The Consumer in The European Union
The Consumer in The European Union
The Consumer in The European Union
Contents
1. Objectives
2. 1 Introduction
3. 2 Economic developments
4. 2.1 Household income
5. 2.2 Inflation
6. 2.3 Unemployment
7. 2.4 Gross domestic product
8. 3 Demographic developments
9. 3.1 Population growth
10. 3.2 Ageing
11. 3–3 Number of households and household size
12. 3.4 Education
13. 3.5 Immigration
14. Will the appeal of the East reach the European High Street?
15. 4 Cultural developments
16. 4.1 Liberalization of women
17. 4.2 Health and environmental concerns
18. 4.3 Changes in values
19. 4.4 Consumer expectations
20. 5 Changes in consumer behaviour
21. Healthier eating
22. Discount junkies?
23. 6 Conclusions
24. 7 The future
25. Further reading
26. Discussion questions
1. to give an overview and insights into developments in consumer behaviour at a macro level
in the nations of the European Union:
2. to suggest how economic, demographic, and cultural developments and changes in
consumer behaviour will evolve.
1 Introduction
CHANGES in consumer behaviour create opportunities and threats for the marketing managers of
firms that produce consumer goods and services. These changes in behaviour derive from a
combination of economic, demographic, and cultural developments. These developments are
discussed in this chapter. The picture that will be presented is that there are striking similarities
between the nations of Europe, as well as interesting differences, based upon their history and
geographical location. Furthermore even within these individual nations there are large
differences, as, for instance, between the north and south of Italy. However, it is suggested that
there is more convergence than divergence between the nations, owing, in part, to the EU policy
of stimulating economic development in the same direction.
2 Economic developments
THE economic developments that affect consumer behaviour can be described by data on
household income, inflation, unemployment, and gross domestic product (GDP).
Proposition 1. Household income is becoming more unevenly distributed and is creating a two-
tier population of wealthy and poor consumers.
Average income has gone up in most EU nations since the early 1990s, but the income
distribution has become less equal in most cases. Income polarization and a two-tier population
of the rich and the poor are reported in Belgium, France, Italy, the Netherlands, and the UK. In
some countries-—for example, the Netherlands—the lowering of the highest rates of tax has
contributed to this development. It is generally accepted that this uneven distribution is likely to
remain a feature of the EU. Well-off consumers will expect to have access to luxury products and
prestigious brands, while poorer consumers need access to less expensive goods and second-
hand products. In general these two target groups are becoming more clearly separated.
2.2 Inflation
Proposition 2. Most EU nations, especially the EMU members, have inflation rates under control.
Much of the income increase apparently achieved in Belgium, Germany, Denmark, Greece, the
Netherlands, Portugal, and Spain was destroyed in the 1980s by inflation. During the last two
decades of the twentieth century, Greece had the highest inflation rate in the EU, with especially
high rates during the first half of the 1980s. However, after 1985 the inflation rate decreased.
Factors such as the increase in price competition in the single European market, cost reductions
caused by abolishing intra-EU trade barriers, relatively small increases in labour costs, and the
general increase in cost consciousness all combined to generate lower labour costs (Leeflang and
Pahud de Mortanges 1993). Most EU countries reduced their inflation rates to below 3 per cent so
that they could meet the criteria for admission to the European Monetary Union (EMU) and the
single European currency (the ‘Euro’). However, of those countries seeking admission to the EMU,
only Greece did not meet these criteria and was not admitted. The belief in the late 1990s is that
most EU nations, especially the EMU members, have inflation rates under control.
2.3 Unemployment
Proposition 3. Although the unemployment has gone down, the level of unemployment is still
high in many EU nations.
Unemployment rose at the beginning of the 1980s, but returned to the 1980 level in the latter
part of the decade. Unemployment, however, remains a major feature of the macro-marketing
environment. 3.1 sets out the unemployment figures for the EU nations and shows that, although
in most nations the unemployment rate decreased after 1988 but increased a little in 1991–3, in
the period 1993–6 for most countries little change was recorded. Exceptionally high rates existed
through the 1990s in Finland, Ireland, Spain, and the south of Italy, while Austria and
Luxembourg had the lowest rates. Especially worrying have been the high levels of
unemployment among the young and the immigrant communities in many EU nations.
Except for Greece, Spain, and Ireland, where relatively few women have entered the labour force,
the numbers of women entering the labour market increased in the 1990s and led to an increase
in demand for part-time jobs. While the EU average of female participation in the labour market
in 1995 was 39 per cent, in Spain the figure was only 32 per cent (in comparison, the figure in
Denmark was 46 per cent).
The changes in gross domestic product (GDP) of the EU nations at current prices are shown in
Table 3.2. Slow growth and some decline in GDP can be observed in 1993, but some acceleration
in growth was present in 1994 and 1995. The period previous to 1992 was one of recession in
most EU countries. In Denmark, Greece, and Italy, the informal or black economy grew
considerably during this period. The informal economy is where people have jobs that they do not
register (and they therefore pay no tax, etc., on their earnings and may indeed still be registered
as unemployed). The GDP is thus understated and unemployment is overstated where this
occurs. Consumer reaction to a recession and the threat of unemployment is usually to curtail
expenditure in various ways–luxury goods in particular are affected by a decrease in demand
(van Raaij and Eilander 1983).
Economic and political developments are inevitably closely related. By the end of 1998 most EU
nations had made a political decision to implement economic policies that would enable them to
reach the criteria for entry to the EMU. In 1998 it was decided to admit Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg,Portugal, Spain, and the Netherlands to the EMU.
Greece did not meet the criteria, and Denmark, Sweden, and the UK decided not to join the EMU
at that time.
3 Demographic developments
DEMOGRAPHIC developments refer to such matters as population growth, ageing, number of
households and household size, education, and immigration. Overall, the EU population increased
at a net rate of 3.6 per cent over the 1990s, with the highest growth rates being found in France,
Germany, Luxembourg, the Netherlands, and the south of Italy.
In the late 1990s it was forecast that in the year 2000 the total EU population would be 375
million, but the expectation was that it would decline to 337 million by 2050. In 1998 the GDP per
capita in the EU was 15,000 ecus and this makes the market much larger than that of the USA
(265 million inhabitants and a per capita GDP of 19,000 ecus) or Japan (125 million inhabitants
and a per capita GDP of 20,000 ecus). India (945 million inhabitants) and China ( 1,225million
inhabitants) have much larger populations but smaller per capita GDPs—these being 550 and 430
ecus, respectively.
3.2 Ageing
Proposition 5. In the age distribution of the population, the proportion of elderly people is
expected to increase (‘greying’) and the proportion of young people to decrease.
In all of the EU countries, the average age is rising, as the population ‘greys’ while the proportion
of young people decreases. As women tend on average to live longer than men do, the
proportion of females is relatively high amongst senior citizens. It is estimated that, by 2000,
21.6 per cent of the EU population will be over 60 and 23.4 per cent under 20. As Table 3.3
shows, by the year 2020 the figures will be 26.7 and 20.4 per cent respectively. Germany has the
widest spread of ages and Ireland has a considerably younger population than other EU nations.
The greying trend has enormous implications for pension plans and social-security schemes.
Many marketing opportunities will also arise in the fields of health care and recreation products
and services directed at the needs of older people.
The trend towards smaller households is most noticeable in Northern Europe (except for Ireland),
but in Greece, Spain, and the south of Italy more households are larger than the EU average.
Some of the marketing implications of this development are a change in the type of housing
required and an increase per head of population in the number of brown durables (such as
television sets and VCRs) and white durables (such as washing machines and deep freezers)
required.
3.4 Education
The level of education, as measured by length of time spent in education, has increased in all EU
countries, though at different rates in different countries. In the Nordic countries and Germany
over 57 per cent of the population continues education beyond the age of 18. In Spain,
Switzerland, and the UK a smaller proportion has continued beyond that age, as indicated in
Table 3.4.
3.5 Immigration
Proposition 8. The proportion of non-EU immigrants is increasing. They form a considerable part
of the population in most EU nations, especially in the large cities.
There is a considerable amount of immigration from Eastern Europe, North Africa, Turkey, and
the former colonies of the individual EU nations, with the largest proportion of non-EU immigrants
coming from Turkey (23.5 per cent). As Table 3.5 shows, these non-EU immigrants live especially
in Austria, Belgium, Germany, France, the Netherlands, and Sweden. The immigrant communities
in Germany, the UK, and other countries typically live in large cities, where they add to cultural
diversity and are considered as new targets for marketing management (see Insert). Austria and
Germany have the largest proportion of non-EU and EU foreigners, while Luxembourg and
Belgium have the largest proportion of EU foreigners (because of the EU and NATO offices).
‘Marketers who understand how family situation affects consumers' buying requirements can
capitalize by designing marketing mixes to appeal to these differences.’ (Chapter 16, p. 386)
Will the appeal of the East reach the European High Street?
In 1998 the London Research Centre estimated that London's ethnic minorities would grow by 40
per cent in the next fifteen years. In addition, there is a mixture of cultures by marriage, with a
fifth of Asian males living in the UK having partners from outside their ethnic group.
4 Cultural developments
CULTURAL developments will, for historical, geographical, and linguistic reasons, differ between
the EU nations. However, there are still several striking similarities in the cultural development of
the EU nations relating to the liberalization of women, concern for health and the environment,
changes in values, and consumer expectations.
4.1 Liberalization of women
Proposition 9. The liberalization of women leads to more women with a paid job outside the
home.
The feminist movement and the greater acceptance of working women (especially mothers)
together with new gender role patterns have been very noticeable in the EU, though the lead
seems to have been taken by the northern nations. Opinions about the role of women are still
quite conservative, as is shown in Table 3.6. Many people still indicate that a woman's role is to
be a housewife. They still support family values (Antonides and van Raaij 1998). Nevertheless, as
indicated earlier, there is a trend towards women participating more fully in the labour market
and for women to have a work-based career. The liberalization of women is more accepted in the
Nordic countries than it is elsewhere in Europe, especially southern Europe.
Proposition 10. Health and environmental concerns are increasing in all EU nations.
As Table 3.7 shows, there is a clear trend towards a greater concern about both health and
environmental issues with ‘health’ including physical fitness and general physical condition. Apart
from Portugal, concern about environmental issues was high throughout the EU in the period
1986–95. This concern seemed to increase between 1986 and 1992, and, although it has
decreased a little since 1992, it still remains high relative to 1986.
Proposition 11. In the EU there is a gradual shift from materialistic to post-materialistic values.
Between 1981 and 1990 there was a gradual shift from materialistic to post-materialistic values
that is a change from a concern about ownership of products to a concern about the quality of
life (see Table 3.8). Such issues as ‘maintaining law and order’ and ‘fighting rising prices’ are
materialistic issues, while ‘giving people more say in government decisions’ and ‘protecting
freedom of speech’ reflect post-materialistic values. People with post-materialistic values tend to
emphasize experience more than ‘ownership’, and for them sports activities, recreation, and
holiday trips become more important than product ownership and those durables that are
purchased are bought for their fun and expressive value rather than for their technical
characteristics. Most postmaterialistic consumers nevertheless own many products, but these
may be of a different type from those owned by a materialistic consumer.
There is a macro and a micro aspect to consumer expectations. The macro aspect is the
consumers'confidence in the economic development of their nation—its economic growth, its
inflation, and its unemployment rates. The micro aspect relates to the conditions of household
and individual consumers and includes household income, value of savings, and job security. The
macro expectations influence micro expectations (van Everdingen and van Raaij 1998), but both
aspects can be summarized in the Index of Consumer Sentiment. A positive score on the Index
indicates that positive expectations prevail, which should lead to more discretionary expenditure
on durables, luxury services, and holidays. A negative score indicates that pessimistic
expectations are dominant, which would be expected to result in lower expenditure on luxury
items and durables together with the taking of less credit and an increase in savings. There were
significant differences between the EU nations in this scale during the period 1993–7. The Danes
have been optimistic since 1994, while the Dutch and Irish became optimistic in 1995 and since
then their levels of optimism have continued to rise. The most pessimistic were the Greeks and to
a lesser extent the French, Italians, Portuguese, and Spaniards—though in recent years the
Portuguese and the Spaniards have become less pessimistic. Although the trend for the EU as a
whole is towards less pessimistic expectations, only the UK switched from a pessimistic to an
optimistic score during the 1990s (see Table 3.9).
Consumer expectations are related to life satisfaction (Eurobarometer 1994). Here in 1993 the
Danes, Dutch, and Irish scored highest on life satisfaction with scores of 63, 40, and 41 per cent
very satisfied. The lowest satisfaction scores were in East Germany, Greece, Italy, and Portugal,
with 10, 15, 17, and 5 per cent very satisfied respectively.
‘In 1994 total sales of medicines within the EU were 51,850 ecus, which accounted for nearly 25
per cent of world output.’ (Chapter 5, p. 93)
The consumption figures of the EU nations in 1994 are compared in Table 3.10. The table shows
large differences in expenditure between nations on specific product categories. In nearly every
case the expenditure on services was at that time higher than on durable consumption.
Proposition 14. The demand for health and green or ecological products is increasing.
A growth in the demand for health-related product is apparent in all countries (see Insert).
European consumers are also very concerned about the nutritional content of food. This is in line
with the high level of environmental concern, which reached its highest level in many countries in
1992 (see Table 3.7). After 1992 concern about environmental issues decreased a little, mainly
because of an increased concern with matters such as criminality and safety.
The increasing concerns of consumers regarding ecological issues explain the demand for green
products. These are products whose production, distribution, and/or consumption cause less
environmental damage and often use ‘sustainable’ resources. There are even green saving
schemes that guarantee that savings are not invested in environmentally harmful activities.
Within the food budget, expenditure on red meat, coffee, tobacco, and alcoholic drinks fell in the
1990s and the demand for low calorie, light and diet dishes and drinks increased. All these
changes are a reflection of increased health consciousness, as is an increasing demand for
private medicine and hospitals, products for body care, and pharmaceutical products. Sports
goods, together with health and sports centres, also benefit from this trend.
Proposition 15. The demand for luxury, convenience, and fun products and services is
increasing.
In many EU countries the demand for luxury goods grew during the 1990s, as did the demand for
goods at discounted prices. This polarization effect is also reflected in the structure of the retail
trade, where there has been an increase in the number of discount stores. Examples of luxury or
fun goods are gourmet, exotic, and ethnic foods (especially popular in Germany and Denmark),
expensive motor vehicles such as four-wheel-drive off-roaders and moderately priced two-
seaters, and the strength of expensive international brands (e.g. Porsche, Rolex, Cartier). The
trends in demand suggest that European consumers behave more similarly with regard to
expensive products than with regard to more everyday products. However, the same brands are
increasingly appearing in everyday shopping baskets all across the EU, even though differences
in national tastes are still very considerable.
Proposition 16. Price sensitivity and price consciousness are increasing among European
consumers.
The trend towards increasing price sensitivity still exists throughout the EU and the interest in
discounted products has become stronger. Consumers continue to show an increasing price
consciousness and sensitivity with regard to a wide range of goods such as food products,
cosmetics, books, furniture, and clothing (see Insert). In part this trend can be explained by the
increased demand for luxury goods as purchasing products at lower prices creates room in
consumers' budgets for the acquisition of luxury products. The increased price sensitivity and
consciousness are not restricted to lower-income groups: ‘Poor people need low prices; rich
people love them.’ Furthermore, curtailment of expenditure on non-luxury products is reflected in
tendencies to buy less, to buy lower quality, to buy private label brands, or not to buy some
goods at all (van Raaij and Eilander 1983).
Healthier eating
Sales of organic food in the UK grew from £100 million in 1993 to over £350 million in 1998. The
expectation of supermarkets is that this growth will accelerate and they forecast sales of £1,100
million by 2002.
Discount junkies?
American studies have found that consumers exposed to repeated price cuts learn to ignore the
‘usual’ price and wait for the next discount and then stockpile the product. They also require
bigger and bigger discounts to stimulate them to buy at all.
6 Conclusions
ALTHOUGH at the end of the twentieth century there were considerable cross-national
differences in consumption patterns within the EU, some common trends were clearly present.
These trends have been outlined for economic, demographic, and cultural aspects of consumer
behaviour.
The economic developments in the EU are in general positive. Income for most consumers is
increasing, creating more discretionary income.
However, these sentiments are not identified in all of the EU countries by the Index of Consumer
Sentiment. Consumers in some nations (e.g. Denmark) are more optimistic than other consumers
(e.g. the southern European nations). Furthermore, income distribution is becoming less equal,
and not all consumers, especially the disabled and the unemployed, obtain a share in the
favourable economic development. Some lowincome groups have to curtail their expenditure on
essentials. Inflation and interest rates are relatively low. Trust in the economy is generally high
and both saving and credit are stimulated by government activity.
Demographic developments in the EU point towards more diversity and variety amongst
consumers: smaller household sizes, higher education levels, and higher proportions of
immigrants. The traditional family structure of husband, wife, and children is becoming less
common. Ethnic and racial variety is increasing. The proportion of older people is increasing,
while the proportion of younger people is decreasing.
Cultural developments show that consumers are becoming more individualistic and experience
orientated (‘kicks’ and ‘thrills’). The acceptance of the equality of men and women is becoming
very apparent—especially in the Nordic countries. Environmental concerns stay at a high level
and peoples' health concerns appear to grow. Postmaterialistic values seem to be replacing
materialistic values. Optimism about the future appears to be strong.
7 The future
A number of propositions have been put forward in this chapter. Some will without doubt turn out
not to be correct, for the factors that determine what actually happens in the EU are numerous
and interconnected in a complex manner. For example, how will the move for greater political
unification within the EU proceed? At the end of the 1990s, some parts of the EU were pressing
for more unification while others were uncertain and some were opposed. Many aspects of the
well-being of European consumers will be determined by how this matter will be resolved.
Similarly, whether or not to extend the EU to include some or all of the East European states has
not yet been determined.
However, some aspects of the future seem clear. There will be further deregulation of industry
(for example, in telecommunications and airlines), so that competition in a number of industries
will increase. As, in general, increased competition leads to lower prices, better service, and more
product development, then increased demand can be foreseen for such industries' products and
services. Yet one of the most difficult aspects to forecast is a feature that might disrupt many
predictions. This is the risk of the continued growth of a type of ‘underclass’ in the EU, made up
of the long-term unemployed people. Nobody seems to see a solution to this problem and the risk
of social unrest arising from it is a matter of great concern. It is not, as a consequence, perhaps
too cynical to suggest that one certain growth market is that for security services, and demand
for its products will surely continue to increase.
Further reading
Antonides, G., and van Raaij, W. F. (1998), Consumer Behaviour: A European Perspective
(Chichester: John Wiley&Sons).
‘The Changing Consumer in the European Union’, International Journal of Research in Marketing,
12/5 (Dec. 1995). This special issue contains eight papers.
‘A Single Currency in Europe’, Journal of Economic Psychology, 19/6 (Dec. 1998). This special
issue contains seven papers.
Discussion questions
1. What are the factors that are causing an increase in the demand for customized services?
2. It has been suggested that for the segment of a community for whom ‘time is money’ a
rational approach to purchasing is to accept that it is cheaper to make the wrong purchase than
spend time on making the correct one. What are the implications of this for consumption
expenditure?
3. For which categories of consumer goods are demands likely to be strongly affected by the
predicted changes in the age structure of the population?
4. Does the increased consumption of convenience foods represent a threat or an opportunity
to manufacturers of domestic appliances?
5. In what ways would you predict that the falling size of the average household will impact on
the demand for housing?
6. Some of the member countries of the EU have relatively low GDPs per head of population.
As these countries ‘catch up’, which categories of consumer products would you expect to benefit
most?
7. Will the growth in the number of ‘house-husbands’ impact on consumer consumption
patterns?
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