THEORIES AND MODELS

OF CONSUMER BEHAVIOR

Prof. SAVICA
 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
 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
 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

 MODELS OF CONSUMER BEHAVIOR

Disadvantages

Very complex

Theoretical, inapplicable

Overestimated

Mathematical, abstract

Expensive

Useless for marketing

decisions
 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
 I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Common features Theory of indifference
Theory of revealed preference
The consumer has income, Game theory
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
 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

Plan for combination apple kiwi

indifference is a list А 15 1
of various
B 11 2
combinations of
products that offer C 8 3
the same utility D 6 4
(satisfaction) to
consumers E 5 5
 I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Theory of indifference
Indifference curve Indifference map
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.

А Points that are combinations of

two products that bring equal
benefits to the consumer
B

C
D ic3
E ic2
ic1
 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

American economist, Paul Samuelson, 1948

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!
 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.

John von Newmann and Oscar Morgenstern , 1944

Two prisoners dilemma:

Tom and Robin are prisoners caught Tom
for the same crime. Placed in 2
different rooms for questioning, To Not to
without communication between confess confess
them. Everyone has two choices, to Robin To 3,3 1 , 10
confess or not to confess the crime. confess
What is the best decision for each Not to 10 , 1 2,2
prisoner? confess
 I. THEORIES OF CHOICE AND
PREFERENCES OF CONSUMERS
Game theory
Two prisoners dilemma
Tom
To Not to Nash equilibrium
confess confess – the best
To 3,3 1 , 10 solution:
Robin confess Both of them to
Not to 10 , 1 2,2
confess the
confess 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!
 II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Common features Experimental theory
Theory of Clinical psychology

Decision making process is Theory of Gestalt psychology

based on the psyche of the Theory of Social psychology
customer (internal factors)

Genetics Бихејвиористичка теорија

Environment

Human activities

Mental state, personal

characteristics
 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

Pavlov model
Unconditional stimulus =
inherent, permanent response
to outside influence
stimulus reaction
Conditioned stimulus =
learned reaction, reaction of
conditioned stimulus
 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.
II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory
 II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Experimental (laboratory) theory

Classical conditioning of consumers

beautiful woman positive reaction

beautiful woman car 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!
 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
 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!

 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."
 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

II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology

Principles:

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

Principles: Similarity

Proximity
II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Principles:
Object and background
II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Same parts –Different objects
II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Theory of Gestalt psychology
Phi phenomenon: static images give a sense of movement
 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
 II. PSYCHOLOGICAL THEORIES OF
CONSUMER BEHAVIOR
Positive Pleasant stimulus
enforcement Behavior is
repeated
Negative Unpleasant stimulus
enforcement

Unpleasant stimulus Behavior is

Punishment
not repeated
 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
 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.
 III. MODELS OF CONSUMER BEHAVIOR
ON THE MARKET FOR PERSONAL
CONSUMPTION
Common features
Economic models
Socio-psychological models
Consumption is very
heterogeneous and complex Combined models

Lot of participants

Many heterogeneous factors

influence the purchase

Final consumption

Price and income elasticity of

demand

Substitution and different needs

 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 Buyer's response:

Media
Quality
Sellers
Availability Product choice
Friends
Service Buyer's black box Brand choice
Family
Design Dealer choice
Personal views
Style Purchase timing
Purchase amount
 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

 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

 Giving priority to one brand over the others

 Attitudes

 Sellers's opinions

 Opinions of third parties

 Advertisements
 III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Lazarsfeld model
Environment factors Factors of social
Т = time psychology

Е1: preferable brands I1: attitude for the brands

Т
A and B A and B

Е2: noticing advertisement I2 : positive attitude for

Т+ for brand B both brands, A and B

Е3: seller's
Т+ I3 : willingness to buy
recommendation to buy
more brand B than A
brand A

Т+ I4 : Buying brand A
 III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Simplified model of Lazarsfeld

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
Howard and Sheth model

Level of decision

А Extensive
Early phase
Little information about products
Undefined purchasing criteria

Б Limited
Advanced phase
Well-known purchasing criteria
Consumer is still unsure what to buy

В Routinized
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
 III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model

Phase 1: Phase 2: Phase 3:

Predisposition Attitude Motivation

motivation
passivity
III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model
 III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
Nicosia model
Field 1 Field 2

Subfield 1:
Subfiled 2: attitude
message
Attributes of the Search and Evaluation
Consumer's (additional information)
company and its
attributes
products

motivation
feedback
Field 4 Field 3

Purchasing
behavior
Consumption Buying decision
(satisfaction/dissatisfaction ) (action)
 III. MODELS ON THE MARKET FOR
PERSONAL CONSUMPTION
March-Simon model
Substitution of one product for another

Environmental Factors Characteristics of consumers

 Market structure  Experience of using the product

 Number and type of producers  Expected advantages of other brand
 Number and availability of brands  Level of aspiration
 Visibility of brands on the market  -----
 -----
 IV. COMBINED MODELS
Common features Model of Katona

Combination of: Model of Preston

 Economic factors
 Sociological factors
 Psychological factors
 IV. COMBINED MODELS
Model of Katona

Environmental stimulators
Consumer

Economic factors

Orientation to
Perception
action
-physical Buying
-cognitive
-attitudes
-expectations
-motives

Consumption habits

Disadvantage: it describes the act and not the purchasing process

 IV. COMBINED MODELS
Model of Preston

Stimulators Characteristics of consumers Reaction

Incentives Experience
Purchase decision

Internal factors Purchase decision

Demographic
Individual changes in consumer Economic
Sociological
Psychological
Other purchasing
determinants
Decision to
External factors postpone buying

Environment

Activities of sellers
 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:--------------------------------