Theories and Models of Consumer Behavior

1. THEORIES AND MODELS
OF CONSUMER BEHAVIOR
Prof. SAVICA

2. DEFINING A MODEL OF
CONSUMER BEHAVIOR
--- it is an attempt to structure the internal and external factors
that affect the decision making process
• Predicting consumers
behavior
• Sales of new products
• Choosing the optimal
location
• Selection of the media
mix

3. DEFINING A MODEL OF
CONSUMER BEHAVIOR
Origin: 1960-es, comes from companies need to know more about consumer
behavior in order better to plan their marketing strategies and actions

4. CONSUMER BEHAVIOR APPROACHES
Traditional approach
Consumer is rational
Consumers require maximum
utility for their money
Modern approach
Consumer is not always
rational
Needs – Motives - Decision

5. MODELS OF CONSUMER BEHAVIOR
Disadvantages
Very complex
Theoretical, inapplicable
Overestimated
Mathematical, abstract
Expensive
Useless for marketing
decisions

6. MODELS OF CONSUMER BEHAVIOR
Advantages
Many factors explained
Predict the future market
structure
Extensive marketing research
Identification of knowledge
gaps about the consumers
behavior
Communication between
model and management
explained

7. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Common features
The consumer has income,
knows the products, prices and
chooses the combination with
maximum efficiency
The consumer has the
preference scale, ranks goods by
income or price
Consumer is consistent, he
compares and looks for the
most favorable combination
Theory of revealed preference
Game theory
Theory of indifference

8. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Theory of indifference
Consumer needs are met by a combination of products, and at the same price
and income, consumers are indifferent because the combination of products
bring them equal benefit
Edgeworth (1881), Pareto (1906), Allen, Hicks (1934), Marshall
combination apple kiwi
А 15 1
B 11 2
C 8 3
D 6 4
E 5 5
Plan for
indifference is a list
of various
combinations of
products that offer
the same utility
(satisfaction) to
consumers

9. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Theory of indifference
Indifference curve
А
B
C
D
E
Points that are combinations of
two products that bring equal
benefits to the consumer
Indifference map
ic1
ic2
ic3
The graph shows a set of indifference curves.
All points on the same curve give same
satisfaction, and all points on the higher-placed
curve bring higher satisfaction.

10. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Theory of revealed preference
Consumer preferences are revealed through their consumer habits. When a
consumer selects a combination of products, that combination compared to
others becomes revealed preference
Revealed preference is when a
consumer chooses a combination of
2 apples and 3 bananas, rather than
a combination of 3 bananas and 2
apples. First combination is treated
as a revealed preference in relation
to the second. The consumer always
prefer the first combination and he
will purchase the second only if the
first is not available. He buys what he
prefers and what is cheaper!
American economist, Paul Samuelson, 1948

11. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Game theory
Predicting the results of a strategic game in which participants have incomplete
information about the intentions of other players. The game depends on
experience, risks, the player's character, and the result is known after the game.
Two prisoners dilemma:
Tom and Robin are prisoners caught
for the same crime. Placed in 2
different rooms for questioning,
without communication between
them. Everyone has two choices, to
confess or not to confess the crime.
What is the best decision for each
prisoner?
John von Newmann and Oscar Morgenstern , 1944
To
confess
Not to
confess
To
confess
3 , 3 1 , 10
Not to
confess
10 , 1 2 , 2
Tom
Robin

12. I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Game theory
Two prisoners dilemma
To
confess
Not to
confess
To
confess
3 , 3 1 , 10
Not to
confess
10 , 1 2 , 2
Tom
Robin
Nash equilibrium
– the best
solution:
Both of them to
confess the
crime!
Maximum best outcome: Robin confesses =1 year prison (Tom
doesn’t confess), Robin doesn’t confess = 2 years prison (Tom
doesn’t confess) = the best outcome= to confess!
Minimum best outcome: Robin confesses = 3 years prison
(Tom confesses), Robin doesn’t confess =10 years (Tom confess)
= the best outcome= to confess!
Dominant strategy (Nash equilibrium) = maximum equals
minimum outcome = both prisoners to confess!

13. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Common features
Decision making process is
based on the psyche of the
customer (internal factors)
Genetics
Environment
Human activities
Mental state, personal
characteristics
Theory of Clinical psychology
Бихејвиористичка теорија
Experimental theory
Theory of Gestalt psychology
Theory of Social psychology

14. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory
Consumer behavior depends on the instincts of a person. Instincts can be
inherent (lower level) and learned (classical conditioning).
Learning is a process of association and repetition.
Russian physiologist Ivan Pavlov , 1920
stimulus reaction
Pavlov model
Unconditional stimulus =
inherent, permanent response
to outside influence
Conditioned stimulus =
learned reaction, reaction of
conditioned stimulus

15. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory
Classical conditioning
= the process by which
a neutral stimulus
leads to a positive
answer, because it is
consistently and
repeatedly paired with
a stimulus that
naturally causes a
positive response.

16. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory

17. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory
Classical conditioning of consumers
beautiful woman
beautiful woman
car
positive reaction
positive reaction
car positive reaction
In marketing, nice events cause positive
feelings. If the event is associated with
the brand and is repeated many times,
after a while the brand will cause
positive emotions!

18. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Clinical Psychology
Human behavior is motivated by unconscious, the repressed and subconscious
motives. The human psyche is composed of three major systems: the id, ego,
super ego and these systems are in balance in a normal person.
Sigmund Freud, 1856-1939
ID = instincts,
unconscious fantasies,
painful tension
EGO = reality, experience,
learning, link between
fantasy and reality, action
SUPER EGO = morality,
perfection

19. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Clinical Psychology
ID – I want a chocolate!
EGO – take a little part!
SUPER EGO– you're on a diet!

20. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Clinical Psychology
Human behavior is motivated by unconscious, the
subconscious motives. Subconscious motives are
Thanatos (death) and Eros (life). The subconscious
create "unconscious needs," causing "unconscious
strivings" to achieve "an unconscious goal."

21. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Human behavior is based on recognition of the whole, not the relationship
between stimuli and responses. The whole is more than the sum of the parts of
which is made. Human mind considers objects in their entirety before, or in
parallel with, perception of their individual parts
Christian von Ehrenfels, Koffka, Metzger, 1920 /
Germany
Гешталт = лик, целина, облик, група

22. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Principles:
Completing / Closing
Continuity

23. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Principles:
Proximity
Similarity

24. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Principles:
Object and background

25. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Same parts –Different objects

26. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Phi phenomenon: static images give a sense of movement

27. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Behavioristic Theory
People's behavior makes sense if it is observed and objective. What happens in the
human brain is unknown, unmeasured and therefore is considered as a “Black
box.“ Consumer behavior is the body's reaction to external stimuli.
Skinner (1904-1990)
Learning = repetition of
preferred actions+ rewarding
good habits + punishment of
bad habits

28. Behavior is
repeated
Behavior is
not repeated
Positive
enforcement
Negative
enforcement
Punishment
Pleasant stimulus
Unpleasant stimulus
Unpleasant stimulus
II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR

29. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Behavioristic Theory
Positive enforcement = response is
rewarded
Negative enforcement = response is
followed by removal of unfavorable
event (fasten your seat belt to
disable the horn!)
Punishment = response is punished
and behavior will not repeat again

30. II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Social psychology
People are social beings. The behavior of an individual depends on the group
consciousness. This theory explains how people think, act and influence one
another.
William McDougall, 1908
If a person look towards the
top of the building, all the
other people will follow
shortly.
If a child is teasing another,
soon, all the kids will join the
teasing.

31. III. MODELS OF CONSUMER BEHAVIOR
ON THE MARKET FOR PERSONAL
CONSUMPTION
Common features
Consumption is very
heterogeneous and complex
Lot of participants
Many heterogeneous factors
influence the purchase
Final consumption
Price and income elasticity of
demand
Substitution and different needs
Economic models
Combined models
Socio-psychological models

32. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Economic models
Buyer decision process is based on 4 elements:
inputs, channels, processes and outputs
Philip Kotler
input channel process output
Price
Quality
Availability
Service
Design
Style
Media
Sellers
Friends
Family
Personal views
Buyer's black box
Buyer's response:
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount

33. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Socio-psychological models
Consumer behavior depends on the sociological and
psychological factors
Petz, Lazarsfeld, Howard and Sheth, Nicosia, March-Simon and Wurzburg

34. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Socio-psychological models
Consumer behavior depends on
environmental factors and factors of social psychology
Lazarsfeld
Environmental factors Factors of social psychology
 Attitudes
 Sellers's opinions
 Opinions of third parties
 Giving priority to one brand over the others
 Advertisements

35. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Е1: preferable brands
A and B
Е2: noticing advertisement
for brand B
Е3: seller's
recommendation to buy
brand A
I1: attitude for the brands
A and B
I2 : positive attitude for
both brands, A and B
I3 : willingness to buy
more brand B than A
I4 : Buying brand A
Т
Т+
Т+
Т+
Environment factors
Т = time
Factors of social
psychology
Lazarsfeld model

36. Exposure Environmental impact Disposition Motive
External factors Internal factors
Disadvantage: it explains the act of
purchase and not the whole
purchasing process
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Simplified model of Lazarsfeld

37. Level of decision
Extensive
Limited
Routinized
А
Б
В
Early phase
Little information about products
Undefined purchasing criteria
Advanced phase
Well-known purchasing criteria
Consumer is still unsure what to buy
Consumer knows what he wants to buy
Well-known purchasing criteria
Consumer is ready to buy what he wants
Through learning
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Howard and Sheth model

38. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Howard and Sheth model

39. Phase 1:
Predisposition
Phase 2:
Attitude
Phase 3:
Motivation
passivity
motivation
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model

40. III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model

41. Search and Evaluation
(additional information)
Consumption
(satisfaction/dissatisfaction )
Buying decision
(action)
Subfield 1:
Attributes of the
company and its
products
Subfiled 2:
Consumer's
attributes
message attitude
motivation
Purchasing
behavior
feedback
Field 1 Field 2
Field 3Field 4
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model

42. Environmental Factors Characteristics of consumers
 Market structure
 Number and type of producers
 Number and availability of brands
 Visibility of brands on the market
 -----
 Experience of using the product
 Expected advantages of other brand
 Level of aspiration
 -----
Substitution of one product for another
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
March-Simon model

43. IV. COMBINED MODELS
Model of KatonaCommon features
Model of PrestonCombination of:
 Economic factors
 Sociological factors
 Psychological factors

44. Model of Katona
Economic factors
Consumption habits
Perception
-physical
-cognitive
Orientation to
action
-attitudes
-expectations
-motives
Buying
Disadvantage: it describes the act and not the purchasing process
Environmental stimulators
Consumer
IV. COMBINED MODELS

45. Model of Preston
Internal factors
External factors
Stimulators
Incentives
Individual changes in consumer
Environment
Activities of sellers
Characteristics of consumers
Demographic
Economic
Sociological
Psychological
Other purchasing
determinants
Reaction
Purchase decision
Purchase decision
Decision to
postpone buying
Experience
IV. COMBINED MODELS

46. TEST
Explain the following terms:
• Indifference map: -------------------------
• Id, ego, super ego: ---------------------------------
• Phi Phenomenon:-----------------------------------------
• Elements of Howard and Sheth model:------------
• Elements of Nicosia model:------------------
• Game theory means:-------------------
• Gestalt means:----------------------------------
• Combined models are:---------------------------------------------
• Behavioristic theory:--------------------------------