Cb unit-ii (models in consumer behavior)

Editor's Notes

• #5: Psychological factor like perception and learning will be coverded also in the Howard Sheth model…check
• #6: three Assumptions of the Standard Economic Model of Consumer Behavior: People have known preferences. ------ Full Internal Knowledge People act with full information.------------Full External Knowledge People choose rationally so as to maximize utility-----------Maximizing Choices In philosophy, rationality and reason are the key methods used to analyze the data gathered through systematically gathered observations. In economics, sociology, and political science, a decision or situation is often called rational if it is in some sense optimal, and individuals or organizations are often called rational if they tend to act somehow optimally in pursuit of their goals. Thus one speaks, for example, of a rational allocation of resources, or of a rational corporate strategy. In this concept of "rationality", the individual's goals or motives are taken for granted and not made subject to criticism, ethical or otherwise. Thus, rationality simply refers to the success of goal attainment, whatever those goals may be. Sometimes, in this context, rationality is equated with behavior that is self-interested to the point of being selfish. Sometimes rationality implies having complete knowledge about all the details of a given situation. Debates arise in these three fields about whether or not people or organizations are "really" rational, as well as whether it make sense to model them as such in formal models. Some have argued that a kind of bounded rationality makes more sense for such models. Others think that any kind of rationality along the lines of rational choice theory is a useless concept for understanding human behavior; the term homo economicus (economic man: the imaginary man being assumed in economic models who is logically consistent but amoral) was coined largely in honor of this view. Rationality is a central principle in artificial intelligence, where a rational agent is specifically defined as an agent which always chooses the action which maximises its expected performance, given all of the knowledge it currently possesses. The real reason why I spend my money is because of a little concept in economics called utility. Its a very simple concept so don’t worry if you’ve not taken economics at any point in your life. Its not because I oppose piracy, nor is it because I have a guilty conscience. Its just that I am concerned in maximising my overall utility and thus not waste time in the things I do in life. In fact, piracy has its uses in free promotion of products that benefits both consumers and producers, but when you fully embrace piracy and ignore commercial purchases, you are actually doing yourself more harm than good. Utility, in lay man terms, is basically the amount of satisfaction you derive from consuming a product. In a perfect economy, producers seek to maximise profit, while consumers (us) seek to maximise utility Diminishing marginal utility An individual will typically be able to partially order the potential uses of a good or service. For example, a ration of water might be used to sustain oneself, a dog, or a rose bush. Say that a given person gives her own sustenance highest priority, that of the dog next highest priority, and lowest priority to saving the roses. In that case, if the individual has two rations of water, then the marginal utility of either of those rations is that of sustaining the dog. The marginal utility of a third unit would be that of watering the roses. (The diminishing of marginal utility should not necessarily be taken to be itself an arithmetic subtraction. It may be no more than a purely ordinal change.[6][12]) The notion that marginal utilities are diminishing across the ranges relevant to decision-making is called “the law of diminishing marginal utility” (and also known as a “Gossen's First Law”). However, it will not always hold. The case of the person, dog, and roses is one in which potential uses operate independently—there is no complementarity across the three uses. Sometimes an amount added brings things past a desired tipping point, or an amount subtracted causes them to fall short. In such cases, the marginal utility of a good or service might actually be increasing. For example: bed sheets, which up to some number may only provide warmth, but after that point may allow one to effect an escape by being tied together into a rope; tickets, for travel or theatre, where a second ticket might allow one to take a date on an otherwise uninteresting outing; dosages of antibiotics, where having too few pills would leave bacteria with greater resistance, but a full supply could effect a cure. The fact that a tipping point may be reached does not imply that marginal utility will continue to increase indefinitely thereafter. For example, beyond some point, further doses of antibiotics would kill no pathogens at all. Marginal utility From Wikipedia, the free encyclopedia Jump to: navigation, search In economics, the marginal utility of a good or service is the utility gained (or lost) from an increase (or decrease) in the amount available of that good or service. Marginal utility is the utility associated with the marginal use—the specific use to which an agent would put a given increase in that good or service, or of the specific use that would be abandoned in response to a given decrease—which, if the economic actor is economically rational, would (in the case of an increase) be the most urgent use of the good or service for which it could be used (or, in the case of a decrease, the least urgent for which it is currently used).[1][2] Under the mainstream assumptions, the marginal utility of a good or service is the posited quantified change in utility obtained by increasing or decreasing use of that good or service. Contents [hide] Marginality Utility Diminishing marginal utility Independence from presumptions of self-interested behavior Marginalist theory Market price and diminishing marginal utility The paradox of water and diamonds Quantified marginal utility History Proto-marginalist approaches Marginalists before the Revolution The Marginal Revolution The second generation The Marginal Revolution and Marxism Eclipse Revival See also References [edit] Marginality Constraints are conceptualized as a border or margin.[3] The location of the margin for any individual corresponds to his or her endowment, broadly conceived to include opportunities. This endowment is determined by many things including physical laws (which constrain how forms of energy and matter may be transformed), accidents of nature (which determine the presence of natural resources), and the outcomes of past decisions made both by others and by the individual himself or herself. A value that holds true given particular constraints is a marginal value. A change that would be effected as or by a specific loosening or tightening of those constraints is a marginal change, as large as the smallest relevant division of that good or service.[2] For reasons of tractability, it is often assumed in neoclassical analysis that goods and services are continuously divisible. In such context, a marginal change may be an infinitesimal change or a limit. However, strictly speaking, the smallest relevant division may be quite large. Frequently, economic analysis concerns the marginal values associated with a change of one unit of a resources, because decisions are often made in terms of units; marginalism seeks to explain unit prices in terms of such marginal values. [edit] Utility Main article: Utility Different conceptions of utility were and have been employed during and subsequent to the development of theory employing notions of marginal utility. It has been common among economists to describe utility as corresponding to a measure, that is to say, as being quantifiable.[4][5] This has significantly affected the development and reception of theories of marginal utility. Conceptions of utility that entail quantification allow familiar arithmetic operations, and further assumptions of continuity and differentiability greatly increase tractability. However, conceptions without even weak quantification are able to consider rational preferences that would otherwise be excluded.[6] Benthamite philosophy equated usefulness with the production of pleasure and avoidance of pain,[7] conceptualized as subject to arithmetic operation.[8] British economists, under the influence of this philosophy (especially by way of John Stuart Mill), conceptualized utility as “the feelings of pleasure and pain”[9] and further as a “quantity of feeling” (emphasis added).[10] The Austrian School more generally attributes value to the satisfaction of needs,[11] did not depend upon a presumption of quantification,[6][12] and sometimes rejects even the possibility of quantification.[13] The mainstream of contemporary economic theory frequently defers ontological questions, and merely notes or assumes that preference structures conforming to certain rules can be usefully proxied by associating goods, services, or uses thereof with quantities, and defines “utility” as such a quantification.[14] Recognizing that preference may be taken as the determinant of usefulness,[15] this conception doesn't depart from the concept of usefulness. Under any standard conception, the same object may have different marginal utilities for different people, reflecting different preferences or individual circumstances.[16]
• #7: Ought (oot) = should Irrationality From Wikipedia, the free encyclopedia Jump to: navigation, search For irrationality as it relates to numbers, see irrational number. Irrationality is cognition, thinking, talking or acting without inclusion of rationality. The term is used, usually pejoratively, to describe thinking and actions that are, or appear to be, less useful or illogical than other more rational alternatives. Irrational behaviors of individuals include taking offense or becoming angry about a situation that has not yet occurred, expressing emotions exaggeratedly (such as crying hysterically), maintaining unrealistic expectations, engaging in irresponsible conduct such as problem intoxication, disorganization, or extravagance, and falling victim to confidence tricks. People with a mental illness like schizophrenia may exhibit irrational paranoia. These more contemporary 'normative' conceptions of what constitutes a manifestation of irrationality are difficult to demonstrate empirically because it is not clear by whose standards we are to judge the behavior rational or irrational. Contents [hide] Why does Irrational behavior occur? Intentional Irrationality Irrationalist Irrationality and literature Irrationality and psychotherapy See also References External links [edit] Why does Irrational behavior occur? The study of irrational behavior is of interest in fields such as psychology, cognitive science, economics, game theory, and evolutionary psychology, as well as of practical interest to the practitioners of advertising and propaganda. Theories of irrational behavior include: people's actual interests differ from what they believe to be their interests. mechanisms that have evolved to give optimal behavior in normal conditions lead to irrational behavior in abnormal conditions. In situations outside of one's ordinary circumstances, one may experience intense levels of fear, or may regress to a Fight or flight mentality. people fail to realize the irrationality of their actions and believe they are acting perfectly rational, possibly due to flaws in their reasoning. apparently irrational decisions are actually optimal, but made unconsciously on the basis of "hidden" interests that are not known to the conscious mind an inability to comprehend the social consequences of one's own actions, possibly due in part to a lack of empathy. Some people find themselves in this condition by living "double" lives. They try to put on one "mask" for one group of people and another for a different group of people. Many will become confused as to which they really are or which they wish to become. Factors which affect rational behavior include: stress, which in turn may be emotional or physical the introduction of a new or unique situation intoxication peers who convey irrational thoughts as necessary idiosyncrasy for social acceptance This section requires expansion.[edit] Intentional Irrationality Irrational is not always viewed as a negative. The Dada and Surrealist art movements, for example, embraced irrationality as a means to "reject reason and logic". Andre Breton, for example, argued for a rejection of pure logic and reason which are seen as responsible for many contemporary social problems [1]. In science fiction literature, the progress of pure rationality is viewed as a quality which may lead civilization ultimately toward a scientific future dependent on technology. Irrationality in this case, is a positive factor which helps to balance excessive reason. In psychology, excessive rationality without creativity may be viewed as a form of self-control and protection. Certain problems, such as death and loss, may have no rational solution when they are being experienced. We may seek logical explanations for such events, when in fact the proper emotional response is grief. Irrationality is thus a means of freeing the mind toward purely imaginative solutions, to break out of historic patterns of dependence into new patterns that allow one to move on. [edit] Irrationalist Irrationalist is a wide term. It may be applied to mean one without rationality, for their beliefs or ideas. Or, more precisely, it may mean someone who rejects some aspect of rationalism, variously defined. For example religious faith may be seen as, in part, a rejection of complete rationalism about the world; this would be contested by some religious thinkers, in that the rational is a debatable term. On the other hand, it might be considered irrationalist to buy a lottery ticket, on the basis that the expected value is negative. Irrational thought was seen in Europe as part of the reaction against Continental rationalism. For example Hamann is sometimes classified as an irrationalist.
• #8: Application In such cases, the marginal utility of a good or service might actually be increasing. For example: bed sheets, which up to some number may only provide warmth, but after that point may allow one to effect an escape by being tied together into a rope; tickets, for travel or theatre, where a second ticket might allow one t o take a date on an otherwise uninteresting outing; dosages of antibiotics, where having too few pills would leave bacteria with greater resistance, but a full supply could effect a cure.
• #9: Draw graph beteen quantity (on X axis) and marginal utility at Y axix..
• #10: For knowing buyers characteristic…we will study cultural, social, personal factors having influences on buyers. The Buyer's characteristics (maninly cultural, sociological and individual factor) influence how he or she perceives the stimuli; the decision-making process determines what buying behaviour is undertaken FactorCould include:Political e.g. EU enlargement, the euro, international trade, taxation policy..heavy duties on US drugs so person not able to buy that medicine in india..this factor having less impact on consumer buying but more in business buying..sometimes Economic e.g. interest rates, exchange rates, national income, inflation, unemployment, Stock Market Social e.g. ageing population, attitudes to work, income distribution Technological e.g. innovation, new product development, rate of technological obsolescence Environmental e.g. global warming, environmental issues Legal e.g. competition law, health and safety, employment law
• #11: All the activities are grouped into five five categories: 1.Information Input 2.Information Processing 3.Decision Making Process 4. General Motivating Influences 5. Environmental Influences Exposure may refer to: Publicity, an activity designed to rouse public interest Outing, exposure of someone's secret sexual orientation In climbing, the state of openness with relation to the distance of a fall (see glossary of climbing terms) In geology, an occurrence of a rock at the Earth's surface - an outcrop. Publicity is the deliberate attempt to manage the public's perception of a subject. The subjects of publicity include people (for example, politicians and performing artists), goods and services, organizations of all kinds, and works of art or entertainment. From a marketing perspective, publicity is one component of promotion. The other elements of the promotional mix are advertising, sales promotion, and personal selling. Promotion is one component of marketing. But the publicist cannot wait around for the news to present opportunities. They must also try to create their own news. Examples of this include: Art exhibitions Event sponsorship Arrange a speech or talk Make an analysis or prediction Conduct a poll or survey Issue a report Take a stand on a controversial subject Arrange for a testimonial Announce an appointment Invent then present an award Stage a debate Organize a tour of your business or projects Issue a commendation Attention by five sences…smelling, touching, viewing, eating, feeling Attention is the cognitive process of selectively concentrating on one aspect of the environment while ignoring other things. Attention has also been referred to as the allocation of processing resources [1] Examples include listening carefully to what someone is saying while ignoring other conversations in a room (the cocktail party effect) or listening to a cell phone conversation while driving a car.[2] Attention is one of the most intensely studied topics within psychology and cognitive neuroscience. William James, in his textbook Principles of Psychology, remarked: “Everyone knows what attention is. It is the taking possession by the mind, in clear and vivid form, of one out of what seem several simultaneously possible objects or trains of thought. Focalization, concentration, of consciousness are of its essence. It implies withdrawal from some things in order to deal effectively with others, and is a condition which has a real opposite in the confused, dazed, scatterbrained state which in French is called distraction, and Zerstreutheit in German. Comprehension has the following meanings: In general usage, and more specifically in reference to education and psychology, it has roughly the same meaning as understanding. Reading comprehension measures the understanding of a passage of text In logic, the comprehension of an object is the totality of intensions, that is, properties or qualities, that it possesses. Related to this, in Anglicanism, comprehension (or comprehensiveness) refers to the theological inclusiveness and liturgical breadth thought to be integral to the definition of the tradition In set theory, comprehension is another name for the axiom schema of specification (or more specifically, the axiom schema of unrestricted specification). A related term in computer science, list comprehension, denotes an adaptation of mathematical set notation to represent infinite lists. Comprehensions are most closely associated with Haskell, but are available in other languages such as Python, Scheme and Common Lisp. The term acceptance is defined as a verb, in which it shows to have two different meanings. The first is known as the act of taking or receiving something offered. For example, if someone is giving you a gift and you receive it, than that person has accepted the gift; therefore, having acceptance. Another definition of acceptance has to deal with positive welcome; favor and endorsement. In which, a person could like someone and have acceptance for them due to their approval of that person. The third description of acceptance is that it can be act of believing or assenting. For instance, Christians believe (accept) that Jesus Christ is their Lord and Savior. Or people that are Buddhist believe that Buddha is their higher being. Acceptance – “An express act or implication by conduct that manifests assent to the terms of an offer in a manner invited or required by the offer so that a binding contract is formed. The exercise of power conferred by an offer by performance of some act. The act of a person to whom something is offered of tendered by another, whereby the offered demonstrates through an act invited by the offer an intention of retaining the subject of the offer.” (Chirelstein, 2001) This definition overlaps with the definition of the quality tolerance. Acceptance and tolerance are not synonyms. Retention can have the following meanings: Retention basin, instance retaining (e.g. water in the ground) In learning: it is the ability to retain facts and figures in memory (spaced repetition) Grade retention, in schools, keeping a student in the same grade for another year (that is, not promoting the student to the next higher grade with his/her classmates) Retention period, in Usenet, the time a news server holds a newsgroup posting before deleting it as no longer relevant Judicial retention, in the United States court system, a process whereby a judge is periodically subject to a vote in order to remain in the position of judge Urinary retention, the lack or inability to urinate Employee retention, the ability to keep employees within an organization Retention agent is a process chemical
• #12: Nicosia model:As well known consumer motivation and bevaviour expert Mr. Nicosia presented his buyer model in 1966 which attempts to establish linkages between the marketing firm and its consumer. The essence is how the activities of the firm influence the consumer and result in his direction to buy. (activities like samsung mobile website offers price comparision and also the indigo and jet airlines offers the price comparison on their website.)According to his model the messages from the firm first influence the predisposition of the consumer towards the product, he develops a certain attitude towards the product depending on the situation. It leads to a search for the product or on evaluation of the product. In case, these steps have a positive impact on him it may result in decision to by. This is the sum and substances of the explanation. His model lumps these activities into four basic fields.Field One has two sub-fields namely, the firms attributes and the consumer attributes.An ad message from the firm reaches consumer’s attributes. Depending on the way the messages received by the consumer, a certain attribute may develop and this becomes the input for the field Two. Field Two is the area of search and evaluation of the advertised product and other alternatives. If this process results in a motivation to buy, it becomes the input for field three. Field Three consist of the act of purchase. The field Four consists of use of the purchased item. There is an output from field Four --- feed back of sales results to the firm
• #13: Org buying having 8 steps..with 7 paricipants…but CB with 5 steps with 5-6 participants Envirnnmental using proters 5 force and pestel Org using SWOT or value chain analysis..bcg matrix and others individuaLS..LIKE 7 paricipants in B2B
• #16: Sociological model: According to sociological model, the individual buyer behaviour is influenced by society—by intimate groups as well as social classes. That is, his buying decisions are not totally determined by the concept of utility. That is his buying decisions are governed by social compulsions. As a part of sociological model—two important variations can be considered namely, one that of Nicosia and another Howard & Sheth.The marketing scholars have tried to build buyers-behaviour models purely from stand point view of marketing man. Here F. Nicosia model of 1966 and H. Sheth model of 1969are of this category. These models are systems models where human being analysed as a system with stimuli as INPUT and behaviour as an output. Learning model: All theories of buyer behaviour have been basically based on a learning model namely, Stimulation- Response or more popularly known as SR model. SR learning theory is very useful to modern marketing and marketers. Learning is the centrifugal point in the entire study to human behaviour. Learning, as noted earlier, refers to a change in the behaviour which occurs as a result of practice. It is a change in the behaviour that results from previous experience and behaviour in similar situations. What is important, learning is a product of reasoning, thinking, information processing and, of course, perception. Therefore, behaviour is deeply affected by the learning experiences of the buyers.Of all the psychologists, Pavlovian stimulus or learning of buyer behaviour is widely accepted. He says that buyer behaviour is capable of being manipulated by human drives, stimuli, and responses of the buyer. This model banks on man’s ability to leave, forget and discriminate. Learning process involves three steps namely, Drive—a strong internal stimulus which impels action. When it is directed towards a drive-reducing object, it becomes a motive. A drive- need- thus motivates a person for action to satisfy the need. Here, the objectives are the stimuli which the drives Cues are weak stimuli. Cues determine when the buyer will respond. Say, we have cues such as a product advertisement relevant to the situation and existing in our environment.Response is the final stage which is needed to fulfill the drive or as a need which was acting as a strong stimulus. Thus, the thirst, can be quenched by an ad. These sequential components of learning link stimulus cue and response finally resulting in a habit. In marketing, it is better known as a learning brand loyalty brand images and store patronage. Repeated reinforcement leads to a habit formation and the decision process for an individual becomes a matter of routine. It is worth emphasizing here that we learn through trial and error and changes in our behaviour are brought about by practice as experience. The SR model of Pavlovian learning is made clear by given figure: The psychoanalytical model : The psychoanalytical model draws from Freudian psychology. According to this model, the individual consumer has a complex set of deep seated motives which drive him towards certain buying decisions. The buyer has a private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by appealing to those desires and longings.According to Mr. Freud, human personality has three parts namely, 1. the “ID”, the source of all mental energy which drives one to an action. 2.the “Super Ego”, the internal representation of what is socially approved—one’s conscience.3. the “Ego”, the conscious director of ‘ID’ impulses for finding satisfaction in socially acceptable manner. In other words, ‘ID’ represents one’s animal or basic impulses, ‘instincts’ and cravings for immediate and total satisfaction. These instincts might be even anti-social. The Super Ego or conscience reflects one,s idealised or mended behaviour pattern a via media between the extremes, that is the, conflict between “ID” and “Super Ego” is resolved by Ego. The Ego is the intermediary which mediates and processes the dispute action as a rational con- trol centre between the conflicting extreme sides of ID and Super Ego. It is Ego that directs ones behaviour to satisfy both the “ ID” and “Super Ego”. Thus a person is interested in buying say KV-L34MFI SONY TV with characteristics of Hi-black Trinitron Screen—super drum sound system, 100system memory,1 tuner digital picture in picture, A/V Stereo, LD compatibility casting say Rs.1,05,000 with remote control. Here his ‘ID’ demands the use of consumer credit liberally to buy that costly T.V. set. The Super Ego dissuades him from heavy borrowing as credit beyond certain limits is not acceptable. Here the Ego acts like a mediator and comes with a fine compromise of instalment system without away strains and drain on his financial position. Here self image of a consumer is a great motivating force inducing him to buy certain products. This model can be presented as follows