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Consumer behavior theories are used by businesses in order to optimize their selling and marketing strategies. These theories tend to concentrate on how consumers spend money, what causes them to spend more money, and how the spending of consumer money should impact the planning and strategies practiced by businesses. Different types of consumer behavior theories may focus on the choices consumers make based on their budgets, how consumers make decisions to reach the highest level of satisfaction, how consumers consider the utilities and features of different products, or what and how much consumers know about particular products.
One of the most commonly used consumer behavior theories states that consumers behave rationally. In other words, consumers tend to want to get the most from their products while spending the least amount of money. Likewise, this theory asserts that consumers are unlikely to spend all of their money at once, leaving them with no savings. On the other end of the spectrum, consumers often do not save all of their money, an act which could force them to live without purchasing even basic needs, such as food, shelter, and clothing.
Another important theory posits that consumers have tastes and preferences that dictate which products they show interest in. Marketing experts often perform consumer studies that they break down into different demographics, such as occupation, age, and location, since these factors contribute to consumer preferences. Income is another important factor in this theory since income is what places a limit on on a consumer's budget.
Prices of products are often considered in one of the most commonly used consumer behavior theories. In general, businesses believe that by pricing their products at the lowest possible sums, they can encourage consumers to purchase more of their products. This is because rational consumers tend to buy products that provide them with the greatest degree of satisfaction while costing the lowest sum of money.
The features or utilities of different products tend to change the prices of the products. For this reason, consumers attempt to match features that they can use with added price. This theory can be applied, for instance, to automobile sales. A consumer may determine how much extra he or she would pay for a car that has bonus features, such as extra entertainment or media devices. A professional in the marketing department might try to determine how much extra the company can charge for bonus features without losing sales.
The impact of knowledge on consumer behavior is the focus of another of the consumer behavior theories. Consumers are more likely to choose products that they understand or which they are familiar with. The nature of the information is also important, since a company or product's bad reputation can influence an individual to purchase a competitor's product instead.
@Comfyshoes- Wow that sounds like fun. I wanted to add that I think that consumer purchasing behavior increases when credit cards enter the picture. I read somewhere that a theory of consumer behavior involves the fact that people generally spend more when they use their credit cards than when they use cash.
This is why department stores are always offering additional discounts for people to open charge accounts in their stores. They figure that once you get the charge card you will buy more because you are not immediately accountable for your purchase like you are when you pay cash.
They also know that more than half of those surveyed carry balances on their credit cards, so they
also get to make money on the finance charges as well.
I try to stick with one or two credit cards and pay them at the end of the month. I usually stay away from those department store offers because I don’t want my debt to get out of control because it is easy to do.
@GreenWeaver- I also think that market research companies try to perform consumer behavior research in order to help companies forecast the success or potential failure of a new product or concept for a business.
I was involved in a focus group and it was a lot of fun. At first the market research company offered me a survey and based on the results of the survey, I was called for a screening interview over the phone.
Then once I passed that, I was invited to be a part of a panel of about eight people. They asked me questions about my purchasing habits regarding appliances and also asked me questions about the retailer as well as the retailer’s
competitor. It was very interactive and the discussions lasted about two hours and I think I was paid $125 for my time.
It was really fun and I know they really listened to our suggestions because this retailer gives great service now.
@Latte31 -I know what you mean. I think that this happens a lot during the holidays. I also think that consumer buying behavior does change based on their income.
For example, when people earn more they tend to spend more, but when they earn less they tend to spend less. However, I do think that extreme sales events like buy one get one free or door buster sales tend to bring out all kinds of consumers that may not have even thought of buying anything at all.
Another example of this was with the gas prices. As the price of gas hits $4.00 a gallon a lot of people decide to take public transportation, car pool, or resort to getting a much smaller car. They adjust their lifestyle in order to consume less of the pricier gasoline. The price of an item does affect consumer behavior. I know I try to drive less because gas is too expensive.
I think that consumer buying behavior has a lot to do with the perceived value that a product or service has. For example, a coveted private school might be something that consumers are willing to splurge on because the value of the education is high.
This also happens when there is extreme demand for a new product that just came out on the market. Consumers may want the latest technological gadget or the hottest toy for the season. In these instances, consumers’ behavior forces these items to sell out because the demand is so high.
In the private school this is akin to resorting to a wait list scenario because there are limited spaces available because the demand
for the school was so high.
Sometimes people will buy a hot new product that just came out on the market because everyone else wants it. It is sort of like a herd mentality which is really a form of consumer psychology.I have to say that I am guilty of this too.
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