Mr. White asks the student to discuss the relationship between consumer behavior and fields such as microeconomics, behavioral economics, culture, decision-making, marketing psychology, and marketing strategy. The student is asked to consider whether consumer behavior is a science or an art. The document discusses how consumer behavior has increasingly been applied to microeconomics. Behavioral economists recognize both predictable and unpredictable influences on consumer choice. Theories of bounded rationality and heuristics show people make satisfactory rather than perfect decisions based on past experiences. Consumer behavior incorporates psychological insights showing emotions and experiences influence decisions more than rationality. While consumer behavior provides scientific findings, observers' conclusions are also shaped by intuition, making it both a quantitative science and qualitative art

1. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
ALISDAIR WHITE ASKS:
Identify, document and discuss the interrelationship between the study of
consumer behaviour and other fields such as, but not limited to, microeconomics,
behavioural economics, culture, decision-making, marketing psychology, and
marketing strategy. Consider the commonalities and the differences and draw
conclusions concerning whether the study of consumer behaviour can be
considered a quantifiable science or a qualitative art.! Your essay needs to
identify the principal theorists and theories and demonstrate a depth of study
commensurate with a Level Two masters programme.
Consumer behavior is a field of study that aims to understand the mental process
that consumers, as end-users, go through prior to, during and after the purchasing
process. Increasingly seen as a separate field of study within social sciences, this
field of research is now being “applied”, as it is now being specifically “applied” to
the domain of microeconomics.
In being applied to the market, applied consumer behavior theorists increasingly
recognize that the human psyche can be as much affected by very tangible and
predictable elements whilst consumer choice can also be very unpredictable and
come from a vast range of subjective influences.
To this, McFadden would argue that the assumption of the rational economic man,
as held by classical economists (Adam Smith and Jonathan Bentham) is incomplete.
He explains that homo economicus, originally presented as the standard economic
human being, is in fact a rare sub-class of the human race, as explained through the
notion of ‘heuristics’ and bounded rationality.
Indeed, the assumption of the perfectly rational man was created to enable
mathematical modeling of consumer choice,; second, the idea that preferences are
fixed and so that the consumer would necessarily choose the product that brings
most economic profit is simply not true.
Naturally, the notion of perfect rationality is in practice wrong and this is proved in
the false assumption that consumers are fully aware of all alternatives available to
them. The actual lack of information and the Man’s limited capacity for sense
making simply discredits this assumption of the perfectly informed consumer,
originally presented as a standard representation of the economic human agent.
In stark contrast, behavioral economists actually aim to more explicitly recognize
the role that subjective experience and bounded rationality generally play within
consumer choice.
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2. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
Thinkers of this school- Daniel Kahneman and Amos Tversky (2000)- have
demonstrated that people actually make satisfactory decisions, as opposed to
perfect ones, based on heuristic models of habitual behavior. They describe that
during the learning process, human beings increasingly learn to associate particular
stimuli in the environment with typical displays of behavior that have repeatedly
revealed themselves to be adequate in the past, and in similar contexts.
Explanations and predictions of people’s choices, in everyday life as well as in the
social sciences have always been founded on the assumption of rationality
essentially for the purpose of academia. Theoretical books of the time, written in the
classical style, were much concerned with prescription and much less so with
implementation. As such, previous writers in the fields of human sciences, ranging
from anthropology, social sciences and into consumer behavior saw themselves as
rational beings and used this to justify the highly prescriptive style in which articles
and books were written; mostly concerned in guiding professionals such as
marketers and psychologists, models were often created on the back of sometimes
unrealistic assumptions that are in fact testament of our limited capacity for sensemaking. Theory was often presented as fundamental fixed dogmas as opposed to
evolutionary science allowing for new variables to be implemented within
microeconomic models.
Bathed in microeconomics, the field of applied consumer behavior started to
integrate anti-classical microeconomic and psychological input as firms around the
world were faced with the increasing uncertainty that came with phenomenon of
globalization. The factor of speed, the rate of obsolescence and the cheer amount of
competition throughout all markets and industries have meant that suppliers (even
more so than ever before) no longer have access to clear, on-time-in-full (OTIF)
information, they do not possess the full knowledge as to how to collect and
interpret this information and finally they simply do not have time to make rational
decisions. This has forced people to slowly recognize that not only consumers, but
also suppliers- seen often as the consumers of consumers in a system in which the
“customer is king”- make decisions which satisfice as opposed to perfect ones. This
once more supports Kahneman and Tversky’s idea that people value more what
they are about to lose and already have as opposed that what is yet to be acquired.
This historical trend in academic practice would further suggest that it is only when
suppliers were threatened by the competitive and uncertainty challenges of
globalization that attempts at amending the standard microeconomic model were
made- note that many believe that the inception of globalization theory came to
prominence in the 1980s as speculation on lowering trade barriers mounted
(regional economic agreements). Having said this, globalization, also seen as the
widespread and transnational crystallization of culture in many aspects of wider
society (e.g. Americanization of media channels and cinema), has prompted not only
a need to better understand consumer choice determinants, their intricacies and
also culture as related to applied consumer behavior. The objective of academia still
4TH DECEMBER 2013

3. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
is to provide guidance and certainty to practice. Considering this, we now
understand that amendments have been encouraged once suppliers of goods and
services needed to find a better way to navigate through the mess of understanding
the capricious demands of a consumer often faced with excessive choice.
Alisdair White (2013) thereby argues against the idea of the consumer society, built
on the notion of consumerism which promotes ‘the provision of an abundance of
goods and services to consumers, the purchase of these far exceeding basic needs,
and the disposal of these goods, often before the end of their economic life’. White
explains that the consumer society model used in the Western World (more so the
US and the UK) is a big reason why a microeconomic rethink did not occur earlier.
Let me explain. The consumerist model is based on the assumption that an efficient
market is one whereby demand meets supply and the consumerist model is
presumably the best fit. The downside of this assumption has been that this is a
‘zero sum game’, in other words, both the consumer and supplier cannot be winners
at the same time since very often demand is unequal to supply and in the case where
the latter is higher, consumers are getting poorer whilst suppliers are getting richer.
Whilst the intrinsic value of a good does not change, all too often the consumer is
faced with prices, which keep on rising even during an economic crisis. Strangely so,
this microeconomic model seems to favor the supply side of economies at the
detriment of the consumer-side, it initially pretends to serve best as explained by
utility theory as applied to a perfectly rational individual. In light of the research
conducted for this essay, we now know that predicting purchasing behavior is made
more challenging amid the fog and excessive amounts of goods, which often render
consumer behavior more intuitive and less predictable. Thus the conclusion of A
Time for an Economic rethink (2013) is the soul-searching question of whether we
should adopt the non-consumerist economic model, which despite its greater
fairness seems so irrelevant to the overly capitalist mindset of consumer societies.
To this, White does warn of a need to change attitudes, beliefs and cultures,
intangible elements of the human psyche, which are very hard to change.
“Sovereign in tastes, steely-eyed and point-on in perception of risk, and relentless in
maximization of happiness (The Economist, 27/04/2013)” McFadden criticizes this
assumption of classical microeconomics and dismisses homo economicus as being
the oddity and recommends that practitioners also borrow from the fields of
anthropology and psychology in integrating the notion of emotions, subjectivity and
experience in the recommended new microeconomic model. For example,
consumers in reality do not have fixed preferences and instead display much fluidity
and subjectivity in the choices made. For example, behavioral psychologists have
demonstrated that a person would associate higher importance, and fitness for use,
for a product towards which they experience a feeling of endowment. A person used
to take a particular type of coffee every morning is likely to maintain this preference
for the product despite discretionary rises in price.
4TH DECEMBER 2013

4. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
Thus, Adam Smith’s view that the standard version of the economic human being
would always choose that which is most economically profitable is definitely a false
assumption.
In line with this, Kahneman’s and Tversky’s “prospect theory” holds that in the face
of uncertainty, we tend to group risks and assign value functions to assess them. The
interesting development is that people generally seem to be more concerned about
the risk of losing something they already have rather than gaining something. In
other terms, risk aversion compromises the linearity of the value functions that we
use. Humans also assess groups of risks from a personal preference point and also
tend to overweight low probability outcomes and underestimate medium to high
ones and they Kahneman also describes other types of illusions in which people
misjudged certain aspects of. This is highly relevant to the fields of decisionresearch, risk analysis and also enlightens the limited scope for application that the
standard microeconomic model possesses.
Indeed, Daniel Kahneman points directly at the fact there is an inherent inability for
classical economists to account for the issue of memory and experience in
determining consumer choices. Inspired form the fields of anthropology and
psychology, there is a long-standing knowledge that accumulated knowledge and
experience creates memory, and that the marketers can effectively learn to
stimulate previously experienced sensations (feelings) that the consumer associates
with a particular stimuli. As such, this is undeniable evidence that feelings, in stark
contrast with ‘rationality’ play a significant choice we make in our everyday lives. A
very good example of this would be the upcoming Christmas ‘promotional displays
in supermarkets’. Marketers, building on the sense of magic, family, unity and joy
that people generally associate with Christmas will generally promote traditional
Christmas family presents and sell them in batches with the all too known “ Two for
the price of one”. The effect is that consumers, highly swayed by the Christmas
atmosphere, generally end up believing they are making a fifty percent profit whilst
in truth they often do not need to buy as many articles and may only need one sock,
which alone would still have the same retail price as the batch of two. Alisdair White
(2013) uses this as a prime example of how irrational Man is to believe that he is
Rational. White’s argument that human beings are the only species to display the
irrational emotion, characteristic that is greed evokes an underlying understanding
that marketers and marketing psychologists have on the matter. A major reason
why economies have shifted from excessive demand to essentially exceeding supply
is also because of the ability that marketers have found in inducing the consumer to
buy into a feeling, the feeling that they need something which in reality they don’t.
Indeed, the richer countries display the lowest percentage of disposable income as
spent on basic needs and instead spend more on other things that they ‘feel’ they
need such as leisure.
4TH DECEMBER 2013

5. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
The old marketing assumption that a need is merely something that must be
acquired to secure survival (i.e. shelter, food, sex and water) is no longer applicable
in today’s society. Today the term would rather be defined as ‘ a motivating force,
highly driven by feelings, that compels action for its satisfaction.
Having spent more than six decades observing and interacting people, trying to
understand how people perceive themselves and their environment, Kahneman
uses data and observations to establish how we use information and heuristics in
making decisions. He concludes that’ that we navigate through life essentially
trusting our impressions and feelings, and the confidence in our intuitive beliefs
which are not always justified (Kahneman, 2011, p.32). Kahneman goes on to
describe that there are two systems of though patterns- 1 and 2- the first being
mostly unconscious and yet guides many of our final decisions based on heuristics.
System 2, in contrast is not automatic nor unconscious but instead it is a though
process that we are fully aware of and thus our rationality is bounded by the fact
that we do not realize that System 1 thoughts are not taking place and where they
actually come from.
Moreover, psychologists are suggesting that experience and emotions should be
more explicitly incorporated into the microeconomic model. Experiments have
indicated that the order in which options are exposed to the consumer, and the
intensity of pleasure/ pain at the peak of one experience is likely to make the type of
consumer choice a much more predictable science, to the extent that a clear cause
and effect continuum can be clearly demonstrated. Experiments have shown, that a
spike in the level of pain or pleasure shortly before the purchase decision is likely to
directly affect the purchasing decision that the consumer is likely to make soon
after. In Thinking fast and Slow (2002), Kahneman and Kunreuther describe how
victims and near victims of natural disasters or accidents such as earthquakes or an
attempted burglary, display an inherent need for protective action despite the
probability of the event reoccurring being very low. They describe ‘ after each
earthquake, Californians are for a while diligent in purchasing insurance and
adopting measures of prevention’ such as making a hiding place in the baseman in
the case of a tornado, tying down the boiler to reduce quake damage and even
sealing baseman doors against floods (Kahneman, 2011, p.136).
In conclusion to our findings, indications are that applied consumer behavior is in
fact a qualitative science more so than it is a qualitative art. We can say this in light
of the many certified and approved experiments conducted by the likes of Tversky
and Kahneman who have conclusively provided added knowledge in terms of how
we think of ourselves, and how we perceive our environments. The conclusions we
can bring to the issue of microeconomics as related to consumer behavior is that
4TH DECEMBER 2013

6. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
bounded rationality and heuristics require that we deviate from the indiscriminate
and generic modeling offered by classical economists which fail to account for the
complexities of the mind of Man, first as an individual, and second as an accurate
representation of the typical economic man. The point where observers draw
conclusions on this subject and make new discoveries on the workings of the mind,
inherently implicates that the conclusions made following experiments and data
analysis will themselves be colored by some measure of intuition, heuristics and
subsequent ‘non-rationality’. We must not forget that the observers are the same as
the observed. At this point Consumer behavior takes on the banner of quantifiable
art; yet we must recognize the important and scientifically proven findings to give
rigidity and relevance to the field, as something that people can trust.
4TH DECEMBER 2013

7. BADIBANGA SAM
APPLIED CONSUMER BEHAVIOUR
MR WHITE
WORDCOUNT: 2455
REFERENCES
Gilovich T, Griffin D, Kahneman D (eds). Heuristics and Biases: The Psychology of
Intuitive Judgment. New York: Cambridge University Press, 2002.
Kahneman D, Tversky A (eds). Choices, Values, and Frames. New York: Cambridge
University Press, 2000.
Kahneman D, Slovic P, Tversky A . Judgment Under Uncertainty, Heuristics and
Biases. New York: Cambridge University Press, 1982.
Kahneman D (2011), Thinking Fast and Slow, New York: Farrar, Strauss and Giroux.
Tversky A, Kahneman D. The framing of decisions and the psychology of choice.
Science, 1981; 211: 453–458.
Risk Analysis: AN international Jouranl (author) , 1st July 2012 , vol. 32, No.7
Daniel Kahneman: How we think we choose by Michael Greenberg and Karen
Lowrie, The Open University Library (accessed on 2/ 12/13)
White A (2013), Time for an Economic Rethink, (blog) available at:
pm.solutions.com, accessed on 28/11/2013.
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