Download CONSUMER BEHAVIOR THEORIES and more Summaries Consumer Behaviour in PDF only on Docsity!
CONSUMER BEHAVIOR THEORIES
From the very early times, efforts were made to explain the
motivational processes that influence buying behavior. All social
sciences have contributed separate theories and tried to find out
this phenomenon. Later on, based on theories researchers started
developing models of consumer behavior since they can explain
behavior more precisely than theories. In this unit you will be
given an idea on different theories of buyer behavior through three
different lessons.
School of Business Unit- 2 Page- 32 Blank page
School of Business Unit- 2 Page- 34 marketers. They are rather based on the findings of different disciplines of social and behavioral sciences. Since consumer behavior is considered as an interdisciplinary field of study today, theories explaining consumer behavior are also based on such disciplines from which consumer behavior borrows. Consumer is described as the most complex and unpredictable creature in this earth. He is again a social element interacting with different groups belonging to a particular culture. Moreover, he himself is an identity. Because of this multidimensional aspects, his behavior at times is rational, and other times highly irrational and unpredictable. His mind also changes very often changing his behavior. The modern or contemporary theories can deal very successfully with the volatile, unpredictable, and irrational aspects of consumer behavior. These theories based on social and behavioral sciences though not as precise as the theories of physical or natural sciences, but they can explain the uncertain behavior, unaccountable change of mind, and unreasonable behavior of people more accurately than the old theories. In real life we see that majority of our behaviors are irrational and unpredictable. The contemporary theories focus mainly on these aspects in explaining consumer behavior. They are developed through eclectic borrowing from anthropology, sociology, social psychology, individual psychology, and other related fields. These are the couple of fields dealing with almost all of the forces that may have potential influence on our behavior. The contemporary theories are now-a-days heavily used to build models of buyer behavior. The reason for developing and using models of consumer behavior are numerous of which consideration of all of the variables affecting decision making of individuals is most important. It is obvious that behavior should be understood in totality, and to do this, simultaneous consideration of every single variable having impact or potential impact on buying behavior is a must. And a model can help effectively in this since it organizes variables in a comprehensive way.
Theory Building in Consumer Behavior
Theories are assumptions or conclusions about some phenomena. Consumer behavior theories are also assumptions or conclusions about how consumers behave or may behave. Marketers at every stage make such assumptions or conclusions as to how consumers may react to their offers or how the potential buyers may behave. Bluntly speaking, these assumptions or conclusions are also consumer behavior theories. But, realistically, consumer behavior theories are developed in a more formal and structured way. Scientific method, as used in physical or natural sciences is used today by consumer behavior researchers in theory building. But, scientific method used here to build or develop theories of consumer behavior is not as precise as that used in the physical sciences. Since consumer behavior is a multidisciplinary subject in nature, theories of consumer behavior are also based on the findings of a number of Majority of our beha- viors are irrational and unpredictable. Behavior should be understood in totality. Theories are assumptions or conclusions about some phenomena. Consumer behavior is a multidisciplinary subject in nature.
Bangladesh Open University Consumer Behavior Page- 35 disciplines. In theory building here, researchers basically borrow findings from anthropology, sociology, social psychology, individual psychology, marketing research, and to some extent from economics. Now question may come to your mind, ‘which discipline is considered more important while borrowing findings for a theory building?’ You may also ask, ‘how the theory builder fits cultural, social, and individual determinants of buying together?’ Consensus lacks among the researchers as to which influence is more important than others or how should the determinants of buying be tied together. As a result of this, researchers developed quite a number of theories of consumer behavior each highlighting on a particular influence. You will find that certain theories focus on the culture as a determinant of buying decision, while others on social class or family, yet another group on the personal characteristics such as learning, perception, motivation, personality, or attitude. In this unit we shall try to focus in brief on each of different types of consumer behavior theories.
The Role of Theory in Science
Marketers now a days use contemporary consumer behavior theories in explaining consumer behavior and undertaking marketing activities based on those theories. Consumer behavior research undertaken by present day marketers are based on scientific methods. The scientific method used here, though as not precise as that of physical or natural sciences, but it closely resembles those (physical or natural) sciences. Theory is defined as an exposition of the general principles of any science or the philosophical explanation of phenomena, either physical or moral. Philosophy is the science of the relations of causes, reasons, and effects of phenomena. Therefore, theory is that explanation of phenomena or events that identifies relations of causes, reasons, and effects, not a general explanation. It also identifies relationship among facts that are observable and combines the facts in such a way that carries certain meaning to the user. The explanation of phenomena or facts are also presented in theory in an orderly or systematic way to make it meaningful to the users. The role of theory in science may be summarized according to the following points: Consumer behavior theories of modern time are based on empirical results. By empirical, we mean, that which is observable as well as measurable. A result may be termed as empirical, provided anybody interested may observe it later as well as measure it. What theory does is that, it defines this empirical orientation. The definition is given by focusing on the data that are required to explain the theory. You should know that applying a particular theory, you do not need to consider all available data on the field. Theory tells you which are the relevant data on which you should concentrate on and which you should sidestep. Data that you consider in using a theory may fall in many categories. If you consider them together without distinguishing them according to their nature, you may lead toward wrong direction. To be on the Consumer behavior theories of modern time are based on empirical results.
Bangladesh Open University Consumer Behavior Page- 37 borrow findings from a number of disciplines. When borrowing, theory developer must keep in mind that, the findings that he considers in theory building should resemble the mainstream discipline from which he borrows. Findings of a particular discipline resemble the mainstream thinking only when it is substantiated by the principal findings or avenues of research of the discipline concerned. Consumer behavior theories help us to conduct research on different aspects of buyer behavior. There are certain areas of behavior which are well researched, and there are other areas which have not received much attention. A sound theory gives us pointers on the areas where research should be conducted, thus saving our time and resources which otherwise would be channeled in unrelated dimensions. A theory usually consists of a number of elements. To apply a theory in its proper perspective, one should understand what each of its parts or elements means. In addition, he should be able to measure the elements using certain yard-stick. But, what each of the elements of the theory stands for and what is the yard-stick? A sound theory of buyer behavior gives answers to these two questions to the user of it. Therefore, a sound theory of consumer behavior is that which fixes the precise meaning of its components and provides measuring devices to measure them. The above mentioned four are the criteria of a sound theory of buyer behavior as identified by Mr. John A. Howard. But, according to Mr. Mittelstaedt, following three are the basic criteria of a sound theory of consumer behavior : A sound theory of buyer behavior is that which includes known characters of buyer behavior. For example, one of the known character of buyer behavior is that it is affected by the principal norms of his culture. A theory which accounts for such known characters may be termed as a sound theory. Consumer behavior theories are used to understand and predict behavior of consumers. Marketers not only are interested in knowing the existing behavioral patterns that are influenced by different known regularities. Since societies and cultures are changing, there could be new characters observed in consumers which may influence their behaviors. A sound theory of buyer behavior is that which highlights on such new characters that may be observed in consumers in future. For example, majority of Bangladeshi consumers do not enjoy self- service shopping. But, time may come, when majority may behave otherwise. A sound theory of consumer behavior always highlights on such future changes. A sound theory of buyer behavior is one which is single unified theory. It is not based on eclectic borrowing. A theory usually consists of a number of elements. Consumer behavior theories are used to understand and predict behavior of consumers.
School of Business Unit- 2 Page- 38 Self Evaluation Objective Questions
- Theory is basically a. An exposition of the general principles of any science b. The philosophical explanation of phenomena, either physical or moral c. Both a & b d. None of the above.
- There are two types of theories that explain consumer behavior, they are a. New and old b. Traditional and modern c. Classical and contemporary d. All of the above.
- The traditional theorists would believe that a. Consumers behave mechanistically b. Consumers behave rationally c. Consumers behave logically d. All of the above.
- One of the principles of economics says that as consumers’ incomes increase a. They buy more items for use or consumption b. They save more for future consumption c. Both a & b d. None of the above.
- Traditional theories explaining consumer behaviors were based on – a. Economic laws b. Marketers’ own experiences, as well as their intuitions c. Both a & b d. None of the above.
- Contemporary theories of buyer behavior are based on a. The findings of different disciplines of social sciences b. The findings of different disciplines of behavioral sciences c. Both a & b d. None of the above.
School of Business Unit- 2 Page- 40 Lesson - 2: Economic Theories Explaining Consumer Behavior
Objectives of this lesson
After reading this lesson, you will be able to: Form a deeper understanding on economic theories explaining buyer behavior Understand different economic theories used in consumer study Know the market laws that may be formulated using economic theories Trace the contributions as well as weaknesses of economic theories Explain different psychological theories applied in consumer behavior study Trace social psychological theories of buyer behavior Know how sociological theories explain consumer behavior.
Introduction
Efforts were made from very early times to explain the motivational processes that influence consumer behavior. All social sciences including economics have contributed separate theories and tried to find out this phenomenon.
Economic Theories - Some Insights:
Economists from even the Adam Smith’s time developed theories that explain the behavior of consumers. The trend continued thereafter and even the contemporary economists are constructing theories of buyer behavior. Economic theories describe man as a rational buyer who has perfect information about the market and uses it to obtain maximum value for the buying effort and money. Consumers, according to the economic theories (particularly the classical ones) take purchase decisions purely based on self-interest. Price is considered to be the strongest motivation. Consumers compare all competing sellers’ offerings, and buy the one with the lowest price. Number of economic factors influence consumer in the ways he spends his income for personal consumption. Purchasing power of the consumer is used to convert production into consumption. People do not spend all their income. Disposable personal income is used both for personal consumption and saving. If disposable personal income should rise businessmen would be interested in learning what proportion of the additional income the consumers might spend and what proportion they might save. Marketing analysts are more interested in examining the effect of changes in income on spending and saving. In inflationary periods spending rises faster than income. In the same way size of family and family income is also important as they affect spending and saving Price is considered to be the strongest motivation.
Bangladesh Open University Consumer Behavior Page- 41 patterns. The income that consumer expects to receive in the future has some bearing on his present spending pattern. In particular, spending for automobiles, furniture, major appliances and other expensive items tend to be influenced by consumers’ optimism or pessimism about future incomes. In the same way consumers’ liquid assets also affect buying plans. Cash and other assets readily convertible into cash such as balance in saving accounts, shares, etc. influence our purchases. Retired and unemployed individuals may use liquid assets to buy every day necessities. Other consumers may use liquid assets to meet major medical bills and other emergencies. Availability of consumer credits strongly influences the pattern of consumer spending. Credit which allows one to buy now and pay later enables a consumer to command more purchasing power than that separated by his current income. Even small fluctuation in income causes sharp repercussion in consumer’s purchases. The quick response of durable goods expenditure to income changes traces to the wide use installment credit in financing such purchases. Consumers are more willing to increase installment debt when income is rising and are more reluctant to incur additional indebtedness when income is declining. Quite a number of economic theories explain different aspects of buying behavior described in the above few paragraphs. Here we shall take into consideration four major economic theories dealing with buyer behavior. They are: Marginal Utility Theory Indifference Theory Income and Savings Theory Rising Income Theory Let us now look at them in turn.
Marginal Utility Theory
This theory was developed by classical economists. According to them, a consumer will continue to buy such products that will deliver him the most utility or maximum satisfaction at relative prices. He continues buying and consuming a product so long the total satisfaction increases thus he avoids dissatisfaction. How a consumer calculates his total satisfaction? According to Kotler, he calculates it by taking into account the consequences or results of purchases. As a customer you will buy a good because you feel it gives you satisfaction or utility. A first unit of a good gives you certain amount of psychological utility or satisfaction. Now imagine consuming a second unit. Your total utility goes up because the second unit of the good gives Availability of consumer credits strongly influences the pattern of consumer spending.
Bangladesh Open University Consumer Behavior Page- 43 that it fails to explain how product and brand preferences are formed. Further, economic factors alone cannot explain variations in sales. Indifference Theory Indifference theory states that consumers form preferences for some combination of products over others. It also states that they (consumers) remain indifferent to some other combinations. The combinations of products that consumers view indifferently may be plotted on a graph which will give some points. If joined, these points will give us a curve termed as an indifference curve. All of the combinations of products that will fall right to or above the indifference curve will definitely be considered more satisfactory by the consumers, and as a result they will undertake activities to buy and consume those. The combinations of products that will fall left to or below the indifference curve will be viewed negatively as they are considered less satisfactory than the combinations falling on or above the indifference curve. Consumers as a result, will try to avoid buying and consuming products of these combinations (that fall below the indifference curve). The lesson that marketers may take from this theory is that, they should do their best to produce and offer products in such a way that are considered falling above the indifference curve. If viewed so, chances are that they will sell better than competing products.
Income and Savings Theory
This theory is based on the fact that purchasing power is the real determinant of buying. Purchasing power, on the otherhand, is dependent on disposable income, i.e., income left after payment of tax and savings. To facilitate how people allocate changes in their total income between spending and saving, there are two concepts as given by the economists: The marginal propensity to consume, and The marginal propensity to save. The marketers are interested in examining the effect or changes in income on spending and saving as this will have direct bearing on buying habits. The theory states that personal consumption spending tends both to rise and fall at a slower rate than does the disposable income. In certain situations, spending rises faster than income and, at certain other times, a higher proportion may be saved. Though the theory does not explain consumer behavior in specific terms, the concept is used in planning and analysis of demand.
Rising Income Theory
The rising income theory was given the present shape by Ernst Engel. This theory states that, consumer spending pattern changes with the change in his income. As income increases, expenditures on most of the Purchasing power is the real determinant of buying. Indifference theory states that consumers form preferences for some combination of products over others.
School of Business Unit- 2 Page- 44 items are likely to increase. But, the increases do not follow the same pattern. According to Engel, as income rises, percentage spent on food tends to decline, and percentage spent on housing and furniture tends to stay constant. He however, noted that percentage of income spent on luxuries and savings tends to increase.
Market Laws That May be Formulated Using Economic
Theories:
Economic theories are studied by marketing students as well as the practitioners as they suggest four important market laws that guide marketers in formulating their policies and strategies. The law may be summed up as follows:
Market Law 1
The sale of a product is likely to increase if its price is reduced as consumers try to make the best use of their money that they spend. A marketer willing to increase his sale may pursue a price-cut strategy.
Market Law 2
If the prices of substitutes fall, it is likely that the sale of the original item will fall as more and more people will lean toward cheaper substitutes. On the contrary, if prices of complementary products fall, it is expected that the sale of the original item will go up as many people will be able to afford the original item now.
Market Law 3
If disposable income and real income of consumers increase, they are likely to buy more of the luxury and personal care or high-ticket items as stereo sets. Increase in real income of consumers, therefore, creates opportunities for the manufacturers of such items.
Market Law 4
A marketer can increase the sale of his products by undertaking aggressive promotional activities. Since aggressive promotion helps more people to be aware of a company’s product, it is likely that some of the informed people will buy the product. Marketers always do not consider the above laws as workable and as a result they are not always applied by them. Consumers, for example, may not buy the product even if its price is reduced, thinking that the quality of the product has gone down, or price may come down further. Aggressive promotion also may not help marketer in increasing sales, if consumers are suspicious of or skeptical to advertising claims. Increase in consumers’ income may not also increase the sale of product if customers view it as not able to satisfy their needs. As income increases, expenditures on most of the items are likely to increase.
School of Business Unit- 2 Page- 46 Self Evaluation
Objective Questions
- Economic theories describe man a. As a rational buyer b. As an emotional creature c. Both a & b d. None of the above.
- Consumers, according to the economic theories take purchase decisions purely based on a. Self analysis b. Self interest c. The influence of others d. All of the above.
- According to economic theorists, marketing analysts should be more interested in examining the effect of changes in income on a. Spending and disposable income b. Real income and saving c. Spending and saving d. All of the above.
- Spending for automobiles, furniture, major appliances and other expensive items tend to be influenced by consumers’ a. Optimism about future incomes b. Pessimism about future incomes c. Prediction of price changes d. Optimism or pessimism about future incomes.
- Consumers are more willing to increase installment debt when a. Income is rising b. Income is falling c. Both a & b d. None of the above.
- According to the Marginal Utility Theory, a consumer will continue to buy such products that will deliver him the maximum satisfaction at a. Lower prices b. Relative prices c. Both a & b d. None of the above.
Bangladesh Open University Consumer Behavior Page- 47
- As you consume more of the same good a. Your marginal utility increases b. Your total (psychological) utility decreases c. Your total (psychological) utility increases d. All of the above.
- All of the combinations of products that will fall right to the indifference curve will be considered a. Less satisfactory by the consumers b. Unimportant to the buyer c. Both a & b d. More satisfactory by the consumers.
- According to the Income and Saving theory, purchasing power is dependent on a. Disposable income b. Total income c. Money income d. None of the above.
- The rising income theory was given the present shape by a. Sigmund Freud b. Ernst Engel c. Adam Smith d. None of the above.
- How many market laws that may be formulated using economic theories? a. Three b. Four c. Seven d. None of the above.
- Economic theories assume that a. Consumers are fully informed of all the facts of his or her market domain b. Consumers are not informed of all the facts of his or her market domain c. Both a & b d. None of the above.
Bangladesh Open University Consumer Behavior Page- 49 Lesson - 3 : Different Theories Explaining Consumer Behavior
Objectives of this lesson
After reading this lesson, you will be able to: Form a deeper understanding on Psychological, Social Psychological, and Sociological theories explaining consumer behavior Understand different Psychological theories used in consumer study Understand different Social Psychological as well as Sociological theories explaining consumer behavior Know the Research findings on achievement motivation.
Introduction
Purchase decision of consumers’ re influenced by some of their individual characteristics, such as learning, attitudes etc., as well as the groups and their psychology of which consumers belong. Psychological, social psychological, and sociological theories discussed in this lesson will help you to understand how consumers are influenced by their personal characteristics as well the groups they belong to.
Psychological Theories - Some Insights:
Psychological theories are also called Learning Theories. The essence of these theories lies in the fact that people learn from experience, and the results of experience will modify their actions on future occasions. The importance of brand loyalty and repeat purchase make learning theory more relevant in the field of marketing. Studies of learning and the related areas of recognition, recall, and habitual response have furnished marketers with several keys to understanding consumer behavior. They help in answering questions like how consumers learn about products offered for sale? How do they learn to recognize and recall these products? By what process do they develop buying and consuming habits? There are a number of factors that influence learning. These are as follows : Repetition, Motivation, Conditioning Relationship and organization. The above factors can be pressented as below: Repetition: is necessary for the progressive modification of psychological influences and must be accompanied by attention, Psychological theories are also called Learning Theories.
School of Business Unit- 2 Page- 50 interest, and a goal if it is to be effective. Advertisers who depend on repetition alone waste both their efforts and money. Motivation: The individual motivation is the most important factor involved in indicating and governing his or her activities. Activity in harmony with one’s motives is both satisfying and pleasing. Human motivation is a topic of considerable interest to marketing professionals. Conditioning: It is a way of learning in which a new response to a particular stimulus is developed. Through long advertising efforts and continued exposure of a particular symbol the company succeeds in conditioning the people to recognize the bottle or packet of its product, e.g. Jet washing powder or Aromatic toilet soap. The conditioned response establishes only a temporary rather a permanent behavior pattern and if it is not frequently enforced by the original stimulus, the conditioned response eventually disappears. We have to remember that all persons do not respond equally well to conditioning nor are their responses generally predictable. Relationship and organization: Learning effectiveness is enhanced if the thing to be learned is presented in a familiar environmental setting. A salesman can more effectively demonstrate a vacuum cleaner or a washing machine by using them at the customer’s place instead of describing their capacity and cleaning power in a store. The housewife is interested in the machine’s performance specification only as they directly relate to the task of cleaning own carpets and garments etc. You will now be given brief ideas on a number of psychological theories. We shall limit our discussion on these theories in this unit, because you will find detail description of them in other units. Let us now consider these theories in turn:
Learning or Stimulus Response Theory
Purlon, Skinner, Thorndike and Kotler developed this theory on the basis of experiments they conducted on animals. According to them, learning occurs as a person responds to some stimulus and is rewarded with need satisfaction for a correct response. They proved that most recent and frequent stimuli are remembered and responded. This approach is the basis of repeated advertisements. Stimulus response theory, after constant refinements, is now based on four central processes. They are drive, cue, response, and reinforcement. Drives are needs or motives that are stronger, whereas a cue is a weaker stimulus. The response is the resultant reaction of some stimuli. If it is based on a cue, the response may be shifting from one brand to another based on previous experience. In other words, cues will create different degrees of responses under different occasions. Reinforcement is the process by which rewarding experiences in the past are strengthened. It is Drives are needs or motives that are stronger, whereas a cue is a weaker stimulus.
