Consumer Buying

In: Business and Management

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The Principles of Economics

How Consumers Make Decisions

It is often said that consumers don’t really have an idea of what they want. Purchaser decision making is fundamentally a problem solving process. More often than not the most challenging concept in marketing is to understand the buyer’s behavior. To gain customers a company must understand how the consumer will respond to various product features such as price and advertising. Gregory Mankiw clarified it best within the 10 Principles of Economics. He advised that; people respond to incentives, behavior changes when costs or benefits change, the cost of something is what you give up to get it, and people face tradeoffs. Consumers go through multifaceted buying behavior when they are greatly involved in a purchase and think that there are significant differences existing among brands. Dissonance-Reducing buying behavior consumers are highly involved in a purchase but sees little differences in the brand. Habitual buying behavior has low consumer involvement and the absence of significant brand differences. Taking an example from the article, “5 Behavioral Economics Principles Marketers Can't Afford to Ignore.” The Power of Free can change the consumer’s mindset. Economics stated that supply and demand are central concepts. Market price for any commodity is resolute by the outcome of supply and demand. The textbook explains that supply and demand are closely related to each other. Demand is the quantity of the product the customer is willing to buy at a given price, assuming all other factors remains unchanged (ceteris paribus). The law of demand states that, if all other factors remains equal, higher the price of good, lower the demand of the product in the market and vice versa. Whereas supply is the amount of the product that suppliers are willing to stock in the…...

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