CONSUMER BEHAVIOUR

OBJECTIVES:

1. Define the term ‘consumer behaviour.’

2. List the factors that affect consumer behaviour.

3. Describe the factors that affect consumer behaviour.

Define the term ► Consumer behaviour refers to the ways that
those who consume goods and services react to
‘consumer those who offer goods and services and the
factors that influences their behaviour.
behaviour’.
 ► Price
► Price of substitute goods
Factors affecting ► Quality

consumer ► Taste / Preference

► Tradition / Seasonality
behaviour: ► Income
► Brand loyalty
1. Price

The law of demand states “ more of a good will be

demanded at a lower price than at a higher price,
assuming all other factors affecting demand are held
constant”

In other words, when the price of a good rises, the

demand is likely to fall, assuming all other factors are
held constant. Therefore, a rise in price negatively
impacts consumer behaviour.

It also means, that when the price of a good falls, the

demand is likely to rise, assuming all other factors are
held constant. Therefore, a fall in price, positively
impacts consumer behaviour.
 A substitute good is a good that can be used in place of another good. For
example, butter and margarine are substitute goods.

We assume that margarine is the substitute good for butter.

Price of
If the price of the substitute good rises e.g. price of margarine rises, then
substitute consumers are likely to buy more butter because butter is cheaper in relation to
margarine.

good Conversely, if the price of the substitute good falls e.g. price of margarine falls,
then consumers are likely to buy less butter since the substitute good is now
cheaper.

In summary, availability of cheaper substitute goods e.g. margarine, leads to a

fall in demand for the good e.g. butter and availability of more expensive
substitute goods e.g. margarine, leads to a rise in demand for the good e.g.
butter.
 Quality has a direct impact on
consumer behaviour.

Higher quality goods are likely to lead

Quality to a rise in demand for the good and
impact consumer behaviour positively.

Poor quality goods are likely to lead to

a fall in demand for the good and
impact consumer behaviour
negatively.
Taste / Preference

Taste / Preference has a direct impact on consumer

behaviour.

Increased preference for goods are likely to lead to a rise

in demand for the good and impact consumer behaviour
positively.

Decreased preference for goods are likely to lead to a fall

in demand for the good and impact consumer behaviour
negatively.
Tradition / Seasonality

Traditions affect consumer behaviour for example,

Christmas, Easter, Mother’s Day etc.

There is an Increased demand for certain types of goods

during Christmas, Easter and Mother’s Day. This impacts
consumer behaviour positively.

The converse holds true.

Income

Income refers to the amount of money a person has available to

spend on goods and services.

A rise in income is likely to lead to a rise in demand for a good, thus

impacting consumer behaviour positively.

A fall in income is likely to lead to a fall in demand for a good, thus

impacting consumer behaviour negatively.
Brand loyalty

► Brand loyalty refers to the tendency of some consumers to become

committed to particular brands and make repeat purchases rather than
switching to substitute brands.
► Increased brand loyalty results in a rise in demand for that brand of goods,
thus impacting consumer behaviour positively.
► The converse holds true.