Consumer decision making process
|Consumer decision making process|
Process of the consumer decision-making involves a series of behaviour of households in the market and taking action to meet its needs with limited resources. The purpose of the household is to maximize the utility gained from consumption of the goods given its particular incomes and prices of goods and services. Maximizing the utility requires they take concrete decisions mainly:
- choice of the consumption structure,
- choice of time spent on work and leisure,
- decisions on the allocation of income between consumption and savings
Choosing the consumption structure
The consumer seeks to maximize the utility of goods consumed, but it must take into account various limitations. They are: limited income and the price on which the consumer has no direct effect. Usability is a subjective category, depends on feeling of a particular consumer. One good for one may be of great utility and for other may not have it at all. When choosing between two goods, the consumer will select the combination of consumption, which will give him the greatest overall utility.
Choosing the time spent on work and leisure
Income of households originate mainly from the sale of the work. The consumer must choose between leisure (free time, which has its usefulness) and the work that generates income.
Decisions on the allocation of income between consumption and savings
Consumer must decide which portion of income he should immediately spend, and which save for future consumption. This choice also has its limitations, which are the amount of income and the interest rate. They create a specific budget constraint, also called market opportunities.
Change in the interest rate will change the consumer's decision. Higher interest rate lower current consumption level, at the same time causing an increase in savings. So there is a positive correlation between savings and changes in interest rate
Consumer decision making behavior
Consumer behavior are a process involving: acquisition of goods, its use, and disposal of it. These include not only physical actions, but also all the operations taking place in the psyche at the time of purchase. Consumer behaviour show the procedure used to satisfy the desires of individuals. Thus, they are represented as a series of systematic response to various stimuli.
Consumer decision making behavior include all activities, both mental and physical related to the acquisition, use and consumption, as well as own production (in the household), which allow the consumer achieve the objectives and thereby lead to satisfaction of needs.
Consumer on the market is everyone from small child calling for buying some toys during shopping and CEO of a large company ordering needed equipment worth millions. Similarly discrepancy is present with the products (goods consumed), which can be everything that can satisfy and fulfill desires of consumers.
Types of consumer behavior
There are two main types of consumer behavior on the market:
- intentional, fully conscious, well thought out and towards a specific purpose, this behavior reflects attitudes of consumers and their desires,
- unintentional, usually not conscious, performed automatically on the under the influence of the reflex. They do not reflect the real needs of the consumer.
Both types of consumer behavior can be further classified into:
- voluntary, activities that arise from an inner desire which are not limited by anything,
- involuntary, pressured, or arising out of compulsion. Due to restriction resulting from the difficult situation of individuals, such action may be the result of the influence of other people.
Both voluntary and involuntary behavior can be further separated into:
- rational - that allows the consumer to the greatest possible satisfaction with purchase. Rational purchase takes place when the consumer for the given sum of money buys so many goods to be most satisfied with the purchase. Rational behavior is based on the following assumptions: consumer is able to identify his own needs hierarchy (from the most intense to the least necessary) and make choices that allow for the greatest satisfaction,
- irrational, illogical or inconsistent with the expectation of the consumer, and he knows that at the time of purchase. Sometimes irrationality is defined as sticking to the needs even though they are harmful. It is believed that the irrational consumer making decisions about buying a particular good is guided by imitation, inspiration and impulse.
Factors influencing consumer decision making process
Consumer decision making behaviour during purchase can be classified by four factors. There are the following determinants of consumer behaviour:
- Cultural factors which include: culture, subculture and community,
- Social factors which are: social group, family members, status and role. Attention should be paid particularly on the family, which in a situation of increased spending will be a decision-making group, and each member will play at least one of the roles: initiator, advisor, decision-maker, purchaser and user,
- personal factors which include the characteristics of the individual consumer, such as age and the associated phase of the life cycle, occupation, financial situation, lifestyle, hobbies and personality,
- psychological factors, which include items such as: motivation, perception, learning, values and attitudes.
Models of consumer behavior
- Structural Nicosia model showing the relationship between the company and the customer, who constantly interact.
- Howard-Sheth model shows the process of acquiring goods using the following variables: input variables, information about what impact of stimuli; hypothetical variables that are involved in the mental process of deciding on the purchase of the product and show how they performed motivating activities; output variables include the visible effects of the earlier processes (i.e. resignation from the purchase or change a decision).
- Bettman model shows the decision-making process as processing of the collected data, done according to a specific plan, controlled by the customer.
- EBK model - consumer behavior is a process consisting of the following: identification of the problem, finding the relevant information to verify the ability to choose, actual decision on the purchase and effects of decisions.
- Markov model is a stochastic model and its main objective is to formulate that consumer behavior as an ongoing decision-making process, where you can distinguish the states in time and the decision made in a particular state is dependent on the results attained in the earlier periods.
- Bettman, J. R. (1979). An Information Processing Theory of Consumer Choice, Addison-Wesley, Reading, s. 17.
- Bettman, J. R. (1973). Perceived risk and its components: a model and empirical test. Journal of marketing research, 184-190.
- Diehl, K., & Poynor, C. (2010). Great expectations?! Assortment size, expectations, and satisfaction. Journal of Marketing Research, 47(2), 312-322.
Author: Krzysztof Wozniak