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consumer behavior and utility maximization


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consumer behavior and utility maximization

  2. 2. Objectives : 1. Determine the Consumer Behavior and the Concept of Utility Maximization 2. Analyze their own purchase patterns to become more critical consumers and integrate the Utility Maximization in everyday lives and ; 3. Explain the importance of Consumer Behavior and Utility Maximization.
  3. 3. REMCONSU
  5. 5. TEKRAM
  7. 7. EMOCNI
  8. 8. Consumer is the central point and all the marketing activities revolve around him, manufacturer produces what the consumer wants. As the consumer behavior differs from the person to producer most understand it.
  9. 9. What is Costumer? Buys the product from businesses. They are the one who purchase the product either for resell or they purchased the product for others.
  10. 10. What is Consumer? • Uses the business product. They are the one who consume the produced goods and services produced by the manufacturer.
  11. 11. CONSUMER BEHAVIOUR Study knowing how individual costumers, group or organizations select, buy, use, and dispose ideas, goods and services to satisfy their needs and wants.
  12. 12. TYPES OF CONSUMER BEHAVIOUR There are four main types of consumer behavior:
  13. 13. 1. Complex buying behavior • This type of behavior is encountered when consumers are buying an expensive, infrequently bought product. They are highly involved in the purchase process and consumers’ research before committing to a high-value investment. 2. Dissonance-reducing buying behavior • The consumer is highly involved in the purchase process but has difficulties determining the differences between brands. ‘Dissonance’ can occur when the consumer worries that they will regret their choice.
  14. 14. 3. Habitual buying behavior • Habitual purchases are characterized by the fact that the consumer has very little involvement in the product or brand category. 4.Variety seeking behavior • In this situation, a consumer purchases a different product not because they weren’t satisfied with the previous one, but because they seek variety.
  15. 15. DEFINITION BY AUTHOR’S “Consumer Behavior is the actions and decision process of people who purchase goods and services for person’s consumption.” -Engel, Blackwell and Mansard “Consumer Behavior is the decision process and physical activity, which individuals engage in when evaluating, acquiring, using or disposing of goods and services. -Louden and Bitta
  16. 16. Factors affecting consumer behavior A. Cultural factors A buying decision is affected by culture. These are the two important things that influences the consumer buying behavior: 1. Culture - Set of values and ideologies of a particular groups of individuals or community. It is the culture of an individual which decides the way he/she behaves. In simple words culture is nothing but the values of an individual. What an individual learns from his parents and relatives as a child, becomes his culture. 2. Subcultures - such as religion, age, geographical location, gender and status. Consumers within subcultures will have a perceived sense of identity and follow an expected set of behaviors.
  17. 17. B. Social factors  Plays an essential role in influencing the buying decision of consumers it includes reference groups, family, roles and status. 1. Reference groups – every individual has some people around who influence him/her in any way. It comprises of people that individual compare themselves with. Every individuals know some people in our society who become their ideal in due course of time. Co- workers, Family members, relatives, neighbors, friends seniors at workplace often from reference groups. 2. Family – A consumers family has a major impact on attitude and behavior. Many consumer decisions are made by family members on behalf of the family, so understanding the family consumer decision making dynamics around your product is essential. 3. Roles and status – A role consist of activities, a person expected to perform. Each role carries a status. People choose product that reflect and communicate their role and actual or desired status in society.
  18. 18. C. Personal Factors A buyers decision are also influence by personal characteristics. 1. Life cycle – People buy different goods and services over a lifetime. The life-cycle of the person begins with child birth, teenage, adulthood, middle-age, old age and then ends with death. Under each stages, people’s buying behavior is different. 2. Occupation – it also influence consumption patterns. The occupation of a person decides his ability to purchase a goods or services.
  19. 19. D. Psychological factors It’s also affects consumer buying decision 1. Perception – what an individual thinks about a particular product or services in his/her perception towards the same. In marketing, perception is more important than the reality as it is perception that will affect consumers actual behavior. 2. Learning – describe changes in an individual’s behavior arising from experience. Learning is the process of acquiring knowledge about products, their benefits and methods of usage and also disposal of product after use.
  20. 20. Importance of study of consumer behavior In olden days, the importance of consumer behavior was not realized because it was seller’s market but modern market is customer oriented.  During old days it was very easy to the marketer to sell their goods and services to the market because due to less competitors present in to the market. Customers force to avail the product and the price offered by the manufacturer due to no close substitute or no competitors. It was very hard for them to make the selection or choice. But today’s market has full of competitors, if any of the marketer trying to use their monopoly the customer will shift to the closest substitute or even to their competitors. It is very important for the marketers to understand the needs, taste, wants and mostly the behavior of the consumers.
  22. 22. UTILITY Utility is the satisfaction, value, or benefit gained from the consumption of a good or service  Utility benefit a person gets from consuming a good or service. For example, utility is the satisfaction a person gains from eating a piece of chocolate cake. It's important to understand that the concept of utility is a relative concept. Different people gain different levels of satisfaction from eating chocolate cake, depending on their preferences.
  23. 23. UTILITY MAXIMIZATION Utility maximization means making economic decisions that guarantee the highest level of consumer satisfaction (benefit). Consumers maximize utility by determining the combination of goods and services that guarantee maximum benefit. An example is when a consumer decides to purchase more of "Product A" and less of "Product B" because this combination guarantees more benefit (utility) per dollar.
  24. 24. MARGINAL UTILITY Marginal utility is the additional satisfaction gained when an additional unit of a good or service is consumed. Marginal utility is also known as marginal benefit, and it can also reference the highest amount a consumer is willing to pay for one more unit of a good or service.
  25. 25. MARGINAL COST The marginal cost is the change in total production cost that comes from making or producing one additional unit . Marginal cost is the increase or decrease in the total cost a business will incur by producing one more unit of a product or serving one more customer.
  26. 26. INCOME /BUDGET CONSTRAINTS Consumers have always had limited income which restricts how much they can consume. They can’t just keep buying products. They must consider their budget and what they can afford. That limit the quantity of goods and services that they can buy. But people have limitless wants and needs. So we are constantly experiencing budget constraints. When faced with budget constraints consumers must carefully choose how spend their limited income when buying two or more different goods in order to maximize their utility.
  27. 27. Remember that Utility Maximization is not only about consumers spending or purchasing goods and services that provide them greatest satisfaction but it is also about achieving the highest utility while spending less.
  28. 28. Utility Maximization Rules There are few simple rules to follow when finding the utility maximizing combination of goods and services for consumer. All income will be spent without exceeding budget. Only two goods will be purchased. The good with the greater marginal utility will be purchased next.
  29. 29. The consumer will always choose the good that provides a greater marginal utility. Obviously, if the next of one good provide more utility, then the next unit of another good, a consumer will choose the good that satisfy more needs and wants first. If we follow these rules, we should have no trouble finding the bundle of goods that maximize a consumer’s utility. Consumer Maximize their utility by determining the combination of goods and services that guarantee maximum benefit.
  30. 30. GENERALIZATION It is important for us individuals and as consumers to learn how to maximize our utility because it allows us to satisfy our need within budget limitations.
  31. 31. Quiz: Identify what is being asked on the following question. Write your answer on the space provided. _________ 1. Study how individual costumers, group or organizations select, buy, use, and dispose ideas, goods and services to satisfy their needs and wants. _________ 2. Utility benefit a person gets from consuming a good or service. _________ 3. It means making an economic decisions that guarantee the highest level of consumer satisfaction. _________ 4. It refers to the additional satisfaction that the consumer achieves from utilizing one additional item. __________ 5. The central point and all the marketing activities revolve around him, manufacturer produces what the consumer wants.
  32. 32. ASSIGNMENT: Essay. Answer BRIEFLY AND CONCISELY in two paragraph. 1. Discuss your understanding about Consumer behavior and Utility maximization. 2. Why is it Important to study consumer behavior and the concept of utility maximization? And as a consumer, how are you going to maximize your utility when facing budget constraints. Cite an example. FEATURES POINTS Makes a strong support/evaluation of statement, depth, logically organized and well-constructed thoughts and responsive to what asked. 5 Good support/evaluation of the statement. Clear but could have been powerful, was not able to hit his exact thoughts 3 Unrelated answer but there was an effort 2 No answer. 0
  33. 33. Prepared By: Group 3 oMae Zairel Galvan oJohn Eduard Delos Santos oJoshua San Felipe oDonna Marie Onquit oJuliana Aubrey Saculo