Consumer Psychology & the Tendency to Spend

Published by MBA Skool Team, Published on November 04, 2016

All human no matter what their income is or how much they save, they have equal propensity to spend their money; some are called miser, while some are spendthrift depending on dynamism and nature of their expenditure. If we can classify the consumers on the basis of their propensity to spend, it will be easier for the industries to know their target segments. So there goes the new dimension- propensity to spend.

Let’s define who are misers and who are spendthrift. The misers are those who do not indulge themselves in impulse buying or who do not focus on short term financial objectives. The spendthrift are those who will keep on buying things till the time there is one penny left in their account (this reminds me of the movie “confessions of a shopaholic” based on the novels by Sophie Kinsella). If instead of judging these two categories of people from bird’s-eye view, we focus on them individually, we will get many insights.

Image: pixabay


They won’t visit posh restaurants frequently, or if you want to sell them a Gucci bag probably they would stop you in the middle of your first sentence, but they won’t take even 10mins to decide if they would invest 30k in the stock market if they foresee a considerable return or while buying a house they would go for the highest priced one available in the town. These means for repeat purchase they won’t go for the highest priced things, but for one time buy, definitely they are in the premium segments.


They would go by the brand names, will buy anything and everything in their daily use which is of high perceived value. They are definitely the premium segments for the repeat purchase but for one time buy they might not afford to be the premium ones even if they aspire to be; the reason being most of them fail to allocate their budget properly.

What drives people to buy?

Need is definitely the universal answer but beyond that what makes a person choose a particular brand among so many different brands? And the answer is the everybody irrespective of gender, culture, language wants to be perceived to be elite class. All the usage of products, publicizing about the newly possessed things in social media everything is because possession of wealth is not yet complete till you flaunt it, after all this is the reason why all people want to feel rich, so that they are “perceived” to be high class.

This is the reason why most of the successful brands will portray in their ad what other people will perceive of their users.

The type and nature of income (i.e. steady source of income, fixed income, flexible earning), the life stage play a huge role in the way of saving money. The other factors that play a role are inherited wealth, culture, geographical location etc. Based on the propensity to spend, the consumers can be classified as:

• Save now spend then

• Save for assets

• Spend to get more

• Spend now


Save now spend then:

This type of consumers will focus on earning and saving more in their early stage of career so that they can lead an independent and carefree retired life or the time when they want to take break from their career. Working woman who wants to take break in their career fall under these category, also people working in organizations where concept of pension is nonexistent, may fall under this category. People who do not have a steady source of income tend to save money for times of need.

Save for assets:

This type of consumers will focus on saving money for one-time-buy products. They would tend to purchase things which do not have depreciating value in the long run. For example- they won’t buy car as its value depreciates with time, rather they would buy gold/property or would invest in business or stocks. People over and above the age of 35 years and people who do not have inherited property tend to have this kind of propensity to spend.

Spend to get more:

This type of consumers is more interested in building their image of the elite class within less span of time. Also they want the feel of being rich. So they tend to buy cars or spend vacation in foreign land or tend to use branded products in their daily use. Mostly people at early stage of their career or those who are on the fast track promotion path tend to fall under this category.

Spend now:

Mostly teenagers or college goers or part time earners fall under this category. Because of their limited earning, they ought to take more time to save money so they focus on to buy or to spend on those products which have higher perceived value, also which fit in their budget. So they go for all those things with greater visibility of perceived high value like posh restaurants, movie theatre, nightclubs, visible cosmetics, branded clothes, bags, shoes etc.


Segments: Type of products/ services for the segments

Save now spend then: Insurance policies, jewelry

Save for assets: Property, stock, Investments schemes

Spend to get more: Electronic devices (like LCD TV, Laptop, phone, Micro oven), car, cosmetics

Spend now: Themed restaurants, movie theatre, clothes, visible make up (like lipstick, nail polish, foundation).


This article has been authored by Twisa Dandapatfrom TAPMI

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