MICROECONOMICS: Consumer Behavior

by Benmar O. Tabuso, BA Pol Sci

I. Definition and Purpose

Consumer Behavior is defined as the study of how people make decisions about what they buy,
want, need, or act in regards to a product, service, or company.

Purpose of Consumer Behavior:

1. It is critical to understand consumer behavior to know how potential customers will
respond to a new product or service.
2. It also helps companies identify opportunities that are not currently met.

II. The Factors Affecting Consumer Behavior

To fully understand about consumer behavior, it's vital to understand the factors that affect
consumer behavior: cultural, social, personal, and psychological.

A. Cultural Factors
 Cultural factors refer to the basic set of values, perceptions, preferences, and behaviors
that a child learns while growing up through the process of socialization involving the
family and other key institutions.
 Cultural factors exert the broadest and deepest influences on consumer behavior.
 Culture is one of the most fundamental determinants of a person’s wants and behaviors.

Examples:
 Some people have preference for the music of Bach or Mozart, while others would go
crazy for Justin Bieber.
 Toilet paper may be a common thing for the urban dwellers but could be a rare
commodity for the people who live in the mountain.

B. Social Factors
 Social factors refer to the influences that a person gets from his reference groups such as
his peers, family, and social roles and statuses.
 Reference group is defined as a group that has a direct or indirect influence on a person’s
attitudes or behaviors.

Examples:
 A teenager may buy shoes that are in accordance to the taste of his peer group, while
a more matured person would prefer more durable or conservative shoes.
 Members of the buyer’s family can exercise a strong influence on the buyer’s
consumer behavior. From the parents, a person acquires an orientation toward
religion, economics, personal ambitions, and love. Husband-wife involvement in
purchases varies widely by product category. Husbands are more dominant in the
 purchases of insurances and cars, while wives are more dominant in the purchases of
washing machines and kitchenware.
 A person’s position in each group can be defined in terms of roles and status:
o A role consists of the activities a person is expected to perform according to
the person around him or her.
o Each role carries a status reflecting the general esteem accorded to it by
society.
o The kind of clothing a person wears reflects his respective roles and statuses.
A company president, for example, will tend to drive Mercedes Benz, wear
expensive clothes, and eat in posh restaurant.

C. Personal Factors
 Personal factors refer to the influences a person gets from his own personal outward
characteristics such as his age, gender, occupation, economic circumstances, lifestyle,
personality, and self-concept.
 Personal factors are characteristics that are specific to a person and may not relate to
other people within the same group. These characteristics may include how a person
makes decisions, their unique habits and interests, and opinions.

Examples:
 Young single people have different consumption needs from retirees; newly married
couples buy different kinds of furniture compared to older couples.
 A person’s occupation has an influence on the goods and services he buys. A company
president will buy expensive clothes, while a blue-collar worker will buy work clothes.
 A person’s lifestyle and economic condition will affect the goods and services he buys.
The traditionalists would buy the usual kinds of goods as opposed to those people
who would like to experiment; the sports-minded type of person would prefer
different kinds of goods as opposed to those who are the homebody type.

D. Psychological Factors
 Psychological factors can include a person’s motivation, perception of a need or situation,
ability to learn or understand information, beliefs, and attitudes.
 Maslow’s Hierarchy of Needs:
o a theory in psychology, proposed by Abraham Maslow, which is often portrayed
in the shape of a pyramid, with the largest and most fundamental levels of needs
at the bottom, and the need for self-actualization at the top.
o Based on this theory, a person will try to satisfy the most important needs first.
When a person succeeds in satisfying an important need, he will be motivated to
satisfy the next important need.
 Maslow’s Hierarchy of Needs

o Example: A starving man (need 1) will not take an interest in going to a bar (need
3), nor in buying a luxury car (need 4). However, as each important need is
satisfied, the next most important need will come into play.

o Additionally, based on the same theory, a motivated person is ready to act. How
the motivated person acts are influenced by his perception and learning of the
situation.

 Perception can be defined as the process by which an individual select,

organizes, and interprets information to create meaningful picture of the
world.

 Learning, on the other hand, describes changes in an individual’s

behavior arising from experience.

 Through perception and learning, people acquire their beliefs and

attitudes. These, in turn, influence their buying behavior.

 Belief is a descriptive thought that a person holds about

something, while an attitude describes a person’s enduring
favorable and unfavorable cognitive evaluations, emotional
feelings, and action tendencies toward some object or ideas.

 Example: if a consumer perceives and believes that Coke is the best soft
drink, he will buy Coke. To simplify, a consumer will buy a particular
product, given an optimum budget, if he thinks and believes that this
product will give him the best value or utility.