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Economic Theories And Customer´S Behaviors Essay

1629 words - 7 pages

For companies to be able to market products or services effectively, an understanding of how consumers behave and make decisions is necessary (Poon and Joseph, 2001). There are several theories that relate to this area, including economic theories as well as psychological theories. Earlier studies in theories concerning consumer behavior were developed through economic theory, for example the conception where consumers advance rationally to make best use of their satisfaction in the process of buying. More recent research shows that consumers are influenced by different types of reference groups, such as family, friends, advertisers and role models. Terms like impetuous purchase, mood, ...view middle of the document...

Some of the factors that are striking in consumer behavior are external environment, demographics and personal characteristics, which are subjective to the consumer’s beliefs, values and attitudes (Li and Zhang, 2002).
Consumers base and make their decisions on expected results. One theory states that consumers are seen as rational individuals who have the ability of estimating the results of different decisions made and thereby selecting the most lucrative one. This theory is known as utility theory. Though consumers are comparatively good at approximating the results of an occurrence, not all consumers are completely coherent, dependable or aware of all aspects in the decision-making process. For this reason, the utility theory has been criticized, but despite its insufficiency, the theory is still well thought-out as a main case in the concerns of decision-making. A new and simpler theory called satisficing had a different approach, instead of, as the utility theory, finding the best result, this theory allows the consumer choose what satisfies his/her needs and then stops the decision making process. An example of this could be the process of finding a house. A more psychological approach has been used in the research of consumer decision-making. This involves the development of prospect theory which has extended the two existing theories and has incorporated psychological factors by adding worth and endowment (Richarme, 2001).
A standard logit model was created, where the probability with which a consumer buys a given product depends on the value perceived and the price of the product. In addition, the importance of price and quality to the consumer is included. Then the aspects of brand loyalty and influence from reference groups are considered. Furthermore, the consumer’s history is involved, for example if there has been any previous purchases of the given product, or if other persons have influence on the consumer (Bettman et al., 1991). Gordon Foxall (1999), who has performed a considerable amount of research in the field of consumer behavior and decision making, has created a model of purchase and consumption, more known as the Behavioral Perspective Model (BPM). It relates an outline of consumer decision-making to different types of environmental consequences. Firstly, preceding consumer behavior events take place, which form the behavioral setting. This involves physical, social and sequential elements, which generate a particular behavior. Furthermore, previous behavior of the consumer is considered, which results in either a positive or a negative approach to the purchase. Foxall (1999) explains when describing the model, is the consumer’s state variables. These variables portray the consumer’s state, such as mood, monetary ability and health. These factors generate certain behaviors, which result in, according to Foxall (1999), three categorized consequences; The hedonic reinforcement, which is the utility or satisfaction of...

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