflect before responding, plus there is a high contact rate. Questions will be crafted carefully so that it will stimulate unambiguous answers from the respondents. The questionnaires will be administered directly to consumers.
7. Project Schedule
Research Gantt Chart (Week commencing 11 July 2010)
Bhattacharyya, D.K., 2003. Research Methodology. New Delhi: Excel Books.
Carrigan, M. and Pelsmacker, P., 2009. Will ethical consumers sustain their values in the global credit crunchInternational Marketing Review, Vol 26, Issue 6, pp. 674 – 687
Carrigan, M., Marinova, S., Szmigin, I., 2005. Ethics and international marketing. International Marketing Review, Vol 22, No 5.
Harrison, R., Newholm, T. and Shaw, D., 2005. The ethical consumer. Sage Publications.
Interbrand, 2009. Consumer spending in a recession. Available online: www.interbrand.com [accessed on 21 May 2010
Keinert, C., 2008. Corporate social responsibility as an international strategy. Springer.
Gill, J. and Johnson, P., 2002. Research Methods for Managers. 3rd ed. London: SAGE publications.
Patton, M.Q., 2002. Qualitative Research and Evaluation Methods. 3rd ed. USA: SAGE publications
Varey, R.J., 2002. Marketing communication: principles and practice. Routledge.
UK Cooperative Bank, 2009. Ethical Consumer Report 2009. Available online: www.ethicalconsumer.org [accessed on 21 May 2010