consumer behavior definition essay

Consumer Behavior – Definition and Examples

Table of Contents

What is Consumer Behavior in Marketing?

In marketing, understanding consumer behavior has become very important for businesses. Consumer behavior refers to the study which analyzes how consumers make decisions about their wants, needs, buying or act with respect to a product, service or organization. It is very critical to understand the behavior of consumers to analyze the behavior of potential consumers towards a new product or service. It is also very useful for companies to identify opportunities which have not yet been met.

An example in the aspect of consumer behavior is the change in eating habits which drastically increased the demand for gluten-free products. Businesses which have identified this market gap have produced gluten-free products and have tapped this market aspect as well.

On the other side, those companies which failed in monitoring consumer behavior could not manage to fill this void in the marketplace and were left behind. Understanding the behavior of consumers allows pro-active companies to increase their market share through anticipating the shift within the consumer choice .

Definition of Consumer Behavior

Consumer behavior can be defined as the study of psychological, physical and social actions when individuals buy, use and dispose of products, services, ideas, and practices. In other words, consumer behavior is the study of how consumers will make their buying decision and what those factors which support or influence these decisions.

According to marketers, by understanding the compelling reason for which a consumer buys a particular product or service over the other, it becomes easier to identify which product is in demand and which is obsolete so that marketing strategies can be designed accordingly.

“The buying behavior of final consumers – individuals and households who buy goods and services for personal consumption” Philip Kotler

Factor affecting Consumer Behavior

Understanding how consumer behavior impacts marketing renders it vital to understand those factors which affect consumer behavior and which include:

Cultural Factors

Consumer behavior is influenced by cultural factors like social class, buyer’s culture, and subculture. There are three types of cultural factors include social class, culture, and subculture. Culture can be different by region, different groups and even countries.

Cultural shifts are always important for marketers whether marketing new products or existing products with new features and attributes. For examples nowadays cultural shift towards health and fitness has created a huge demand for exercise equipment, low calories and organic food and other fitness services. This cultural shift greatly influenced the consumer behavior throughout the world i.e. America, England and Europe and many parts of the world. People go to Gym and love organic and healthy food.

Culture is the combination of subcultures . If you are a Muslim, Hindu or Christian, your buying behavior will be influenced by different subcultures. It will affect your choice and preferences like your food, clothing, career goals and recreational activities.

Another cultural factor is the social class that can affect the consumer buying behavior in different parts of the world. For example, in the western world, both the lower class and upper might show the same buying behavior. But in other countries like India upper class have a tendency to buy luxury cars, gadgets, and personal care products. But people from the lower class are unable to spend money on these purchases.

Social Factors

Social factors greatly influence the purchasing behavior of consumers. Social influencers are diverse and include family, school or work communities, social interaction or any group with which an individual interacts. It also includes an individual’s social class which comprises of education level, living conditions, and income.

Social Reference. For example, Last month I was eagerly needed a laptop. I went to a nearby market and purchased a MacBook Pro laptop. What factors affect my buying decision and why I purchased MacBook Pro. It was because my closest friend already having the same brand and he is quite satisfied with this product.

Family. Family plays an important role in the decision-making process. For example, if you are a married person, you will always prefer those products that would benefit both husband and wife.

Social Role and Status. Let us understand social role and status and how it affect consumer behavior. For example, you are a Chief Financial Officer in a leading organization, you are someone’s son, husband and father. your role can also affect the buying tendency of many people.

Personal Factors

Personal factors impact buying decisions and include age, economic situation and occupation. In considering personal factors, buying behavior is also influenced by habits, opinions and interests along with other personal issues.

Human Life Cycle Stages is another example , here marketers target markets based on the human life cycle. They will target teenagers with bright colors, loud music and fast food. A young couple will prefer to buy a retirement plan and secure their future.

Occupation and Economic Circumstances. A person occupation affects the consumer decision while buying goods and services. For example, if you are a blue-color worker you will prefer to buy more work-related clothes. On the other hand, if you are an office worker you will tend to buy smart clothes. Different types of companies specialize in making products based on occupational group. For example, a software house will develop different software for accountants, lawyers, retailers and engineers.

Marketers closely observe buyer personal income, saving and interest rate. Their marketing mix decisions are based on economic indicators. For example, The price of Nikon D-5 professional camera is over $6000, you can only purchase this camera if you enough disposable income, savings or borrowing power.

Lifestyle means how a person lives in a society. For example, you are living in a posh area and people have expensive watches, branded clothes and luxury cars. You have to maintain your status and image.

  Psychological Factors

Psychological factors that impact buying decision includes perception, motivation and beliefs and attitudes. Every consumer will respond to marketing message based upon their attitudes and perceptions.

Motivation. People have different needs at a time. Some needs are biological i.e. hunger, thirst and some are psychological i.e. recognition, self-esteem and belonging. When a need reaches a certain level of intensity it becomes a motive. According to Philip Kotler, a motive is a need that has the power to direct the person to seek satisfaction.

Maslow’s Hierarchy of Needs also known as Maslow’s theory of motivation was developed by Abraham Maslow in 1943. This Maslow’s theory is based on human motivation. It is shaped like a pyramid and have a bottom to top approach.  According to this hierarchy, there are five levels of human needs.

• Physiological needs consist of basic human needs like water, food and sleep.
• Safety needs consist physical safety of humans like personal, emotional, financial security
• Social Belonging and needs consist of love, friendship needs
• Self-Esteem are those needs looking for self-respect, recognition and social-status
• Self-actualization is the need for personal growth, development and realization.

Freud Theory of Motivation. This theory tells us that the unconscious psychological forces such as emotions and desires shape an individual behavior. These are three factors are Id, superego and ego.

Consumer Behavior Models

Through observation and research, there have been developed several models which further explains the buying behavior of consumers and which includes black box, personal variables as well as complex models.

• Black-box model: This model is based upon external stimulus-response which means that a point triggers the consumer’s mind to make a purchasing decision which is influenced by different factors like sampling, marketing message, promotions, product availability and price.
• Personal variables: When a consumer is influenced by personal-variable model, decisions are based upon internal factors. Internal factors may include belief systems, goals, goals, traditions, personal opinions or any other similar internal motivator.
• Complex model: Complex model includes both external and internal variables.

How to Study Consumer Behavior

Several factors affect the consumer behavior and there are some methods that are used to study consumer behavior. These methods include:

• Surveys: Surveys can be conducted on the phone, internet or in-person. Surveys should avoid the open-ended question and should include multiple-choice questions so that answers are given easily.
• Focus groups: This involves hosting a group of different type of customers to discuss over a product type and to understand the reasons why customers will buy certain brands. This should include open-ended questions and allow participants to try a new brand and write down their views about it.
• Point-of-sale: This requires obtaining statistics from stores or corporate headquarters. Companies should focus upon a particular type of product and determine whether the product is purchased more than often in a certain time period in comparison to other time periods. This paves way for researching the reasons why a particular brand was selected over the other.

About The Author

Umar Farooq

Consumer behaviour Essay

This paper critically focuses on Consumer Decision-making Process models of purchase and post-purchase in relation to the hospitality industry. The paper shall determine the extent these models are vague and all-encompassing, especially when applying to postmodern hospitality industry with the fragmented nature of consumer behaviour, and emerging trends in the global provision of products and services.

Scholars interested in the field of consumer behaviours have developed several models as attempts to explain consumers’ decision-making processes when making a purchase, and what follows after the purchase. Gordon and Saunders have identified six of such stages that involve passive and active consumption phases or sequences (Foxall, 2004).

They identify these stages as emerging needs, active consideration, researching, short-listing, purchase and post-purchase. Smith also supports these stages in his work.

A part from these scholars, other scholars have also offered different perspectives on consumer decision-making process (Kotler, Bowen and Makens, 1999; Chambers, Richard and Lewis, Robert, 2000; Onkvisit and Shaw, 1994; Howard and Sheth, 1996). However, critics argue that such models are vague and tend to be all-encompassing.

Introduction

Gabbott and Hogg offer a brief definition of consumer behaviour as “any behaviour involved in the course of buying, using and disposing of products” (Gabbott and Hogg, 1998). Critics have noted that this definition is vague and not practical. From this definition, we can learn that consumer behaviour is a technical issue to describe precisely.

Engel, Blackwell, and Miniard have offered an advance definition of consumer behaviour as “activities which directly involve decision processes prior and after stages of obtaining, consuming and disposing products” (Blackwell Engel and Miniard, 2001). They further explain how consumers choose products and services using a model of Consumer Decision-making Process (CDP).

This model indicates how consumers make decisions before undertaking any purchase decision and post-purchase decision. Consumers make their purchase at the fourth stage after undergoing all other previous stages.

Consumers look at the value of the products or service they have purchased against the satisfaction derived or fulfilled from using the product. This experience is fundamental for defining the fifth stage, post-purchase evaluation, which takes a mental evaluation of the value of the purchase.

We have noted that depending on the CDP model alone may not provide the necessary information when applied in a marketing environment. This is because there are other various factors that influence every process of CDP.

Understanding factors that influence stages of CDP model may help markets persuade consumers who intend to use their products or competitors. Consumers are likely to purchase services or products that have solved their problems in cases of recurring needs. This is a purchase they know.

The CDP model must recognise that factors such as culture, personal preferences, social status, family, and the situation also influence consumers’ purchasing behaviours.

At the individual level, we have attitude, resources, motivation, personality, and knowledge. For instance, we may consider how consumers who are conscious environmental behaviour towards purchasing green products or services in the hospitality industry.

Characteristics of products and services in the hospitality industry

Hospitality industry mainly caters for tourists or visitors have that need a unique range of services and products. We can group these services and products as packages e.g. accommodation and meals, or stand-alone products such as catering, and entertainment, among others.

We shall focus on a combination of services and products at the hospitality industry so as to enable us to understand the consumer decision-making processes when making such purchases.

This sector largely deals in provisions of services. According to marketing studies and theorists, services are intangible purchases. Thus, such purchases never really result into any ownership. In this regard, they offer various characteristics of services as follows. The hospitality industry offer services that are intangible. We can never touch, see, taste, or even smell them before we make the purchase.

Marketers in the field of hospitality offer images of their services, such as accommodation locations and the surrounding environment to make such services appear real to the consumer. This is a means of overcoming intangibility. However, such techniques do not necessarily overcome intangible characteristics of such services as tourists have to care when purchasing such services in the hospitality industry.

Services in the hospitality industry also have inseparability characteristics between production and how the service works during consumption. This characteristic influences consumer’s purchasing behaviour. Consumers may link the service to the provider together with the performance, and change their purchasing pattern if the services do not meet their expectations.

Services also tend to be heterogeneous in nature. This means services providers at the hospitality industry may find it difficult to offer the same service to every consumer when their needs arise. Different aspects like emotional status of the customer may also affect how he or she perceives the service at a certain time.

It means that consumers of hospitality products and services may not be able to predict the quality of services they may receive at their favourite places. In addition, consumers cannot depend on past their experiences in order to make subsequent purchase decisions regarding the same services or products.

There may be inherent changes in the services, service providers, or the consumers themselves that may affect the quality as well as experience of services offered.

Services also lack ownership, at least to the consumer. Consumers only experience the service through their purchases and access. Consumers will not own the service. Thus, services serve the purpose of a need satisfaction rather than tangible ownership. Therefore, purchases of services will have significant effects on emotional aspects of the consumer.

The above characteristics are just some of the aspects that may influence consumers of the hospitality industry. Marketing pundits also look at the distinction between convenience goods and shopping goods. Convenience goods tend to have low prices and high frequencies of purchases, unlike other goods that have high prices with low frequencies of purchases.

In this regard, we look at shopping goods as serving higher-order needs according to Maslow’s hierarchy of needs. Howard and Sheth note “the purchase of convenience-type goods involves the consumer in a routine problem-solving behaviour, whereas the purchase of shopping goods involves the consumer in an extensive problem-solving behaviour” (Howard and Sheth, 1996).

We can note that consumers will spend a lot of time in order to understand complex issues of services they are about to purchase in the hospitality industry. The acts of choosing tourism destinations and subsequent service providers involve high-level purchases that require consumers to search for information and make informed purchases.

It requires a high-level of commitment, time, and significant spending. Thus, Middleton and Clarke observe that such influences result into low brand loyalty and expectations of repeat purchases, and low chain of distribution (Middleton and Clarke, 2001).

Complexity in Consumer Behaviour in the Hospitality Industry

Consumers involved in purchasing hospitality products and services usually experience some technical issues. Most products and services in the hospitality industry need a high degree of involvement in making purchase decisions and a high degree of consumer commitment. This is due to the nature of products and services that consumers wish to purchase.

Thus, there are no routine or similar behaviour patterns when making such decisions. Consumers consider every purchase unique and need different approaches in making purchase decisions. Consumers in the hospitality industry must first carry out a thorough marketing research before settling on a given decision.

In turn, decision-making processes tend to take longer than when purchasing other products or services. Factors that may influence consumers at this stage may also set in, such as a holiday destination, type of holiday, individual preferences and among other factors.

Consumers link intangible services and products to high levels of insecurity in the purchasing process. The challenge is that consumers cannot have a test of the product before they make any purchase. In this case, most consumers only rely on the assurances from the services or products vendors.

The level of insecurity involved results into complex behaviour patterns where consumers collect information from several sources, including agencies. Information may come from the family, advertisement, travel agents, companies’ Web sites, and social media, among others.

Holidays and visits are significant events in an individual’s life. Thus, there is a considerable level of emotions involved. Holidays restore physical health and provide a chance of escaping the routine of workplaces. Holidays are expensive. This implies that the decision to take a holiday may affect other members of the family, or colleagues in cases of where companies cater for such packages.

This calls for compromises at some points, especially with regard to a holiday destination. There may also be some pressing needs such as purchasing new items, car, improving a home. Thus, family members or colleagues may consider such an expensive holiday a waste of resources.

Consumers who wish to purchase hospitality products and services normally experience strong influences from other people such as family members, colleagues and reference groups. The study of behaviour patterns that are under influences from diverse aspects is extremely difficult. At the same time, such opinion leaders also have tendencies of changing their beliefs and opinions over time.

Most decisions consumers make about visits are long-term decisions that take a considerable amount of time to plan. The challenge is that people may be at different statuses of their minds when they plan their visits, and when they actually go for such visits.

Such decisions depend on aspects of the future that they might not be able to predict. The dynamic nature of the tourism industry may affect such decisions depending on the cost variations, climate changes and lately security.

Purchases made in the hospitality industry involve high levels of search for information. Factors such as emotions and individual preferences may determine the extent to which a consumer will seek for such information.

There is a wide consultation of different sources of information, and the final choice depends on such information gathered. There is a high level of complexity involved as people search for information and make decisions. It may also mean that decisions can change abruptly depending on the new information discovered.

The complex nature of making purchase decision-making processes in a hospitality industry is different from making purchases of other routinely used goods.

The intangible nature, uncertainty of the future and unpredictable of service standards make the process of purchasing services and products a complex experience for consumers. This implies that marketers in may have difficulties when promoting their services and products to such consumers.

The decision-making process in the hospitality industry

The decisions consumers make to buy products and services in the hospitality industry are due to complex processes involved. These factors relate to the consumer, and other external factors that he or she may not be able to control when making a decision of purchasing a service or product without prior experience.

In addition, the nature of products and services in the hospitality industry also make purchase decision-making process a complex affair. For instance, in choosing a holiday destination, consumers consider such factors as the destinations itself, mode of travel, type of accommodation services, the length of the holiday period, the time of the holiday, package of the holiday, and agent to provide tour services.

These are among many factors that may influence the decision-making process of a consumer when choosing a holiday package and subsequent purchase.

We can note that the scope and number of such factors are wide and numerous. We also realise that choosing the destination alone is not enough and not an end in itself. There are issues and activities to engage in once in a holiday destination.

Visitors will also make further decisions regarding how to spend their time, what meals to take, and where to take them among others. We can notice that these decisions look simple. However, they form part of the complex decision-making processes that tourists must critically look before making any purchases.

Decision-making models in hospitality

Cooper and associates provide three processes in the development of consumer behaviour with reference to purchase processes (Cooper et al, 2005). First, there was the early phase of 1930 and 1940s (early empiricist) where emphasis was on empirical research. Still, the industry tried to establish effects of advertising, product distribution, and promotion decisions.

Second, there was the motivational phase in the 1950s where attention focused on “focus groups, in-depth interviews and consumers’ perception studies, and other projective approaches” (Cooper et al., 2005).

The focus was on what factors motivate consumers to make their purchases. Third, there was the formative phase. This phase included published textbooks by consumer behaviour theorists such as Engel, Blackwell, Kollat, Howard and Sheth.

Most early approaches on the study of consumer behaviour “focused on manufacturing industries, and they later moved to general service industries” (Cooper et al, 2005). In the 1970s, scholars began creating purchase models in the area of tourism. These models presented linear representations of decision-making processes.

It was Moutinho who developed a tourist behaviour model that was different from the rest with two scopes (Moutinho, 1987). First, the model provided for three distinct stages in the consumer decision-making process. These were “pre-decision stage and decision process, post-purchase evaluation, and future decision-making” (Moutinho, 1987).

The model also provided opportunities for feedback mechanism. Second, the model recognised three behavioural aspects in making purchase decisions, such as motivation, cognition, and learning.

The Consumer Information Processing Model: Source: Adopted from Kotler (1997)

Post-purchase Evaluation

Post-purchase evaluation occurs as a result of purchase decision. In this context, the consumer considers the level of purchase involvement. As we have identified above, purchases in the area of hospitality are high levels involvement.

In other words, the level of concern for the purchase is high in the hospitality industry because such decisions are not habitual purchases. The process is a continuum where the flow is from low to high level (Solomon, 2006).

High level of involvement during purchase decision-making process will result into an extensive post-purchase evaluation. Consumers usually question if their decisions to make purchases were the best among other alternatives. This is what we call post-purchase cognitive dissonance.

Elaborate Post-purchase Evaluation: Source: Adopted from Hawkins, Best, and Coney (1983)

Consumers are likely to experience such dissonance if the purchase is irrevocable, involves a high level of commitment, individual factors, selection among alternatives, and the importance of the decision.

Post-purchase experience of dissonance makes the consumer feel uncomfortable. Consequently, they resort to a number of ways to reduce such feelings. These may include preferences for the choice, disregard other alternatives, avoid negative comments about the choice, and reduce the importance of purchase decision.

Consumers who fail to reduce the level of dissonance may experience dissatisfaction with their choices. In this process, the consumer is likely to identify new problems and engage in the process of satisfying the need created due to dissatisfaction by the initial purchase. Consumers will use their experiences and negative feeling like part of the new information in making the decision for the next purchase.

Analysis of the purchase decision models

There are inherent weaknesses that exist in consumer decision-making process models. These models do not explicitly show how consumers undergo complex processes when making decisions of purchasing services in the hospitality industry. These models cannot serve marketers when designing their marketing strategies.

Most critics argue that such models do not rely on any empirical research; thus, may not present reality of how consumers make their purchase decisions. In addition, most of these models are out-of-date in the postmodern hospitality industry, which is ever dynamic as consumers’ preferences are not static.

For instance, the tourism and hospitality industry has experienced changes with regard to the rapid changes in the Internet as a means of booking and purchasing hospitality packages and airline tickets, explosion of no-frills budget airlines, the development of all-encompassing holiday destinations, evolution of direct marketing, and changes in the buying behaviours of tourists that involve last-minute and spontaneous purchase decisions.

Third, a number of models that exist in the field of tourism, hospitality, and event management have their origins in North America, Northern Europe, and Australia. This implies that these models do not cater exhaustively cater for emerging markets in Eastern Europe, South America, Asian and African markets.

These models also tend to classify activities in the hospitality industry as homogeneous. However, consumers of such products are different and unique in their own ways.

Some of these factors that may influence characteristics of visitors may include their travelling patterns i.e. as an individual, family or group, past experiences of such tourists, and personal traits, which may involve planning patterns such as last-minute decisions or considerable amount of time for planning.

A number of models do not account for influences of motivators and determinants that affect consumers during decision-making processes. Some factors that influence consumers’ decision-making processes may dominate other factors and account for the entire decision-making process. However, such factors mainly depend on individuals’ preferences such as hobbies, means of travelling, or preferences for leisure activities, among others.

Other models take rational approaches to decision-making processes in purchases, which is not always the case. The ability to make rational decisions in purchasing among visitors depends on the availability of information.

In most cases, tourists may have access to imperfect information that does not give true accounts of their alternatives. In addition, rationality of the purchase decision-making process also depends on an individual’s factors such as personal opinions and prejudice.

These models assume that consumers’ activities and purchase patterns are constant. They fail to account for emerging trends such as conference tourism, holiday destinations, holiday patterns, effects of globalisation and instant decision-making process among some visitors. Such factors influence the nature of the decision and purchase patterns among consumers.

Postmodern consumers of hospitality industry

Studies show that purchases and consumption in the hospitality industry have become fragmented. The perceived social roles have experienced “breakdown and left majority to adopt any identity they want in a postmodern society” (Thomas, 1997).

In the field of hospitality, the postmodern consumption rotates around “changes in consumer cultures of the late capitalism and the emergence of communication technology” (Brown, 1995). These changes have affected marketing trends in hospitality services (Williams, 2002). Thomas notes postmodernism has significantly influenced marketing.

Thus, he elaborates “Marketing, real-time, real-world marketing is thoroughly postmodern because postmodern marketing openly challenges some of the major axioms of the conventional wisdom as reflected in the standard marketing textbooks” (Thomas, 1997).

Thomas lists axioms that relate to postmodern as “consumer needs, consumer sovereignty, behavioural consistency, customer orientation perceived value, product image, buyer and seller separation, individual and organisation distinction, product and process separation, and consumption and production division” (Thomas, 1997).

We can relate these elements to consumption in the hospitality industry and establish consumerism in postmodern.

According to postmodernism, there is no single privileged form of knowledge, i.e. no theories are superior or inferior to others. Thus, it is no longer possible to believe in a generalisation or meta-discourse. A better understanding of postmodernism should entail sensitivity to differences, fragmented individuality, embrace uncertainty, and discourage the use of consensus to suppress heterogeneity.

In the field of hospitality consumption, we must embrace parallel and emerging trends in the social world. This refers to both self and other spheres of life. Postmodernism recognises that there is a lack of unity, lack of unifying central ideas, order, and lack of coherence.

Lack of certainty applies to an individual as well as the whole system. Therefore, the fragmented nature of consumer decision-making process models results from the fact that postmodernism does not recognise coherent and unified approach to issues as there is also general lack of certainty.

There is also breakdown in the system that leads to distinctions and differences. In turn, we have fragmentation in processes that replace unity or totality. Changes in society will allow for conditions of postmodernism characterised by hyperreality, ambiguity and reproduction of features (Gabriel and Lang, 1995).

Thus, postmodernism does not support any suggestions to replace or impose order to the existing chaotic and fragmented reality. Postmodernism puts it that we should embrace the “limitations of knowledge, question the value of generalisations and accept the impossibility of universal truths” (Thomas, 1997).

Fragmentation also emerges due to a low level of commitment to any one brand. What exists is only a momentary attachment, brand repositioning, and regeneration.

Thus, if we apply the principle of none is superior or inferior to another, then marketing becomes only sensible when it recognises language, symbols and elements of communication that imply and signify essential images in marketing. In the hospitality, the breakdown in the system affects marketing in the hospitality industry, which relates to the universal principle of marketing (Williams, 2002).

Postmodernism tends to question ideas behind generalisations and concepts in overarching theories as it sees them as limited in scopes. Thus, it posits that marketing approaches tend to impose order on the chaotic and fragmented statuses of the modern hospitality industry.

Postmodernism argues that there that the knowledge that exists has limitations about the nature of fragmentation. There is little empirical evidence to support generalisations regarding consumers’ consumption and behaviour patterns.

In addition, consumers’ consumption trends are not orderly and unpredictable. Consumers act on their wishes, ignore the set standards, and fail to maintain systems that may guide their activities (Brown, 1995). Thus, consumers are unreliable and changeable. Dynamic characteristics of modern consumers in the hospitality industry present difficulties in predicting buying behaviours and decision-making processes.

Conclusions

This research has looked at the purchase and post-purchase models in consumption of hospitality services. Academicians and market theorists have made their inputs in order to provide theoretical account of the processes.

However, these models offered by theorists have inherent weaknesses both in describing and explaining how consumers make their purchase decisions. Some of these weaknesses result from elaborate decision-making patterns involved in choosing a holiday destination and subsequent activities.

The consumer decision-making process in purchasing hospitality services is a complex affair. It depends on a number of factors that originate from an individual and other external factors.

However, the models present linear processes that do not account for the complex nature and a high level of decision-making process consumers undergo when choosing a holiday destination. Despite these theories and models, understanding consumer behaviour in consumption of hospitality services remains complex.

The post-purchase evaluation occurs as a result of the decision to purchase. It is also a high-level involvement process due to the nature of the decision and purchase involved. Consumers will experience post-purchase cognitive dissonance due to their purchases. However, in most cases, they tend to find ways of reducing negative feeling about their purchases.

With reference to postmodernism, consumption of hospitality services remain unpredictable, fragmented and not attached to reality. Postmodernism believes that consumers of today live in a world of doubt, ambiguity, and uncertainty. Thus, applying a model to explain their decision-making processes involving a purchase remains difficult to limitation of knowledge.

To this end, we cannot apply generalisations to account for behaviours of consumers in the hospitality industry. Still, marketing remains a complex process as predicting purchasing patterns and consumptions among customers are also difficult.

Most consumers will base their purchase decisions on their wishes, make last-minute decisions, and create new trends in demand for services and products. Such are the difficulties that make these theories fragmented and all-encompassing.

Reference List

Blackwell, R, Engel, J and Miniard, P 2001, Consumer Behaviour, 9th edn, Harcourt Education, Boston, MA.

Brown, S 1995, Postmodern Marketing, Routledge, London.

Chambers, R and Lewis, R 2000, Marketing leadership in hospitality: foundations & practices, 3rd edn, John Wiley & Sons, New York.

Cooper, C, Wanhill, S, Fletcher, J, Gilbert, D, & Fyall, A. 2005. Tourism: Principles and Practice, Pearson, New York.

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Gabbott, M and Hogg, G 1998, Consumers and Services, Wiley, New York.

Gabriel, Y and Lang, T 1995, The Unmanageable Consumer, Sage, London.

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Essay on Consumer Behaviour: Top 8 Essays | Microeconomics

Here is a compilation of essays on ‘Consumer Behaviour’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Consumer Behaviour’ especially written for school and college students.

Essay on Consumer Behaviour

Essay Contents:

• Essay on the Modern Approach of Consumer Behaviour

Essay # 1. Introduction to Consumer Behaviour:

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Microeconomic theory tends to assume that individuals are the economic agents exercising the act of consumption, the decision to purchase goods and services. The consumer is assumed to choose among the available alternatives in such a manner that the satisfaction derived from consuming commodities (in the broadest sense) is as large as possible.

This implies that he is aware of the alternatives facing him and is capable of evaluating them. All the information pertaining to the satisfaction that the consumer derives from various quantities of commodities is contained in his ‘utility function’.

We assume that each consumer or family unit has complete information on all matters pertaining to its consumption decision. A consumer knows precisely what his money income will be during the planning period. ‘Utility’ refers to subjective satisfaction derived from consumption of commodities.

The 19th century economists, namely W. Stanley Jevons, Leon Walras and Alfred Marshall came up with the cardinal theory of consumer behaviour. They considered utility is measurable just as the weight of objects. The consumer is assumed to possess a cardinal measure of utility when he is able to assign every commodity, a number representing the amount or degree of utility associated with it.

Under this theory, it is possible to measure marginal utility (MU) of a commodity, whereby by MU we mean a change in utility due to a change in per unit of consumption of a commodity. Another property is the existence of Law of Diminishing Marginal Utility (LDMU).

This means as a consumer keeps on consuming successive units of the same commodity, consumption of other commodities held fixed, marginal utility diminishes. Total utility increases at a decreasing rate for successive units of consumption of a particular commodity.

Essay # 2. Assumptions of Consumer Behaviour under Cardinal Theory :

(i) Utility is numerically measurable.

(ii) Marginal utility is the unit of measurement of utility.

(iii) Marginal utility of money (or total budget) is constant.

(iv) The Law of DMU holds,

(v) Independence axiom holds.

Total utility can be expressed as sum of utilities pertaining to each commodity separately. For example, let utility be a function of two goods x 1 and x 2 , i.e.,

In Fig. 1 we divided consumption space into four zones — I, II, III, IV. Due to the axiom of non-satiation it is observed that consumption bundle, XPY (X has more of x 2 than Y for the same x 1 ). Similarly, ZPY Hence all the points in zone I are superior to Y and all the points in zone III are inferior to Y.

The remaining two zones, viz., II and IV are important to draw indifference map as follows:

A ray through origin, OH, passes through Zone II. All Space points on OP are inferior to Y but XPO i.e., somewhere between P and X where there is switch of preferences say point M. Successive drawings of such a ray through origin can make us safely assert that there is a point say M which is indifferent to X. Similar exercise can be carried out with Zone IV and joining these points like W, M, Y, T, we get a curve called Indifference Curve.

An indifference curve is a locus of points in a commodity space—or commodity bundles—among which the consumer is indifferent. Each point on an indifference curve yields the same utility as any other point on that indifference curve. The IC approach has been applied in areas of international trade and public finance, community (social) indifference curves (ICs and SICs) are used to show gains from trade.

Similarly, ICs are used to compare to the welfare effects of a lumpsum tax and a price distorting tax. IC approach including the Slutsky theorem is also used to show the effect of income tax on a worker’s labour-leisure choice. At times SICs are used to compare cost of living indices and then show the effects of price inflation.

We may now summarise the basic properties of indifference curves as follows:

1. IC is Downward Sloping:

In Fig. 2, along the IC, utility is constant. Therefore, when consumption of one commodity increases, given the level of other commodity, utility increases. But since total utility is constant, additional utility has to be sacrificed by reducing the consumption of other commodity. Hence IC is downward sloping.

2. ICs are Non-Intersecting:

In Fig. 3, CPB (since C has more of x 1 than B for same x 2 ). But CIA as both C and A lie in same IC, IC 0 . Again, BIA, as both B and A lie on same IC 1 .

. . . Therefore, by the axiom of transitivity, CIB (or BIC) which is not possible or gives con­tradictory results. Therefore ICs cannot intersect.

3. Higher ICs give Higher Utility:

It can be seen that BPA, as more of x 2 is consumed in B than A for the same amount of x 1 . Hence all the points on IC 1 are preferred to all the points on IC 0 , as it gives higher utility. Again, CPB as for same x 2 , more of x 1 is consumed. Therefore, all points on IC 2 are preferred to all points on IC 0 and IC 1 as it gives more utility. Higher IC gives higher utility (Fig. 4).

4. ICs are Convex to the Origin:

Axiom 4 leads to convexity of IC which implies diminishing MRS where by MRS we mean absolute necessary reduction in consumption of x 1 due to additional consumption of x 2 by one unit such that total utility is fixed (assuming two commodities x 1 and x 2 only)

Now we shall discuss about budget constraint and budget lines. The budget line is set off more commodity bundles than can be purchased, if the entire money income is spent.

Hence, budget constraint is given by following equation:

where m = total money income (assumed constant).

P i = price of i th commodity

X i = i th commodity, i = 1, 2,…, n

In a two-commodity framework, therefore, the budget constraint will be

m=p 1 x 1 + p 2 x 2

or, x 2 = (m/p 2 – p 1 /p 2 ) x 1 [This is indeed the equation of a downward sloping straight line.]

The solution of problem of maximisation of utility subject to the budget constraint is the main motive behind the theory of consumer behaviour.

Properties of Demand Functions :

Demand functions are homogeneous of degree zero in prices and income which means that equi-proportional and unidirectional changes in prices and money income do not alter optimality condition. This homogeneity postulate suggests that the consumer is free from money illusion.

Consumers’ initial equilibrium is point E. Every time his income increases the budget line shifts F and G are the corresponding equilibrium points. The locus of all the equilibrium points is called income consumption curve. In the Fig. 6 both x 1 and x 2 are normal goods.

If x 1 is inferior the ICC will be backward bending and if x 2 is inferior it will be forward falling. See (Fig 7). If consumption of a good falls as income rises, then such a commodity is called inferior goods. So one important prediction is that if the consumer spends all his income on two goods, both cannot be inferior at the same time.

The relation between money income and quantity consumed is explained by a function is known as the Engel’s curve. Now we allow the price of one of the two goods to fall. Suppose that of x 1 falls. In this case the budget line be­comes flatter and the consumer is able to reach higher in­difference curves and enjoy more utility or satisfaction, thus improving his level of welfare.

So every time P 1 falls, the consumer moves to higher IC and reaches a new equilibrium point. The locus of succes­sive equilibrium points is the price consumption curve (PCC) which shows the consumer’s reaction to a single price change which changes the price ratio, i.e., p 1 /p 2 .

There are two uses of PCC. First, we can derive the con­sumer’s demand curve for a commodity from the PCC. According to the ordinal approach, the demand curve for a normal good is downward sloping due to price effect which has been decomposed by Hicks and Slutsky into two parts, namely, substitution effect and income ef­fect. The slope of the demand curve depends on the relative strength of the two effects which, in turn, depends on the nature of the commodity under consideration.

From the PCC we can predict price elasticity of demand (e) by using the total outlay method.

Three points will be noted in the context:

(i) If PCC is downward sloping, demand for x 1 is price elastic.

(ii) If PCC is horizontal, demand for x 1 is unitary price elastic.

(iii) If PCC is upward sloping, demand for x 1 is price inelastic.

Essay # 5. Price Effect as a Sum-Total of Substitution Effect and Income Effect:

From the Marshallian demand curve (constant money income demand curve) it is not possible to explain the price effect because Marshallian approach is based on LDMU, i.e., cardinal theory. It was John Hicks and E. Slutsky who decomposed the price effect into two parts. Thus, two new concepts of demand curve have emerged, namely,

(i) Real income constant demand curve (the Slutsky demand curve)

(ii) Total utility constant demand curve (the Hicks demand curve)

We shall now construct Marshallian demand curve and compensated demand curve for a normal good in a two-commodity framework.

From the price effect such derivation of the demand curve for x 1 is as follows:

Let initial budget line be AS in Fig. 10(a) for price p 1 , corresponding equilibrium x 1 at E 0 is x 1 . Hence for price p 1 , x 1 is plotted in Fig. 10(b). If p 1 falls slope of budget line falls and hence AB becomes flatter. The budget line becomes AB’. The consumer reaches higher utility level on IC 2 and new equilibrium x 1 is x 1 M . Plotting this in Fig. 10(b) and joining E 0 and E M in Fig. 10(b), we get the negatively sloped demand curve for x 1 which is the Marshallian demand curve, D M .

We will construct D H and D S for same ini­tial conditions as the one we considered while drawing the Marshallian demand curve. Let price of x 1 , p 1 fall from p 1 o to p 1 ’. For Hicksian demand curve we consider budget line, CD tan­gent to initial IC 0 implying constant utility level even as new price ratio P’ 1 /P 2 and hence parallel to AB’. Because of movement from E 0 to E H , x 1 rises from x 1 to x 1 H . This is purely substitution effect, and joining E 0 and E M we get Hicksian demand curve D H .

If we follow the Slutsky approach, we can make the following two Predictions:

(i) Perfect Substitutes:

If two commodities are perfect substitutes like blue and black ink for a colour blind person the IC will be a straight line with PE = SE and IE = 0.

(ii) Perfect Compliments:

If two commodities are perfect complements like left and right shoe SE = 0 Thus, PE = IE. For Slutsky demand curve we consider budget line C’ D’ , which passes through initial equilibrium point E 0 implying that consumer is just enough to purchase initial equilibrium commodities even at new price ratio P’ 1 /P 2 , hence parallel to AB.

This hypo­thetical budget line is thus to the right of CD and hence consumer reaches higher IC, IC 1 . Consumption of x 1 rises, hence when plotted in 10(b), we see that D S is flatter than D M . The movement from E S to E M is the income effect.

The substitution effect is always negative because the entire IC approach is based on the of substitution which suggests that the consumption of one commodity is always at the expense of the other but IE is negative in case of normal good, if we consider change in real income. Thus in case of a normal good the negative income effect reinforces the negative, SE so as to make the price effect very strong in this case and the demand curve is relatively flat.

In case of an inferior good, IE is positive but less-strong than the substitution effect. So the price effect is still negative but less strong than that in the case of a normal good. In case of a Giffen good, which is essentially a price phenomenon, the positive income effect is stronger than the negative substitution effect so as to cause price effect to be positive. This is one of the exceptions to the empirical law of demand. These points are summarized in Table 1.

An important aspect of ordinal theory is the derivation of Slutsky Equation. This is done in the mathematical appendix.

Essay # 6. The Hicksian Interpretation of Consumer Behaviour:

Hicks define own-price substitution effect in terms of constant utility.

According to SARP, if (x 1 , x 2 ) is revealed preferred to (y 1 , y 2 ) (either directly or indirectly) and (y 1 , y 2 ) is different from (x 1 , x 2 ) then (y 1 , y 2 ) cannot be directly or indirectly revealed preferred to (x 1 x 2 ). Likewise, in the ordinal theory under revealed preference approach it can be proved that substitution effect is always negative. Let prices be given by P° when a consumer purchases a commodity bundle X° when X’ was affordable. This means X° is purchased at P° when X’ was affordable. This is possible only when,

Essay # 8. Modern Approach to Consumer Behaviour:

An alternative approach to the theory of consumer demand was pioneered by K. Lancaster. He argued that goods are demanded as their characteristics. It is these characteristics that yield utility. Thus, we may consider three different goods say sugar, honey and saccharixe. But they may have only two characteristic, viz., sweetness and calories. If a new sweetener is produced we analyse it not as a new good but as one better that has the same characteristics.

Thus, compared with traditional analysis, the new approach has two advantages:

(i) We can study the introduction of new goods,

(ii) We can study the effects of changes in quality.

Comparison with traditional approach:

In the traditional theory, the consumer’s indiffer­ence curves are given in terms of the original set of goods. Now if a new good is introduced in the market we have to introduce a whole new set of indifference curves or surfaces. All the information in the preference about old set of goods is discarded.

In terms of the new approach we can make an insightful analysis of consumer choice. In the real commercial world many of the so-called new goods are actually the same as the old goods with the characterisation of different proportions.

Thus, if we consider the preferences in terms of characterisation we can analyse introduction of new goods very easily. We do not have to discard any old set of prefer­ences as worse. If new goods appear in the market with new characteristics, we have to intro­duce a new set of preferences.

A major advantage of the characteristic approach is that it per­mits the analysis of many goods. At times the number of goods is considerably higher than the number of characteristics. Furthermore, once we think in terms of characteristics we have to consider substitution effect which is different from the substitution effect of the traditional theory.

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