Customer purchasing behavior is one of the key factors which influence the overall cash flows of the entity. Depending on market segmentation and customer preference, customers will buy different commodities at different prices thus influencing the overall sales and revenue of the organization. In this paper, we shall discuss how consumer behavior can be linked to future cash flow volatility and sales revenues. Different recurring customer behaviors namely regularly purchasing priced items, promotional habits, return habits as well as low margin habits. The main objective of this study will be to analyze customers’ data, and evaluate how marketers can increase the general value of a firm via managing both volatilities, and customer cash flow by implementing differentiated market initiatives.
The main reason for the existence of any business is to earn and maximize profits and other revenues. This greatly depends on cash flows within the organization. Researchers have found that customers behave differently depending on their tastes and preference, attitudes, and beliefs regarding products. Customers who have a habit to buy certain commodities regularly have increased the potential to increase future cash flows. Essentially, these consumers tend to speculate on market patterns in anticipation of market trends. They ensure that only products that are fresh and valuable are stocked in their stores thus reducing the cost of waste. This, in return, helps to improve the working capital as well as real cash flows in the firm.
Secondly, promotional-based customers are the most common consumers in the market. These types of customers only wait for promotions and other offers to buy in batches. Their main idea is to take advantage of reduced costs and thus they can maximize these opportunities to boost their purchases. In return, they sell these goods at higher prices thus earning extra revenues for boosting internal operations.
Return-habit customers have a tendency to buy goods and return them later. These customers usually use the product for some time and return it in the case of any defects. The main purpose for doing so is to minimize the maintenance cost and other expenses which have an impact on their cash flows.
Low-margin customers are interested in discounts on the products. They buy products when the discount rates are high, and this increases their purchases. By studying the business trends, they can take advantage of discounts and other price reduction strategies thus avoiding the risk of buying inflated goods.
The main contribution of the author is that certain habitual characteristics can trigger people to develop certain behavior faster. For instance, he suggested that older consumers are more likely to exhibit repetitive habits since they rely more on existing information as well as show limited physical mobility. Likewise, customers who possess higher levels of education are considered to exhibit consumption behaviors that are based on a habitual decision process. He argued that a firm’s value is directly proportional to the cash flows and value of the firm thus it is critical to observe consumer behaviors
The main problem in this study is to analyze customer behaviors to come up with strategies to improve the volatility of the cash flows. When retailers understand customer habits, they can strategize effectively to improve cash flows.
We conducted research from a Fortune 500 retailer that sells a wide range of products which are related to furniture, home improvement goods and gardening needs. This entity is amongst the retail stores which are operating in more than 900 stores in the United States. The study will also use the qualitative research method to evaluate the prominent patterns of consumer behavior in the general consumer market. Statistical and other measures of data such as mean and variance were used to analyze and evaluate the data.
After conducting this research, the following crucial results were obtained. The study found that working people formed a major part of the purchase habits of customers. These findings were attributed to the fact that these people are always busy at the workplace thus lacking time to conduct market research. This makes them develop regular habits due to a lack of alternatives.
Promotional habit customers were mostly middle-class people who are seeking self-actualization. According to the research, these people are taking advantage of promotions and other offers to buy expensive commodities which they could not afford. Low margin habits and return habits customers were common among local people. They are mostly speculating for price deductions through discounts since they don’t have high incomes to purchase.
Consumer behavior plays a critical part in every market segmentation by influencing the current and future cash flows of any entity. To ensure that they have steady cash flows, retailers need to conduct extensive market research to understand customer preferences and tastes. The results of this study were obtained from a single retail entity. Therefore, they may not validly apply to all retail firms. Further research should be conducted to determine whether the habit-based approach can help to explain the variation expected in the future cash flow volatility of each consumer.