Consumer Behavior: Lecture 1
1. Introduction to consumer behavior
Consumer behavior refers to the processes involved in selecting, buying, using, and disposing of
products, services, ideas, and experiences to satisfy wants and needs.
Three main aspects:
1. Obtaining: deciding to buy, choosing between brands, deciding where to purchase, selecting
payment methods, and transporting products.
2. Consuming: Using, storing, evaluating, and determining who uses the product and how much is
consumed.
3. Disposing: Throwing away, reselling, or recycling products after use.
Factors influencing consumer behavior:
● Consumer factors: Age, gender, emotions, motivations, attitudes, culture, knowledge, social
influences.
● Marketing factors: branding, advertising, promotions, pricing, packaging, store environment.
2. Why study consumer behavior?
Understanding consumers
Consumer behavior studies help answer:
● What do consumers need?
● How do they make decisions?
● What makes them happy with purchases?
● How do they react to marketing strategies?
Challenges in studying consumer behavior
1. False Consensus Effect: People overestimate how much others share their opinions and
preferences.
2. Affective Forecasting: Consumers struggle to predict what they want or feel in the future.
3. Intuition Trap: Common sense is often misleading when predicting consumer decisions.
Applications of consumer behavior study
1. Marketing Organizations
● Helps create products that align with consumers needs and desires
● Understanding what consumers care about to influence their choices
, ● Example: Crest toothpaste case (consumer emphasized benefits like “whitening” and “fresh” but
after observing actual purchases consumer often prioritized brand familiarity over the other
attributes, this means consumer preferences are not always stable or predictable)
2. Public Policy
● Helps the government regulate behavior through policies.
● Example: Cigarette warning labels
● Assumption: If people understand the risks, they will change their behavior (not always true)
3. Social Marketing
● Used for encouraging or discouraging behavior, such as anti-smoking campaigns or healthy
eating promotions
● Examines how consumers respond to regulations, taxes, and subsidies.
3. How to study consumer behavior?
Research Methods
1. Interview and Surveys (Self-reported data)
● Qualitative: In depth interviews, focus groups.
● Quantitative: Online surveys, telephone surveys, mail questionnaires, small intercepts.
2. Experimental research (controlled studies)
● Allows researchers to determine cause-and-effect relationships.
Challenges in research:
● Self-selection Bias: people who participate may not represent the general population.
● Self-Report Bias: Consumers may not accurately describe their own behavior.
● Question Framing Effects: Responses change based on how questions are worded.
Best Approach
● Combining Methods: A mix of qualitative and quantitative research provides the most reliable
insights.
4. Irrationality in Consumer Behavior
Traditional economics assumes consumers make rational decisions, but real-world behavior is often
irrational.
Examples of irrational consumer behavior:
1. Preferences Reversals
, ● Consumers may value the same product differently depending on the context in which it
is presented.
2. Anchoring Effect:
● Consumers may rely too much on an initial reference point (anchor) when making
decisions.
● Example. In a restaurant when the most expensive dish is listed first on a menu,
consumers are more likely to choose a mid-priced dish than when a cheap item is listed
first.
3. Compromise Effect:
● Consumers tend to choose the middle option when presented with multiple choices.
● Examples. 3 models of a product are available (basic, standard and premium) the
standard model is often the most popular.
4. Endowment Effect
● People value products they already own more than products they don't own.
● Examples. A person is willing to sell a coffee mug for 5 euros but only willing to buy the
same one for 2.
5. Choice overload
● Too many options can lead to indecision and dissatisfaction
● Example. Jam study
6. Opportunity Cost Neglect
● Consumers often ignore the cost of not choosing the next best alternative.
7. Regret and Anticipated Regret
● Fear of making the wrong choice impacts decision-making.
Marketing Implications:
● Pricing strategies: using psychological pricing and anchoring to influence perceptions
● Product placement: presenting choices in ways that encourage purchases (ex. using a
“compromise” option)
● Reducing choice overload: Limiting excessive product options to improve consumer satisfaction
5. Conclusion and Key Takeaways
What is Consumer Behavior?
● The process of obtaining, consuming and disposing of products and services.
● Influenced by personal and external factors
● Affects emotions, cognition and behavior.
Why study consumer behavior?
● Helps marketers predict and influence consumer decisions
1. Introduction to consumer behavior
Consumer behavior refers to the processes involved in selecting, buying, using, and disposing of
products, services, ideas, and experiences to satisfy wants and needs.
Three main aspects:
1. Obtaining: deciding to buy, choosing between brands, deciding where to purchase, selecting
payment methods, and transporting products.
2. Consuming: Using, storing, evaluating, and determining who uses the product and how much is
consumed.
3. Disposing: Throwing away, reselling, or recycling products after use.
Factors influencing consumer behavior:
● Consumer factors: Age, gender, emotions, motivations, attitudes, culture, knowledge, social
influences.
● Marketing factors: branding, advertising, promotions, pricing, packaging, store environment.
2. Why study consumer behavior?
Understanding consumers
Consumer behavior studies help answer:
● What do consumers need?
● How do they make decisions?
● What makes them happy with purchases?
● How do they react to marketing strategies?
Challenges in studying consumer behavior
1. False Consensus Effect: People overestimate how much others share their opinions and
preferences.
2. Affective Forecasting: Consumers struggle to predict what they want or feel in the future.
3. Intuition Trap: Common sense is often misleading when predicting consumer decisions.
Applications of consumer behavior study
1. Marketing Organizations
● Helps create products that align with consumers needs and desires
● Understanding what consumers care about to influence their choices
, ● Example: Crest toothpaste case (consumer emphasized benefits like “whitening” and “fresh” but
after observing actual purchases consumer often prioritized brand familiarity over the other
attributes, this means consumer preferences are not always stable or predictable)
2. Public Policy
● Helps the government regulate behavior through policies.
● Example: Cigarette warning labels
● Assumption: If people understand the risks, they will change their behavior (not always true)
3. Social Marketing
● Used for encouraging or discouraging behavior, such as anti-smoking campaigns or healthy
eating promotions
● Examines how consumers respond to regulations, taxes, and subsidies.
3. How to study consumer behavior?
Research Methods
1. Interview and Surveys (Self-reported data)
● Qualitative: In depth interviews, focus groups.
● Quantitative: Online surveys, telephone surveys, mail questionnaires, small intercepts.
2. Experimental research (controlled studies)
● Allows researchers to determine cause-and-effect relationships.
Challenges in research:
● Self-selection Bias: people who participate may not represent the general population.
● Self-Report Bias: Consumers may not accurately describe their own behavior.
● Question Framing Effects: Responses change based on how questions are worded.
Best Approach
● Combining Methods: A mix of qualitative and quantitative research provides the most reliable
insights.
4. Irrationality in Consumer Behavior
Traditional economics assumes consumers make rational decisions, but real-world behavior is often
irrational.
Examples of irrational consumer behavior:
1. Preferences Reversals
, ● Consumers may value the same product differently depending on the context in which it
is presented.
2. Anchoring Effect:
● Consumers may rely too much on an initial reference point (anchor) when making
decisions.
● Example. In a restaurant when the most expensive dish is listed first on a menu,
consumers are more likely to choose a mid-priced dish than when a cheap item is listed
first.
3. Compromise Effect:
● Consumers tend to choose the middle option when presented with multiple choices.
● Examples. 3 models of a product are available (basic, standard and premium) the
standard model is often the most popular.
4. Endowment Effect
● People value products they already own more than products they don't own.
● Examples. A person is willing to sell a coffee mug for 5 euros but only willing to buy the
same one for 2.
5. Choice overload
● Too many options can lead to indecision and dissatisfaction
● Example. Jam study
6. Opportunity Cost Neglect
● Consumers often ignore the cost of not choosing the next best alternative.
7. Regret and Anticipated Regret
● Fear of making the wrong choice impacts decision-making.
Marketing Implications:
● Pricing strategies: using psychological pricing and anchoring to influence perceptions
● Product placement: presenting choices in ways that encourage purchases (ex. using a
“compromise” option)
● Reducing choice overload: Limiting excessive product options to improve consumer satisfaction
5. Conclusion and Key Takeaways
What is Consumer Behavior?
● The process of obtaining, consuming and disposing of products and services.
● Influenced by personal and external factors
● Affects emotions, cognition and behavior.
Why study consumer behavior?
● Helps marketers predict and influence consumer decisions
