This document discusses factors that influence consumer behavior, including cultural, social, personal, and psychological factors. It outlines Maslow's hierarchy of needs and defines concepts like utility, total utility, and marginal utility. The key points are that consumers aim to maximize their total utility given budget constraints by equating the marginal utility per peso of each good purchased. The law of diminishing marginal utility and utility maximization rule guide consumers in determining optimal consumption levels.

1. Consumer Behavior

2. Objectives
• Identify the different factors that affect utility and
consumption behavior
• Explain Maslow’s Hierarchy of needs

3. Utility and Behavioral Factors
• Utility is defined as the satisfaction derived from the
consumption of a commodity which determines
consumption and demand behavior.

4. Factors Influencing Behavior
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5. 1. Cultural Factors
• Culture is one of the most fundamental determinants
of a person’s wants and behavior. Human behavior is
generally learned.
• A child growing up in a society learns basic set of
values, perceptions, preferences and behaviors through
the process of socialization.
• 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.

6. 1. Cultural Factors
• Most human societies exhibit social hierarchy. More
frequently, stratification takes the form of social
classes. This show distinct product and brand
preferences.
• For instance, komiks tend to be the reading material
(1980s) for the lower income classes, while magazines
and newspapers are preferred by the middle and higher
income classes.

7. 1. Cultural Factors
• Values of individuals or people are highly influenced
by cultural environment.
Western Child
• Achievement and
success
• Progress
• Material comfort
• Efficiency and
practicality
Filipino Child
• Hiya
• Pakisama
• Social acceptance
• Smooth interpersonal
relationships

8. 2. Social Factors
• A consumer’s behavior is also influenced by social
factors such as the consumer’s reference groups,
family and social roles and statuses.
 Reference groups are those groups that we compare
ourselves to for the purpose of evaluating our
behaviors.
 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.

9. 2. Social Factors
• Members of the buyer’s family can exercise a strong
influence on the buyer’s behavior. From the parents,
a person acquires orientation toward religion,
economics, social ambitions and love.
• Husband-wife involvement in purchases varies widely
by product category. Husbands are dominant in the
purchases of insurances and cars, while wives are more
dominant in the purchases of washing machines and
kitchenware.

10. 2. Social Factors
• A person’s position in each group can be defined in
terms of role and status. Each role carries a status
reflecting the general esteem accorded to it by
society. The kind of clothing that a person wears
reflect his respective roles and statuses.
• A company president, for example, will tend to drive a
Mercedes Benz, wear expensive clothes and eat in a
posh restaurant.

11. 3. Personal Factors
• Buyer’s decisions are also influenced by personal
outward characteristics such as age and life cycle,
occupation, economic circumstances, lifestyle,
personality and self-concept.
• People change the goods and services they buy over
their lifetime. Young single people have different
consumption needs from retirees; newly married
couples buy different kinds of furniture compared to
older married couples.

12. 3. Personal Factors
• 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.
• A traditionalist will buy the usual kinds of goods as
opposed to people who would like to experiment.

13. 4. Psychological Factors
• Person’s purchases are also influenced by
psychological factors: motivation, perception,
learning, beliefs and attitudes.
• Maslow’s Theory of Motivation sought to explain
why people are driven by particular needs at
particular times.

14. Maslow’s Hierarchy of Needs
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15. Perception and Learning
• Perception can be defined as the process by which
an individual selects, organizes, and interprets
information to create meaningful picture of the
world. Learning, on the other hand, describes
changes in an individuals behavior arising from
experience.

16. Beliefs and Attitudes
• If a consumer perceives and believes that Coke is the
best soft drink, he will buy Coke.
• A belief is a descriptive thought that a person holds
about something while attitude describes a person’s
enduring favorable and unfavorable cognitive
evaluations, emotional feelings and action
tendencies toward some object or idea.

17. Theory of Consumer Behavior
• How rational consumers decide on the optimal
combination of goods to consume with their limited
budget in order to maximize their total utility at any
given time.
• Utility is the technical term for satisfaction To allow
us to measure the utility of consumers, we will refer
to an imaginary value of happiness, called the UTIL.
One UTIL equals one unit of happiness…

18. Individual Consumption
• Every consumer behaves rationally: Consumers try to get the "most for their
money" to maximize their total utility
• Every consumer has different preferences: Consumers have clear cut preferences
and can determine how much marginal utility they get from consuming more units
of a product
• Every consumer is under a budget constraint: All consumers face a budget
constraint, therefore must make decisions about what they buy based on their
limited budget
• Every product has a price: Every product has a price, so consumers must weigh
their purchasing decisions based on their marginal utility from consumption and
the price of the goods they consume

19. Total Utility and Marginal Utility
• Two concepts that will help understand HOW consumer
maximize utility.
• Total Utility (TU): This is the total happiness of a consumer at a
particular level of consumption. Total utility will generally
increase as total consumption of a particular good increases,
until the consumer has “had too much” of the good, when total
utility will begin to decline.
• Marginal Utility (MU): This is the increase in total utility
resulting from the consumption of each additional unit of a
particular good.

20. The Law of Diminishing Marginal Utility
• law of diminishing marginal utility states:
The greater the level of consumption of a
particular good, the less utility consumers derive
from each additional unit of the good.

21. Consider the total and marginal
utility one derives from consuming
ice cream. Notice the following:
• The first scoop provides you with 5
utils, so TU = 5 at Q=1
• Additional scoops of ice cream
provide you with less and less
additional happiness. Nothing tastes
quite as good as that first scoop! MU
declines beyond the first scoop, but
TU continues to increase, until…
• The fourth scoop: At four scoops your
TU is maximized, but the 4th scoop
provided you with no additional
utility.
• Beyond four scoops, you’ve “had too
much”. TU begins decreasing while
MU becomes negative.

22. The Utility Maximization Rule
• With the law of diminishing marginal utility in mind,
we must now determine how a consumer should
decide what to buy. Assume the following:
 You have a budget of ₱20 that you wish to spend
entirely on two goods
 The two goods you are trying to decide between are
Widgets (w) and Robotrons (r)
 The price of Widgets (Pw) is ₱5 and the price of
Robotrons (Pr) is ₱2

23. • To determine how many of each good you should buy, you must
consider the utility each good provides. Consider the table
below. First, calculate the MU at each level of consumption.
Quantity
Widgets: Pw=₱5 Robotrons: Pr=₱2
TU MU MU/P TU MU MU/P
1 10 10 5 5
2 18 8 9 4
3 24 6 12 3
4 28 5 14 2
5 30 2 15 1

24. How to decide what to buy: The goal for consumers is to always maximize marginal utility per peso.
• You should buy a Robotron first, giving you a MU/ ₱ of 2.5. Remaining budget = ₱18
• Next you should buy a second Robotron, which gives you an MU/ ₱ of 2. Remaining budget = ₱16
• Next you should buy a Widget, which gives you an MU/ ₱ of 2. Remaining budget = ₱11
• A 2nd Widget will now give you an MU/ ₱ of 1.6, compared to 1.5 for a 3rd Robotron. Remaining buget = ₱6
• A 3rd Robotron now gives you an MU/ ₱ of 1.5, compared to 1.2 for a 3rd Widget: Remaining budget = ₱4
• Based on the utility maximization rule, you should buy 2w and 3r, where MUw/Pw=MUr/Pr

25. • A consumer maximizes utility by equating the
marginal utility-price ratio for each good purchased
and consumed. If the ratios are not equal, then utility
can be increased by changing the combination of
goods consumed.