Economic Theories and Customer´s Behaviors Essay

1500 Words6 Pages
For companies to be able to market products or services effectively, an understanding of how consumers behave and make decisions is necessary (Poon and Joseph, 2001). There are several theories that relate to this area, including economic theories as well as psychological theories. Earlier studies in theories concerning consumer behavior were developed through economic theory, for example the conception where consumers advance rationally to make best use of their satisfaction in the process of buying. More recent research shows that consumers are influenced by different types of reference groups, such as family, friends, advertisers and role models. Terms like impetuous purchase, mood, situation and emotion are applied more commonly in…show more content…
Consumers base and make their decisions on expected results. One theory states that consumers are seen as rational individuals who have the ability of estimating the results of different decisions made and thereby selecting the most lucrative one. This theory is known as utility theory. Though consumers are comparatively good at approximating the results of an occurrence, not all consumers are completely coherent, dependable or aware of all aspects in the decision-making process. For this reason, the utility theory has been criticized, but despite its insufficiency, the theory is still well thought-out as a main case in the concerns of decision-making. A new and simpler theory called satisficing had a different approach, instead of, as the utility theory, finding the best result, this theory allows the consumer choose what satisfies his/her needs and then stops the decision making process. An example of this could be the process of finding a house. A more psychological approach has been used in the research of consumer decision-making. This involves the development of prospect theory which has extended the two existing theories and has incorporated psychological factors by adding worth and endowment (Richarme, 2001). A standard logit model was created, where the probability with which a
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