Consumer Sentiments/Behavior Effects on Businesses in Pakistan
Consumer Sentiments/Behavior Effects on Businesses in Pakistan
The classic consumer behavior definition has everything to do with the study of how people decide what they buy, want, need, or act regarding a product, service, or company. Initially, the consumer tries to find what commodities they would like to consume. Then, they select only those commodities that promise more excellent utility. After choosing the items, the consumer estimates the available money they can spend. Lastly, the consumer analyzes the prevailing prices of commodities and decides what they should consume.
Factors Affecting Consumer Behavior
Cultural Factor
Culture varies from country to country, and it is the crucial cause of a person’s wants and behavior. Marketers can further segment the market into various small portions, i.e., religions, nationalities, and racial groups.
Social Factor
It includes reference groups, family members, and societal status. Social class is determined by income and other factors such as wealth, education, occupation, etc.
Personal Factor
Personal factors influencing buying behavior are age, occupation, economic situation, lifestyle, and personality. Consumers’ needs and wants change with the life cycle, and high income also directs them to purchase more expensive products. The way of acting and interacting in the world and personal characteristics also influence consumer behavior.
Psychological Factor
These factors include motivation, perception, beliefs, and attitudes. A need becomes a motive when it is satisfying, and when information provides a meaningful experience, it becomes perception. Beliefs and attitudes also play an essential role in creating the brand image.
Business and Economy of Pakistan
Pakistan has experimented with several economic models during its existence. During the 1980s – 2000s, Pakistan’s politics shifted from Developmentalist to Neoliberalism. The economy, primarily agricultural at the time of independence, has diversified considerably. Agriculture, now no longer the largest sector, contributes roughly one-fifth of GDP, while manufacturing provides about one-sixth.
Agriculture, Forestry, and Fishing
Approximately one-fourth of Pakistan is arable land, although only small fractions are in permanent crops (about 1 percent) or permanent pastures (6 percent). Roughly, 5 percent of the country is forested. Agriculture, forestry, and fishing employ the most significant proportion of the labor force and a livelihood for an even more substantial segment of the population.
Resources and Power
The exploration of Pakistan’s mineral wealth is far from complete. Besides, enormous limestone reserves form the basis of a growing cement industry, a significant component of the manufacturing sector, Pakistan has modest quantities of petroleum and some large natural gas fields. The largest natural gas deposits are at Sui, and coal mining is one of the country’s oldest industries. Pakistan also has three nuclear power plants.
Manufacturing
Constitutes a healthy proportion of GDP. Cotton textile mills account for a large part of the total employment in the industry. Woolen textiles, sugar, paper, tobacco, and leather industries also provide many jobs for the industrial labor force.
Trade
There has been a trend toward increasing exports, but still, the country has a chronic annual trade deficit, with imports often outstripping exports. Major exports include cotton goods and agricultural commodities.
Current Dilemma
Pakistan’s economy is forecasted to slow to 3.5% in fiscal year (FY) 2023 amid devastating floods, policy tightening, and critical efforts to tackle sizable budgetary and external imbalances. Business people termed 2022 the worst-performing year for Pakistan’s economy. The country’s currency dropped Rs 49.31 against the US dollar, and the interest rate rose to 16%, the highest since 1998-1999. In addition, inflation is in the double digits while the consumer price index (CPI) is currently hovering around 25%.
Influence on Businesses
Cultural Influence
Pakistan boasts a rich and diverse cultural heritage and multiple creative and artistic traditions. As much as 15% of all employees nationally are accounted for in the crafts and related services sector alone. The research on ‘Impact of regional culture on business performance of women entrepreneurs’ however, revealed that the emerging role of women as business owners in the global economy is a significant phenomenon, and it is affecting economic indicators positively. In this regard, the part of the culture, particularly regional, is of great significance.
Social Influence
Social factors may influence business decisions, such as what stock to carry, where to locate brick-and-mortar shops, and how aggressively you pursue online selling options. The younger generation prefers to use digital technology to shop online. Older people will perhaps stick to their traditional methods.
Personal Influence
People’s personalities influence their behavior in groups, their attitudes, and the way they make decisions. Besides, the research on ‘The Impact of Personal Traits of the Consumers on their Impulsive Buying Behavior of Pakistan’ revealed that openness, extraversion, agreeableness, and positive mood have a significant relationship with impulse buying behavior.
Psychological Influence
Belief systems have the ability to influence all of the other psychological factors. For example, some people learn best visually. This explains why pictures and images are so important for marketing. The study concluded in Pakistan revealed that brand image significantly positively affects the psychological factors of female consumers in the category of designer clothing brands.
Influence of COVID-19
The pandemic has been called the “perfect storm,” simultaneously causing demand, supply, and financial shocks. Businesses have also experienced the economic shocks brought about by the COVID-19 pandemic. However, the pandemic outbreak has different financial implications for businesses in Pakistan.
Effect of the Stringency Index on the Business confidence index:
| Business Freedom Index | Investment Freedom Index | Economic Freedom Index | Financial Freedom Index | Economic Globalization index | Political Globalization | Share of industry | Share of manufacturing | Share of service | Share of saving | |
| Business Freedom Index | 1 | -0.72 | 0.18 | -0.24 | 0.16 | 0.07 | 0.85 | 0.82 | -0.86 | -0.34 |
| Investment Freedom Index | -0.72 | 1 | -0.47 | 0.45 | 0.16 | 0.44 | -0.94 | -0.89 | 0.79 | 0.79 |
| Economic Freedom Index | 0.18 | -0.47 | 1 | 0.3 | -0.04 | -0.9 | 0.43 | 0.21 | -0.25 | -0.08 |
| Financial Freedom Index | -0.24 | 0.45 | -0.44 | 1 | 0.3 | -0.6 | -0.03 | 0.04 | 0.53 | -0.65 |
| Economic Globalization index | 0.16 | -0.63 | -0.04 | 0.3 | 1 | -0.9 | 0.56 | 0.63 | -0.17 | -0.47 |
| Political Globalization | 0.07 | 0.44 | 0.01 | -0.6 | -0.9 | 1 | -0.45 | -0.54 | -0.06 | 0.48 |
| Share of industry | 0.85 | -0.94 | 0.43 | -0.03 | 0.56 | -0.45 | 1 | 0.95 | -0.79 | -0.45 |
| Share of manufacturing | 0.82 | -0.89 | 0.21 | 0.04 | 0.63 | -0.54 | 0.95 | 1 | -0.8 | -0.46 |
| Share of service | -0.86 | 0.79 | -0.25 | 0.53 | -0.17 | -0.06 | -0.79 | -0.8 | 1 | -0.06 |
| Share of saving | -0.34 | 0.33 | -0.25 | -0.65 | -0.47 | 0.48 | -0.45 | -0.46 | -0.06 | 1 |
The pandemic has indeed had a tremendous effect on people’s lives around the globe – even in the short term. People had to stay at their homes – being quarantined; hence there was limited movement. The government imposed restrictions, and people were fined if they broke the law. Here we will analyze consumer buying and business behavior during Covid-19. We have used free, publicly available data from the global economy. Additionally, we have systematically collected data to carry out our analysis.
Impact of One Variable on the Other
The heatmap above shows the impact of one variable on the other. A correlation coefficient greater than 0.4 indicates a significant effect on each other. And correlation coefficient of less than 0.4 shows a weak influence. The negative correlation shows the inverse relationship between the variables.
For example, the relation between the business freedom index and share in manufacturing is 0.82 and is quite significant. It means the lesser the constraint in the given country to operate the business, the more value the business can add to the country. Moreover, the relation between the investment freedom index and share of service is also significant, which shows if a government has allowed people to move in and out of the border with lesser restrictions, the percentage of service tends to increase.
Understanding the Consumer Behaviour Model
Complex buying behavior
Complex Consumer buying behavior is when consumers purchase expensive products, an infrequent transaction. People take time before they invest in it.
Dissonance-reducing buying behavior
It occurs when products with differentiation are unavailable; hence, consumers prefer readily available products.
Habitual buying behavior
This does not involve much thinking. Consumers either buy from their favorite brand or the one they use regularly.
Variety seeking – Consumer behavior process
Consumers here generally buy different products not because of dissatisfaction but mainly with an urge to seek variety.
Furthermore, analyzing consumer buying behavior and consumer behavior trends can inform businesses for better and more effective marketing campaigns to influence consumers’ shopping behavior.
Consumer Confidence Index
The Consumer Confidence definition – is a survey that calculates how optimistic or pessimistic consumers are regarding their expected financial situation.
Business Confidence Index
The business confidence definition provides information on future developments based on opinion surveys on production products, orders, and stocks.
Purchasing Manager Index
Purchasing Managers’ Index is an economic indicator from different companies. The index shows trends in the manufacturing and services sector. The index helps determine whether the market conditions, as seen by purchasing managers, are expanding, contracting, or remaining the same.
The table below shows the correlation between Purchasing manufacturing index, Business confidence index, and consumer confidence index.
| 2020 q2 | 2020 q3 | 2020 q4 | 2021 q1 | 2021 q2 | 2021 q3 | 2021 q4 | 2022 q1 | |
|---|---|---|---|---|---|---|---|---|
| PMI /Manufacturing | 38.4 | 52.1 | 55.4 | 57.8 | 57.6 | 61 | 52 | 53 |
| Business Confidence Index | 38 | 52 | 55 | 60 | 58 | 61 | 52 | 53 |
| Consumer Confidence Index | 50 | 43 | 40 | 41 | 41 | 42 | 38 | 53 |
| Indexes | PMI | Business Confidence Index | Consumer Confidence Index |
| PMI | 1.00 | 0.99 | -0.53 |
| Business Confidence Index | 0.99 | 1.00 | -0.53 |
| Consumer Confidence Index | -0.53 | -0.53 | 1.00 |
PMI and Business Confidence Index are highly correlated, as seen. Business confidence is lowered, and managers feel less likely to invest.
COVID-19 has created an immense impact; fear and uncertainty during the pandemic inescapably impacted consumer behavior, indicating that consumers care more about their health. Furthermore, it has been seen that the fear generated by a pandemic can encourage prosocial behavior. The COVID-19 pandemic has changed consumer behavior in more sustainable ways and healthier directions.
What Businesses were greatly affected?
While talking about the effects on businesses, it is evident that not all companies were incredibly hit equally.
Smaller firms faced more challenges as compared to larger ones. More than 80% of them, on average, reported reduced consumer demand, and 30% of the companies with a more significant workforce said lesser consumer demand.
Relationship of Stringency Index and Consumer Confidence Index
In the sections above, we discussed various consumer behavior examples and the process. How consumer habits and sentiments have significantly shifted amid the pandemic, so you need to consider how your offerings fit into your customers’ current lifestyles.
The figure shows consumer behavior data and stringency index:
| Year, and Quartile | 2020 q1 | 2020 q2 | 2020 q3 | 2020 q4 | 2021 q1 | 2021 q2 | 2021 q3 | 2021 q4 | 2022 q1 |
| Stringency Index | 28 | 81 | 55 | 56 | 55 | 67 | 67 | 48 | 61 |
| Consumer Confidence Index | 44 | 50 | 43 | 40 | 41 | 41 | 42 | 38 | 53 |
| 0.3465209037 | Weak positive relationship |
Consumer sentiments are, however, affected. The consumer’s sentiments or behavior due to Covid-19 is relevant due to stringency measures such as social distancing. Besides, the consumers did not have high disposable incomes, or they might have been restricted in spending them. After the lockdown was lifted, the consumers then chose to do need-based shopping. Although there may not be better situations in the long run, businesses must continue facing these challenges. The foremost challenge was reduced consumer demand, which might be picking a fraction of the company.
Relationship of Stringency Index and Business Confidence Index
There is a mismatch between consumers’ revealed intentions and consumption behavior, indicating a gap between what buyers announced they would purchase and what they do when buying.
The table shows business behavior data and stringency index:
| Year. Quartile | 2020 q1 | 2020 q2 | 2020 q3 | 2020 q4 | 2021 q1 | 2021 q2 | 2021 q3 | 2021 q4 | 2022 q1 |
| Stringency Index | 28 | 81 | 55 | 56 | 55 | 67 | 67 | 48 | 61 |
| Business Confidence Index | 49 | 38 | 52 | 55 | 60 | 58 | 61 | 52 | 53 |
| -0.1469297698 | Negligible negative relationship |
The business confidence index comprises all the businesses, big or small, and the effect is not prominent. Hence to visualize the impact on smaller firms, we have furthered our studies in this research. The index might have included the other online companies (all the E-commerce industries) which started to boom during Covid-19 since ​​Certain companies may have performed well and are better suited to the current climate than others. Businesses like Online delivery, pharmaceutical companies, Fitness, etc. Moreover, thanks to the internet and technology, anyone can embrace their inner entrepreneur and start making money online with their skills, talents, education, or experience. However, the overall effect is not seen in the index. Hence we furthered our consumer behavior analysis.
Relationship between the Covid Positivity rate and Business Confidence Index:
We took the business behavior data from July/21 to Feb/22 to find the relationship between the Covid Positivity rate and Business Confidence Index:
| Month | Positivity Rate | Business Confidence Index |
| July’21 | 0.05 | 61.5 |
| Aug’21 | 0.07 | 59 |
| Sep’21 | 0.05 | 59 |
| Oct’21 | 0.02 | 59 |
| Nov’21 | 0.01 | 59 |
| Dec’21 | 0.01 | 59 |
| Jan’22 | 0.07 | 53 |
| Feb’22 | 0.06 | 53 |
| -0.46 | Moderate negative relationship |
The correlation came to about -0.46, which is quite significant, meaning businesses get affected when the positivity rate rises. First, the business confidence index may reflect what companies plan to do, given real-time information on current economic conditions. Second, Covid-19 may directly affect production and labor supply conditions. More importantly, the policy responses to the Covid-19 pandemic, particularly the containment measures to restrict movement, may also have substantial economic consequences.
During a covid pandemic, citizens look to their government worldwide for direction. But in Pakistan, the government needed a plan or approach to deal with COVID-19.
This pandemic significantly impacted the manufacturing industry in the first quarter of 2020. As a result, there were substantial economic losses in the agricultural, industrial, and services sectors. In addition, significant losses in tourism and entertainment negatively affected other food and service activities, especially in the northern side of Pakistan.
Micro-small-medium sized businesses
The impact on many industries has been significant. The clothing, barbershops, food places, and entertainment places were severely affected. These small and mid-sized businesses went into crisis due to less cash available to run the business. Some even had to take precautionary measures during the tough time and deal with stringency measures imposed by the government. The Pakistani currency was also devalued in many affecting sectors.
| % of MSM | % Impact on Businesses |
| 91-100% | 38.04 |
| 81-90% | 15.76 |
| 71-80% | 11.96 |
| 61-70% | 8.7 |
| 51-60% | 7.07 |
| 41-50% | 5.98 |
| 31-40% | 4.89 |
| 21-30% | 3.8 |
| 11-20% | 2.72 |
| 1-10% | 1.09 |
The ultimate impact of the pandemic on the Micro, small, and medium industry sectors is not yet ascertainable as the covid continues, with constant changes, including the rate of infection and patient recovery and stringency measures additionally.
Being a developing country, Pakistan faced the coronavirus consequences. The stringency measures proved dangerous to the economic effects on small and medium-sized businesses since they work to meet their daily demands. There were fewer measures taken by the government, such as financial support to these institutions.
The graph above shows the degree of impact on Micro-Small-Mid-Sized businesses. On average, 91-100% of the MSM businesses were affected, 38%. While 80-90% of the MSM businesses were affected on average, 16 %, and so on.
The major that Micro-Small and Medium-Sized businesses encountered during covid 19 was Financial and Institutional challenges. Therefore, they needed more innovative products, higher transaction costs, business planning, accounting, and more Financial awareness.
Retailers and other businesses took steps.
The business performance looks very different now than before and could change again. And developing a long-term business plan with sound financial planning will help ensure your startup can weather any storm.
According to the Retailer’s sentiment survey, retailers faced issues due to measures taken by the government to restrict movement. However, nearly 59% of retailers opened their e-commerce stores to promote their services online, and some even started their home delivery services. At the same time, the others needed more resources and knowledge to create their e-commerce stores.
We have a detailed case study regarding the challenges faced by the retail industry and how to overcome that. Along with that, we do offer Retail Financial models.
In Pakistan, absenteeism was not a challenge. This might seem like a suggestion that Pakistan does not need to do anything with less labor available or health but to do more with lower consumer demand and Financial Analysis/Planning.
Talking about consumer behavior concepts, including consumer behavior theory, it is a misconception that it is unlikely to pursue entrepreneurship in such uncertain times. Despite the risks involved, it is very much possible for a company to survive and even thrive during a pandemic by assessing customer needs and developing innovative strategies that address those needs. Because this is what consumer behavior refers to.
E-commerce Industry in Pakistan
The pandemic has already shifted in stores to consumer behavior online in Pakistan. With a decline in retail shopping and a growth in online buying, the demand for online news, videos, and even online-entertainment solutions has peaked during covid. The figure below shows the people converting to internet connectivity boosting online businesses.
The figure shows digital connectivity (consumer behavior online) in Pakistan in the year 2021
Internet use in Pakistan, especially during Covid-19, has also altered the marketing budgets of major brands and businesses.
Consumer behavior online has increased. While the global ad revenue shrank significantly due to COVID-19, brands and companies are now more receptive to a digital-first mindset regarding promotion in Pakistan. And an excellent digital marketing strategy and tactics can help bolster your new business through uncertain times.
Consumers’ Behaviour concerning Restaurants
The restriction of dining on restaurant premises substantially affected restaurants. Therefore, the demand for meals and services decreased for a while, and consumers adopted social distancing to avoid spreading the COVID-19 infection as per government measures. However, consumers changed their lifestyles and shifted to online. Moreover, due to the relative changes in buying opportunities, online buying of food items is increasing. This way, COVID-19 generated a significant shift in consumers’ consumption behavior.
What do Small Business Entrepreneurs need to do?
Before starting any project, Entrepreneurs need to project whether there will be a large, passionate market for their product or service in a post-Covid future. Then, once they have begun the business, there is long-term planning and analysis. As experts here at Oak Business Consultant, we believe that there is a lack of market demand which is the most common reason for failed startups’ demise, with 42% of companies citing it as a contributing cause of startup failures.
Conclusion
- To conclude our study, we aimed at understanding consumer behavior, the consumer behavior process, the types of consumer behavior, and the consumer behavior model through consumer buying behavior model data.
- We have analyzed consumer sentiments that are affected when the country is in crisis.
- We analyzed that the Consumer Confidence Index and Stringency Index are correlated to each other through consumer behavior data.
- The Stringency Index has a more negligible effect on the Business Confidence Index because the E-commerce industry has evolved.
- In-store businesses such as Retail and Wholesale companies had a tremendous effect on their sales.
- We analyzed how the pandemic has indeed had a tremendous effect on people’s lives around the globe – even if short-term.
- Shops that converted shops online could make sales during covid-19.
- How Financial Planning helps small business entrepreneurs make strategies that can help them establish long-term goals.
Financial Planning with Oak Business Consultant
Our analysis above – what is consumer behavior shows that these problems vary by industry. Therefore, Financial planning gets you through how much more profitability your startup/business can bring in the coming period. Some believe it is a monetary tool, but it’s much more than that. It is a plan where you set your company’s future goals and devise tactics and strategies to reach them. On the whole, the future of any business directly depends on how well they plan its finances. As proficient analysts here at Oak Business Consultant, we were hoping you could do your best in your financial planning; therefore, we offer all business owners our spectacular financial services.
Moreover, we have a list of Financial Models that we have helped Business owners to establish their businesses successfully. Here are a few examples:
- Accounting Software Services | Financial Model Excel Projection
- Online Service Marketplace | Financial Model Excel Projection
- Bookkeeping Agency | Financial Model in Excel
- Consultant Agency | Financial Model Projection
- Online Cooking Classes | Financial Model Excel Template
- Online Platform for Finance Professionals | Projection in Excel
And even if your desired online business is not listed, you can consult for our services or use the generic Financial Model built by the experts and input your numbers.
Choosing us for your services would help you tremendously. Moreover, if you started your business and couldn’t pick a move, come to us, and we will help in every possible way. Have a look at our portfolio and find out why all the Micro-Small and Mid-sized Businesses always prefer our financial planning services. Once you start rendering our services, we assure you there is no looking back!
