Persuading Consumers to Favour Local Purchasing: A Contribution towards Sustainable Economic Growth

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1 Persuading Consumers to Favour Local Purchasing: A Contribution towards Sustainable Economic Growth Bright Nyamekye, Joseph School of Business Studies, S.H.U.A.T.S Allahabad, India. bnyamekye86@gmail.com Devaraj Badugu, Joseph School of Business Studies, S.H.U.A.T.S Allahabad, India. bajjie@gmail.com Abstract Every economy is partly driven by customer demand. Unfortunately, these patterns of demand varies from one consumer to the other. Some favour locally made goods while others go with that of imported foreign products due to differences in taste and preference. This varying consumer buying behaviour has a material effect on a nation s economic growth. Since marketing drives any consumer economy and plays an economic role in promoting business expansion, job creation, higher tax revenue for governments and eventually overall economic growth, one way that a country can stimulate and boost its economy is by persuading its indigenous people to favour local purchasing in order to really make sure money stays internally. Local purchasing is a preference to buy locally produced goods and services over those produced farther away. The primary objective of this study was to discover the impact of patronizing locally made goods on a country s sustainable economic growth. A sample of 400 respondents consisting of consumers in the retail industry in India were chosen for the study. Both quantitative and qualitative methods were employed in this study to achieve the stated objectives. Responses were analyzed with various statistical measures and the interpretations showed a high level of agreement between the independent and dependent variables. Furthermore, findings from the study indicate that, preference for locally made goods has a very strong impact on a country s sustainable economic growth. The study therefore recommends that governments and other business stakeholders continuously encourage indigenous people to patronize locally made goods in order to sustain economic growth. Key Words: Local purchasing, Economic growth, Persuading, Stakeholders, Consumer taste and preference. 1

2 1. Introduction Proceedings of the Sixth Middle East Conference on Global Business, Economics, Truth be told, sustainable economic growth and development cannot be achieved with the mindset of Dependency. This has to change and it begins with recognising our preference for home made goods in order to reduce imports and its effects on the economy. We cannot expect a change in economic welfare if we keep doing the same thing and living a particular lifestyle over and over again. Business needs a strong, stable economy as the basis for innovation, investment and economic development on which future generation will depend. Today, marketing permeates every facet of our daily lives. Marketing drives a consumer economy, helps in promoting goods and services and targeting consumers most likely to become buyers. Changing the mindset of consumers is one of the keys to success. Higher sales for a business that employs successful marketing strategies translate into expansion, job creation, higher tax revenue for governments and, eventually, overall economic growth. In addition, the marketing industry itself creates jobs and wealth as businesses seek new and innovative ways to promote themselves and their products. Local purchasing is a preference to buy locally produced goods and services over those produced farther away. Advocates often suggest local purchasing as a form of moral purchasing as it enhances local job creation and wealth while strengthening community cohesiveness. Persuading consumers to favour home made goods is one of the best ways to achieve sustainable growth, particularly in industries that are stagnant. Striking a balance between unbounded economic growth and sustainability requires a new mindset from the indigenes of a country. 1.1 Statement of the Problem One of the challenges faced by various economies around the world is how best to make sustainable economic growth and development a reality. Striving to sustain and grow their economy, governments put various measures in place to achieve this critical objective. Bringing about sustainable economic growth and development requires action from all stakeholders. Today the drive for economic sustainability is critical. Persuading consumers to favour home made goods and services makes a contribution towards its sustainable economic growth. This helps the indigenes understand and think through their purchasing decisions in a way which helps them become more consistent with sustainable economic growth development for their own welfare. 1.2 Rationale of the Study No economy in the world has been fully developed by expatriates. The basic rationale behind this study is to provide insights into how the patronage of home made goods by indigenes influences its quest for economic growth and development. Moreover, the study also highlight on how price and quality may mediate the relationships between favouring local 2

3 purchasing and economic growth since no study has addressed this. The ability of indigenous people to favour goods and services which are widely available and produced in their country greatly influences its economic growth and sustainability. Many other economic advantages are also accompanied by this purchasing attitude; money stays in the country, increases the wealth of the residents, higher tax revenue for government, creates a sense of patriotism, just to mention a few. Conceptual and theoretical models are developed for this study to provide a pictorial aid to explain the relationship that exist between favouring local purchasing and sustainable economic growth. Research hypotheses are also formulated from the conceptual model and tested accordingly to propose managerial implications and draw the conclusion. 1.3 Research Gap None of the small number of previous studies conducted on sustainable economic growth has addressed its direct relationship with indigenous people favouring home made goods. Hence, there exist a wide gaps in literature that should be filled. It is evident that, there has been no study on price and quality as mediating factors to be considered if local purchasing is to be encouraged to make sustainable economic growth flourish. The findings and recommendations from this exceptional study would be significant in providing fresh and added information as well as useful guidelines in bridging the gap that exist in previous literature. 1.4 Research Objectives The study addresses the following research objectives; To examine the added benefits local purchasing carries in terms of growing a sustainable economy. To find out the relationship that exist between favouring local goods and sustainable economic growth To identify the some of the mediating factors that can influence the consumers preference for home made goods. 2. Review of Literature According to Hartley (2014), sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for future generations. Periods of sustained economic growth are often triggered by increase in output as a result of increase in aggregate demand such as a rise in consumer spending. If output does not increase, any extra demand will push up the price level. (Brian, 2012). In a related development, Kelly (2015) also disclosed that, economic growth and development is associated with a number of material benefits which increase economic welfare. He indicated that, a growing economy means that the public sector can receive more tax revenue 3

4 and more resources can be allocated for community development such as more roads, hospitals and schools. Stable economic growth is likely to stimulate demand for labour, and it is expected that more people will be employed and fewer unemployed. (Shuman, 2010). According to Alessandro (2013), favouring local goods and services enriches our social community. By patronising locally made goods, people help neighbours keep their jobs and that benefits the entire community. This creates a more intimate relationship with our neighbours and thereby promoting a sense of community and patriotism. Moreover, Stacy (2015) supported that one way of stimulating economic growth is through preference for local purchasing. It stimulates the economy as money circulates within which puts that money right back in the community for development and ultimately helping to create more healthy and stable communities. Edward (2010) also added his voice saying that, local purchasing carries with it added benefits in terms of environmental concerns and infrastructure stability. Purchasing goods locally requires less transportation, decreasing costs of production and reduces the nation s level of dependency. 2.1 Theoretical Framework Hierarchy of Effects Model (Lavidge And Steiner, 1961) The Hierarchy of Effects Model was created in 1961 by Robert J. Lavidge and Gary A. Steiner. This marketing communication model, proposed Persuasion as an important factor in influencing change in consumer purchasing. According to the Lavidge and Steiner model, consumer must go through the following six steps in order to manipulate their purchase behaviour: Figure Awareness This step has to do with making the consumers become aware of the existence of the product through promotion. This is a challenging, as there is no guarantee that consumers will be aware of all products Knowledge 4

5 The customer comes to know about the features and uses of the product. The customer begins to gain more knowledge about the products. Consumers will quickly move to competitor brands if they do not get the information they want. The marketer s job is to ensure product information is easily available Liking The customer develops a favourable attitude towards the product. This is where the consumer builds a liking for the product. This is where the product is being considered for its emotional benefits; be sure to make them prominent Preference Consumers develops preference for the product over other competitive products or substitutes. By this time consumers may be convinced to try out the product, but may like other brands too. These points of differentiations or unique selling points need to be highlighted to make sure that the consumer likes the product more than the others in his consideration list Conviction This step involves a desire to buy the product. The customer is convinced of a good purchase This stage is about creating the customer s desire to purchase the product. This is the stage where the doubt in consumers minds about buying the product of your brand needs to be converted into action Purchase The customer makes the actual purchase. Having proceeded through the above stages, the marketer wants the consumer to purchase their product. The last and the most crucial stage of the consumer buying cycle is the purchase. Sellers need to ensure that purchase experience is easy and perhaps even more enjoyable for the consumer. Conceptual Model Independent Variable Conceptual Model Mediating Variables Dependent Variable PRICE QUALITY Local Purchasing Sustainable Economic Growth Source: Developed for the study 5

6 The figure above depicts how local purchasing directly influences a country s sustainable economic growth and development. When the indigenes of a country favour home made goods, it opens up lots of economic opportunities which helps to improve the standard of living of the people and helps for a stable economy. Moreover, the figure also highlights on how price and quality mediate the relationship between local purchasing and sustainable economic growth. 2.2 Hypotheses The following are the hypotheses constructed for the study; H1: There is a close association between local purchasing and High demand for labour H2: There is a close association between local purchasing and circulation of money for better economic welfare and standard of living. H3: There is a close association between local purchasing and a country s GDP H4: There is a close association between local purchasing and a country s level of Dependency H5: Price has a significant mediating impact on consumers preference for local goods H6: Quality has a significant mediating impact on consumers preference for local goods. 3. Methodology The study was conducted through a mix of qualitative and quantitative approaches. Both approaches were adopted in carrying out this exploratory study with the help of in-depth wellstructured Questionnaire and interviews to obtain and views of consumers regarding local purchasing. Both closed-ended and open-ended questions were included measured on a fivepoint Likert-scale ranging from 1 to 5 corresponding to responses from strongly agree to strongly disagree. Respondents were also questioned on some of the mediating factors that influence local purchasing. Primary and secondary data sources were collected. The primary data were collected with the use of the structured questionnaires self-administered to the respondents. Secondary data saw the use of articles, journals related to local purchasing and sustainable economic growth. Convenience sampling technique, was adopted to distribute the questionnaire among 400 respondents across major cities in India; Chennai, Mumbai, Allahabad and New Delhi. 100 respondents were selected from each city and were selected based on their convenient accessibility. All the study modules were checked for reliability and validity with Cronbach s alpha coefficient, calculated in order to assess the internal reliability of all items in the questionnaire. Furthermore, with the help of SPSS as data analysis tool, the data collected from respondents were statistically analyzed and well interpreted. 3.1 Statistical tools such as; 6

7 Cronbach s alpha was used to determine the reliability coefficient by measuring the consistency associated with all items. Multiple linear regression was used to analyze the variation between the dependent and independent variables Pearson s chi square was adopted to determine the association that exist between independent variables and the dependent variable. These are strong statistical measures to test the relationship between the independent variables and the dependent variables to determine their statistical agreement. Furthermore, the data analyses were tested on the formulated hypotheses and ensuring that they matched up with the set objectives. 4. Results and Analyses 4.1 Demographics Table 4.1: Demographic Profile of respondents (N = 400) Demographics Description N % Gender Male Female Total Age and above Total Qualification Graduate Postgraduate Professional Others Total Income level Between Rs. 10,000 29, Between Rs. 30,000 49, Rs. 50,000 and above Total Occupation Student Government worker Private /Self employed Total Marital status Single Married Divorced/Separated Widowed Source: Field data Total

8 The table above shows the demographic profile of the respondents. From the table, majority of the respondents are males constituting (74.3%) and found in the age categories of years. With respect to qualification, majority are graduates representing (57%) of the total respondents. Moreover, majority of the respondents are students constituting (64.5 %) and are singles with monthly income category falling between Rs. 30,000 49,000 representing (51.5%) of the total respondents. 4.2 Reliability Statistics Table 4.2 Reliability Statistics Cronbach s Alpha Cronbach s Alpha Based on Standardized Items No. of Items Cronbach s alpha was calculated to measure and determine the internal consistency of reliability and validity of the data and the above results obtained. The value of Cronbach s alpha is which is very high, thus showing a higher reliability of the instrument used in the study. This shows that the data is very satisfactory because it meets the minimum acceptable level of 0.7. Further the results demonstrate that the data can be a basis for analysis. 4.3 Chi-square test Table 4.3 Results of Chi-square test H1: There is a close association between local purchasing and High Demand for Labour (Local purchasing * Demand for Labour). Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 3 cells (6.3%) have expected count less than 5. The minimum expected count is.42 8

9 Table 4.4: Results of Symmetric Measures Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi Cramer's V N of Valid Cases 400 The tables above presents a chi square statistical tabulation of preference for local purchasing vs demand for labour. From the table, the Pearson s Chi-Square value of is significant at which is far less that the 5% level of significance and serving as a basis of accepting the alternative hypothesis that, favouring local purchasing has a close association with high demand for labour which helps to reduce unemployment. The table of Symmetric measures shows the effect size between the two variables. From the table, it can be observed that the Phi and Cramer's V which are both tests of the strength of association with values of and significant at respectively clearly depicts that the strength of association between the two variables, local purchasing and demand for labour is very strong. H2: There is a close association between local purchasing and Circulation of money for better economic welfare and standard of living. Table 4.5: Results of Chi-square test (Local purchasing * Circulation of money for Better economic welfare) Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 1 cells (16.7%) have expected count less than 5. The minimum expected count is Table 4.6: Results of Symmetric Measures Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi Cramer's V N of Valid Cases 400 9

10 The tables above presents a chi square statistical tabulation of preference for home made goods vs internal circulation of money. From the table, the Pearson s Chi-Square value of is significant at which is far less that the 5% level of significance and serving as a basis of accepting the alternative hypothesis that, local purchasing has a close association with the circulation of money within the country. The table of Symmetric measures tells us the size of the effect between the two variables. From the table, it can be observed that the Phi and Cramer's V which are both tests of the strength of association with values of each significant at respectively clearly depicts that the strength of association between the two variables, is very strong. H3: There is a close association between local purchasing and a country s GDP Table 4.7: Results of Chi-square test (Local purchasing * High GDP) Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 3 cells (13.3%) have expected count less than 5. The minimum expected count is.42 Table 4.8: Results of Symmetric Measures Symmetric Measures Nominal by Nominal Phi Value Approx. Sig Cramer's V N of Valid Cases 400 The tables above presents a chi square statistical tabulation of local purchasing vs GDP. From the table, the Pearson s Chi-Square value of is significant at which is far less that the 5% level of significance and serving as a basis of accepting the alternative hypothesis that, local purchasing has a close association with high GDP which shows the market value of goods produced within a country. The table of Symmetric measures tells us the size of the effect between the two variables. From the table, it can be observed that the Phi and Cramer's V which are both tests of the strength of association with values of and significant at respectively clearly depicts that the strength of association between the two variables, is very strong. 10

11 H4: There is a close association between local purchasing and a country s level of Dependency Table 4.9: Results of Chi-square test (Local purchasing * Level of Dependency) Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 300 a. 1 cells (16.7%) have expected count less than 5. The minimum expected count is Table 4.10: Results of Symmetric Measures Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi Cramer's V N of Valid Cases 300 The tables above presents a chi square statistical tabulation of preference for home made goods vs the level of dependency. From the table, the Pearson s Chi-Square value of is significant at which is far less that the 5% level of significance and serving as a basis of accepting the alternative hypothesis that, local purchasing has a close association with the level of dependency of the country. The table of Symmetric measures tells us the size of the effect between the two variables. From the table, it can be observed that the Phi and Cramer's V which are both tests of the strength of association with values of each significant at respectively clearly depicts that the strength of association between the two variables, is very strong. 4.4 Multiple Regression Analysis H5: Price has a positive mediating impact on consumers preference for local goods Table 4.11 Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate a b a. Predictors: (Constant), Local purchasing b. Predictors: (Constant), Local purchasing, Price At stage one, when the mediating variable (price) was absent, Regression Coefficient R =.801 or 80.1%. This means that the correlation between the 11

12 Model Proceedings of the Sixth Middle East Conference on Global Business, Economics, dependent variable and the independent variable is positive. The Coefficient of determination R 2 =.641 indicating that 64.1% of the variation in the dependent variable is explained by the independent variable. At stage two, when the mediating variable (Price) was introduced, it increased both the Regression Coefficient and the Coefficient of Determination. Hence, Regression Coefficient R =.844 or 84.4%. This means that the correlation between the dependent variable and independent variable is positive. The Coefficient of determination R 2 =.712 indicating that 71.2% of the variation in the dependent variable is explained by the independent variable. Coefficients a Table 4.12 Unstandardized Coefficients Standardized Coefficients B Std. Error Beta 1 (Constant) Local purchasing t Sig. 2 Local purchasing Price a. Dependent Variable: Sustainable economic growth At stage one, when the mediating variable (Price) was absent, the Beta value of is significant at.000 which is less than This means that the correlation between the dependent variable and independent variable is statistically significant and the regression model is valid. At stage two, when the mediating variable (Price) was added, the Beta value of is significant at whiles that of the independent variable was reduced and insignificant and which more than The interpretation of the above data clearly shows that quality has a positive mediating impact on consumers preference for home made goods. H6: Quality has a positive mediating impact on consumers preference for local goods Table 4.13 Model Summary Std. Error of the Model R R Square Adjusted R Square Estimate a b a. Predictors: (Constant), Local purchasing 12

13 b. Predictors: (Constant), Local purchasing, Quality At stage one, when the mediating variable (Quality) was absent, Regression Coefficient R =.864 or 86.4%. This means that the correlation between the dependent variable and the independent variable is positive. The Coefficient of determination R 2 =.746 indicating that 74.6% of the variation in the dependent variable is explained by the independent variable. At stage two, when the mediating variable (Quality) was introduced, it increased both the Regression Coefficient and the Coefficient of determination. Hence, Regression Coefficient R =.916 or 91.6%. This means that the correlation between the dependent variable and independent variable is positive. The Coefficient of determination R 2 =.839 indicating that 83.9% of the variation in the dependent variable is explained by the independent variable. Coefficients a Model Table 4.14 Unstandardized Coefficients Standardized Coefficients B Std. Error Beta 1 (Constant) Local purchasing t Sig. 2 Local purchasing Quality a. Dependent Variable: Sustainable economic growth At stage one, when the mediating variable (Quality) was absent, the Beta value of is significant at.000 which is less than This means that the correlation between the dependent variable and independent variable is statistically significant and the regression model is valid. At stage two, when the mediating variable (Quality) was added, the Beta value of is significant at whiles that of the independent variable was reduced and insignificant and which more than The interpretation of the above data clearly shows that quality has a positive mediating impact on consumers preference for home made goods. 5. Findings and Conclusion The findings revealed that consumers preference for locally made goods has a close association with a country s sustainable economic growth. It was found that, in order to deliver a more sustainable economy, there is the need to make better use of resources. This 13

14 creates the demand for labour and boosts employment. Furthermore, favouring local purchasing makes money circulate and stays within the nation and thus, increases economic welfare for better standards of living. Preference for local goods also reduces the dependency of the country on other nations. The statistical tools used showed a positive relationship between the independent variable (local purchasing) and the dependent variable (sustainable economic growth). To conclude, this study has found a strong evidence that local purchasing has a significant impact on a country s sustainable economic growth. On the other hand, however, price and quality of the local goods are critical factors that drive the preference for local goods. The hypothesis formulated were also found to supportive in achieving the objectives of the study. 6. Recommendations Charity begins at Home! Developing a marketing mindset is one of the keys to a country s economic turnaround. Every business needs a strong, stable economy as the basis for innovation and investment, on which the next generation will depend. All stakeholders; including the government, consumers, business and marketing managers are to realise that they fight for sustainable economic growth is a shared responsibility! We are all involved in changing our economy for the better. 6.1 Recommendations to Governments Government officials sitting in higher positions are responsible for making influential decisions that binds the nations. They should have a more strategic intervention in business activities and understand that preference for local goods is at the centre of all marketing activities. They are to consider the economic benefits of local purchasing and put strategies in place to empower both consumers and marketers to understand embrace local purchasing. Consumers will always favour goods that are widely available, cheap and of quality. 6.2 Recommendation to Marketers Marketing plays a role in informing and educating consumers as it identifies a consumer need and seeks to explain how its products or services meet that need. For customers with clearly defined needs, marketing provides a means of learning about new products and what they do. It plays a role in managing consumer expectations relying on the consistency that comes from brand loyalty and the fact that consumers rely on what they need. In addition, marketing plays an economic role as it promotes goods and services and targets prospective buyers. Higher sales for a business which result from successful marketing strategies translate into expansion, job creation and higher tax revenues for governments and, eventually, into overall economic growth. The customer is and will always be the king forever! This fundamental business principle should be acknowledged. Marketers must understand that they must produce goods that 14

15 appeals to the customer and giving them the best of experience in order to change their purchase decisions. 6.3 Recommendation to Consumers Living in a sustainable economy benefits all and sundry! Hence, consumers must also consider that, giving back to society what it deserves is part of their social responsibilities. Hence, the need to favour home made goods. 6.4 Managerial Implications Reference It was revealed that all the indicators of sustainable economic growth are partly influenced by the preference for local good. Sustainable Economic growth and development helps to reduce the country s dependency, boost employment, enhances economic welfare of the people, better infrastructural facilities and a high GDP; (which is the market value of all the products, goods and services, which are produced within a country). Hence, stakeholders must put strategies in place in giving consumers a new mindset. Price and Quality were found to be the most influential factors with respect to local purchasing. Thus, if local goods are sold at moderate prices without compromising Quality, consumers will favour them. Hence, marketers and business managers especially in the retail market must see this as a wakeup call and act accordingly. Alessandro B. and Stephen J. (2013) WalMart and Local Economic Development: A Survey, Economic Development Quarterly, 26(4): Janakiraman N., Robert J.; and Andrea C. (2015). "Spillover Effects: How Consumers Respond to Unexpected Changes in Price and Quality". Journal of Consumer Research. 33 (3): ISSN Shuman, M. H. (2010). The Small-Mart Revolution: How Local Businesses Are Beating The Global Competition. San Francisco, CA: Berrett-Koehler. Pp Gentile C. (2014). "How to Sustain the Customer Experience:: An Overview of Experience Components that Co-create Value With the Customer". European Management Journal. 25 (5): Kelly E. (2015) The Role Of Small And Large Businesses In Economic Development, Economic Review, 2: Jed K. and David N. (2010) Does Local Business Ownership Insulate Cities From Economic Shocks? Journal of Urban Economics, 67(1): Kelly E. (2012) The Role Of Small And Large Businesses In Economic Development, Economic Review, 2: Edward G. and William K. (2010) The Secret to Job Growth: Think Small, Harvard Business Review, 88: 26. Shuman M. (2012) Local dollars, local sense: How to shift your money from Wall Street to Main Street and achieve real prosperity, Chelsea Green Publishing. Pp Stacy M. (2015) The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study of Midcoast Maine, Washington, DC: Institute for Local Self Reliance. Thomas A., Michael D.,, and Alfred R. (2010) Civic Community In Small Town America: How Civic Welfare Is Influenced By Local Capitalism And Civic Engagement, Rural Sociology, 67(1):

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