Consumer Behavior Theories

Marketers use theories in explaining how consumers behave. Some of the theories they use are based on economic principles or marketers’ own experiences, known as traditional theories; others are based on different social sciences, known as modern or contemporary theories. The use of theories helps marketers better understand what makes consumers do so.

There are several types of Consumer Behavior Theories;

Traditional Theories of Consumer Behavior.
Modern Theories of Consumer Behavior.
Economic Theories Explaining Consumer Behavior.
Psychological Theories Explaining Consumer Behavior.
Social Psychological Theories Explaining Consumer Behavior.
Sociological Theories Explaining Consumer Behavior.

Traditional and Modern Theories of Consumer Behavior

The theory is an exposition of the general principles of any science. It is basically the philosophical explanation of phenomena, either physical or moral. It is a view held or supposition explaining something.

Two types of theories explain consumer behavior – traditional or old theories and modern or contemporary theories.

The traditional theorists would believe that consumers behave mechanistically. Their views about consumers may be compared with that of the economic philosophers’ views. Economists developed quite a few principles explaining consumer behavior.

One of the economics principles says that as consumers’ incomes increase, they buy more for use or consumption.

The other principle says that if the supply of an item falls, consumers will buy that item in larger quantities meaning an increase in demand. The traditional theorists explaining consumer behavior fully accept these economic principles and believe that consumers comply with economic principles.

They thought that consumers are rational creatures and as a result, every move they take is well thought, planned, and logical. They also applied some of their experiences and intuitions in explaining consumer behavior.

Therefore, we can say that traditional theories explaining consumer behaviors were based on economic laws, marketers’ own experiences, and their intuitions.

The modern or contemporary theories in opposition to traditional theories are neither based on economic principles nor marketers’ intuitions. They are rather based on the findings of different disciplines of social and behavioral sciences.

Since consumer behavior is considered an interdisciplinary field of study today, theories explaining consumer behavior are also based on such disciplines from which consumer behavior borrows.

The consumer is described as the most complex and unpredictable creature on this earth. He is again a social element interacting with different groups belonging to a particular culture.

Moreover, he himself is an identity. Because of these multidimensional aspects, his behavior is rational and other times highly irrational and unpredictable. His mind also changes very often, changing his behavior.

The modern or contemporary theories can deal very successfully with the volatile, unpredictable, and irrational aspects of consumer behavior.

These theories are based on social and behavioral sciences, though not as precise as the theories of physical or natural sciences. Still, they can explain the uncertain behavior, unaccountable change of mind, and people’s unreasonable behavior more accurately than the old theories.

In real life, we see that majority of our behaviors are irrational and unpredictable. The contemporary theories focus mainly on these aspects in explaining consumer behavior.

They are developed through eclectic borrowing from anthropology, sociology, social psychology, individual psychology, and other related fields. These are a couple of fields dealing with almost all of the forces that may influence our behavior. Contemporary theories are nowadays heavily used to build models of buyer behavior.

The reason for developing and using consumer behavior models is that consideration of all of the variables affecting individuals’ decision-making is most important.

Obviously, the behavior should be understood in totality, and to do this, simultaneous consideration of every variable having an impact or potential impact on buying behavior is a must.

And a model can help effectively in this since it comprehensively organizes variables.

Economic Theories Explaining Consumer Behavior

Efforts were made from very early times to explain the motivational processes that influence consumer behavior. All social sciences, including economics, have contributed separate theories and tried to find out this phenomenon.

Economists from even Adam Smith’s time developed theories that explain the behavior of consumers. The trend continued thereafter, and even contemporary economists are constructing theories of buyer behavior.

Economic theories describe the man as a rational buyer who has perfect information about the market and uses it to obtain maximum value for the buying effort and money. According to the economic theories (particularly the classical ones), consumers make purchase decisions purely based on self-interest. Price is considered to be the strongest motivation.

Consumers compare all competing sellers’ offerings and buy the one with the lowest price. Several economic factors influence the consumer in the ways he spends his income on personal consumption. The purchasing power of the consumer is used to convert production into consumption.

People do not spend all their income. Disposable personal income is used both for personal consumption and saving. If disposable personal income rose, business people would be interested in learning what proportion of the additional income the consumers might spend and what proportion they might save.

Marketing analysts are more interested in examining the effect of changes in income on spending and saving. In inflationary periods spending rises faster than income. In the same way size of family and family income is also important as they affect spending and saving patterns.

The income that consumer expects to receive in the future has some bearing on his present spending pattern. In particular, spending on automobiles, furniture, major appliances, and other expensive items tend to be influenced by consumers’ optimism or pessimism about future incomes. In the same way, consumers’ liquid assets also affect buying plans.

Cash and other assets readily convertible into cash, such as balance in saving accounts, shares, etc. influence our purchases. Retired and unemployed individuals may use liquid assets to buy everyday necessities. Other consumers may use liquid assets to meet major medical bills and other emergencies.

The availability of consumer credits strongly influences the pattern of consumer spending. Credit that allows one to buy now and pay later enables a consumer to command more purchasing power than that separated by his current income.

Even small fluctuation in income causes sharp repercussions in consumer’s purchases. The quick response of durable goods expenditure to income changes traces the wide use of installment credit in financing such purchases.

Consumers are more willing to increase installment debt when income rises and are more reluctant to incur additional indebtedness when income is declining.

Quite a several economic theories explain different aspects of buying behavior described in the above few paragraphs. Four major economic theories dealing with buyer behavior are;

Marginal Utility Theory
Indifference Theory
Income and Savings Theory
Rising Income Theory

Psychological Theories Explaining Consumer Behavior

The purchase decision of consumers re influenced by some of their individual characteristics, such as learning, attitudes, etc., as well as the groups and their psychology of which consumers belong. Psychological, social-psychological, and sociological theories discussed in this lesson will help you understand how their personal characteristics and groups influence consumers.

Psychological theories are also called Learning Theories. The essence of these theories lies in the fact that people learn from experience, and the results of experience will modify their actions on future occasions. The importance of brand loyalty and repeat purchase make learning theory more relevant in the field of marketing.

Studies of learning and the related areas of recognition, recall, and the habitual response has furnished marketers with several keys to understanding consumer behavior. Do they help in answering questions like how consumers learn about products offered for sale?

How do they learn to recognize and recall these products? By what process do they develop buying and consuming habits? Four factors influence learning;

Repetition,
Motivation,
Conditioning
Relationship and organization.

Repetition

Repetition is necessary for the progressive modification of psychological influences. It must be accompanied by attention, interest, and a goal if it is effective—advertisers who depend on repetition alone waste both their efforts and money.

Motivation

Individual motivation is the most important factor involved in indicating and governing his or her activities. Activity in harmony with one’s motives is both satisfying and pleasing. Human motivation is a topic of considerable interest to marketing professionals.

Conditioning

It is a way of learning in which a new response to a particular stimulus is developed. Through long advertising efforts and continued exposure of a particular symbol, the company successfully conditioning the people to recognize the bottle or packet of its product, e.g., Jet washing powder or Aromatic toilet soap.

The conditioned response establishes only a temporary rather than a permanent behavior pattern, and if the original stimulus does not frequently enforce it, the conditioned response eventually disappears.

We have to remember that all persons do not respond equally well to conditioning, nor are their responses generally predictable.

Relationship and organization

Learning effectiveness is enhanced if the thing to be learned is presented in a familiar environmental setting. A salesperson can more effectively demonstrate a vacuum cleaner or a washing machine by using them at the customer’s place instead of describing their capacity and cleaning power in a store.

The housewife is interested in the machine’s performance specification only as they directly relate to cleaning their own carpets and garments etc.

Social Psychological Theories Explaining Consumer Behavior

The credit for formulating these theories goes to Thorstein Veblen and Festinger.

Veblen asserted that man is primarily a social animal, and his wants and behavior are largely influenced by the group he is a member of. All people tend to fit in society despite their personal likes and dislikes. Most luxury goods are bought primarily because one’s neighbor or friend of the same status bought it.

Culture, sub-culture, social classes, the family are the different factor groups that influence buyer behavior. Consumers are social beings and belong to social groups. Among these, perhaps, the family plays an important role in behavior formation.

Man is essentially a social being and interacts with other individuals in a variety of social groups. Despite personal differences, people may be forced to accept society’s decision, such as the Group Insurance Scheme, where individual differences of opinion may not be given much consideration.

It is pertinent here to ask how these considerations influence marketing. The answer is simple, for the present day, marketing is consumer-oriented, and consumers’ psychology, their social and economic characteristics, etc., therefore, form the cornerstone for marketing decisions.

It is this recognition given to consumers that have given rise to the concept of market segmentation.

Now you will be given brief ideas on two important social psychological theories that help understand consumer behavior. They are as follows :

Theory of Achievement Motivation, and
Cognitive Dissonance theory.

Sociological Theories Explaining Consumer Behavior

Sociologists and anthropologists view behavior as involving the activities of groups of people motivated by group pressures.

It is recognized that individuals as social creatures are strongly influenced in their buying by social and cultural environments in which they live. The people with whom an individual regularly associates exert strong influences on his or her behavior.

The reference group exerts a strong influence on individual behavior. Knowledge of reference groups and their influences make it easier to explain why consumers behave in particular ways, and more important to marketers is to predict their behavior.

There are quite a few sociological theories developed so far. Here we shall concentrate on two of them that explain consumer behavior;

Theory of Inner versus Other Direction, and
The Role Theory.

Theory Building in Consumer Behavior

Theories are assumptions or conclusions about some phenomena. Consumer behavior theories are also assumptions or conclusions about how consumers behave or may behave.

At every stage, marketers make such assumptions or conclusions about how consumers may react to their offers or how the potential buyers may behave.

Bluntly speaking, these assumptions or conclusions are also consumer behavior theories. But, realistically, consumer behavior theories are developed in a more formal and structured way.

As used in physical or natural sciences, the scientific method is used today by consumer behavior researchers in theory building. The scientific method used here to build or develop consumer behavior theories is not as precise as that used in the physical sciences.

Since consumer behavior is a multidisciplinary subject in nature, consumer behavior theories are also based on many disciplines’ findings.

In theory building here, researchers basically borrow findings from anthropology, sociology, social psychology, individual psychology, marketing research, and to some extent, from economics.

Now the question may come to your mind, ‘which discipline is considered more important while borrowing findings for a theory-building?’ You may also ask, ‘How does the theory builder fit cultural, social, and individual determinants of buying together?’

Consensus lacks among the researchers as to which influence is more important than others or how the determinants of buying should be tied together. As a result of this, researchers developed many consumer behavior theories, each highlighting a particular influence.

You will find that certain theories focus on the culture as a determinant of buying decisions, while others on social class or family, yet another group on personal characteristics such as learning, perception, motivation, personality, or attitude. In this unit, we shall try to focus briefly on each of the different types of consumer behavior theories.

Criteria of a Sound Theory of Consumer Behavior

Not all consumer behavior theories are good or sound. Certain theories may be termed as sound in explaining consumer behavior. How can you conclude that a theory is a sound?

Obviously, there should have certain features in it to be considered as an ideal theory. Mr. John A. Howard, one of the leading authorities in this discipline, has offered several criteria of a sound theory of buyer behavior.

If a consumer behavior theory contains the features offered by him, it may be called a good theory of consumer behavior. The criteria are mentioned below:

A sound theory of buyer behavior describes the behavior and gives a reasonable description of that behavior. Let us say we have developed a consumer behavior theory on female customers’ behavior of dress materials. In the said theory, it is said that female customers of dress materials enjoy bargaining. This is a mere description of their behavior, not the explanation of the behavior. On the contrary, if the theory identifies which female customers enjoy bargaining, what are the reasons for such a practice, this can be termed as an explanation of behavior. So, a sound theory of buyer behavior describes the behavior, side by side, its explanation.
Consumer behavior has been described as an interdisciplinary field of study. Hence, theories explaining consumer behavior take help, or developer must keep in mind that the findings that he considers in theory building should resemble the mainstream discipline he borrows. The findings of a particular discipline resemble mainstream thinking only when substantiated by the principal findings or avenues of research of the discipline concerned.
Consumer behavior theories help us to research different aspects of buyer behavior. Certain areas of behavior are well researched, and other areas have not received much attention. A sound theory gives us pointers on where research should be conducted, thus saving our time and resources, which otherwise would be channeled in unrelated dimensions.
A theory usually consists of several elements. To apply a theory in its proper perspective, one should understand what each of its parts or elements means. Also, he should be able to measure the elements using a certain yard-stick. But, what each of the elements of the theory stands for, and what is the yard-stick? A sound theory of buyer behavior gives answers to these two questions to the user of it. Therefore, a sound theory of consumer behavior fixes the precise meaning of its components and provides measuring devices to measure them.

The above mentioned four are the criteria of a sound theory of buyer behavior identified by Mr. John A. Howard.

But, according to Mr. Mittelstaedt, the following three are the basic criteria of a sound theory of consumer behavior:

A sound theory of buyer behavior is that which includes known characters of buyer behavior. For example, one of the known characters of buyer behavior is that it is affected by his culture’s principal norms. A theory that accounts for such known characters may be termed as a sound theory.
Consumer behavior theories are used to understand and predict the behavior of consumers. Marketers are not only interested in knowing the existing behavioral patterns that are influenced by different known regularities. Since societies and cultures are changing, there could be new characters observed in consumers, which may influence their behaviors. A sound theory of buyer behavior highlights such new characters that may be observed in consumers in the future. For example, the majority of Bangladeshi consumers do not enjoy selfservice shopping. But, time may come when the majority may behave otherwise. A sound theory of consumer behavior always highlights such future changes.
A sound theory of buyer behavior is one that is a single unified theory. It is not based on eclectic borrowing.

Theories to Understand Consumer Behavior

Cognitive Dissonance Theory in Consumer Behavior

According to Festinger, when a person makes a decision, dissonance or discomfort will almost always occur. The person making the decision knows that it has certain advantages as well as disadvantages.

After making his decision, then, the person tends to expose himself to information that he perceives as likely to support his choice and to avoid information that may favor the rejected alternatives. In marketing an important goal both of advertising and personal selling is to reduce cognitive dissonance on the part of buyers and prospects.

Customers suffering cognitive dissonance may need reassurances that their decisions are or were wise ones. This can be accomplished by providing information that permits them to rationalize their decisions.

The theory further states that, even after a well-thought-out purchase, the consumers undergo some sort of discomfort, fear, or dissonance.

This post-decision anxiety is caused by noise arising from doubts about the decision taken. The consumers go on comparing the merits of the product bought with substitutes or start analyzing the drawbacks of the product.

Such customers require some reassurances from sellers stressing that the decision taken is a wise one. It is for this purpose that when automobiles or similar durable goods are sold, the seller gives a letter of congratulation on the wise decision to the buyer.

Though the theory was developed to explain the post-decision phenomenon, it is suitable for explaining predecision anxiety also. An important goal, both in advertising and personal selling, is to reduce cognitive dissonance on the part of buyers and prospects.

Role of Theory in Consumer Behavior

The role theory was developed by Erving Goffman. To him, every individual is an actor. As an actor, he plays different roles at different times to convey certain impressions.

This role is played in the presence of others. Since an individual interacts with different people at different times, his roles vary. While playing the role, he takes into account the expectations of his audience as well as his position in the minds of the audience.

The role playing also is dependent on the demands of the audience as well as the actor’s physical and mental characteristics. An individual’s consumption behavior is dependent, thus, on the roles he plays, the audiences, their expectations, as well as the actor’s physical and mental abilities.

Marketers nowadays use contemporary consumer behavior theories to explain consumer behavior and undertake marketing activities based on those theories.

Consumer behavior research undertaken by present-day marketers is based on scientific methods. The scientific method used here, though, is not precise as that of physical or natural sciences, but it closely resembles those (physical or natural) sciences.

The theory is defined as an exposition of any science’s general principles or the philosophical explanation of phenomena, either physical or moral. Philosophy is the science of the relations of causes, reasons, and effects of phenomena.

Therefore, the theory explains phenomena or events that identify relations of causes, reasons, and effects, not a general explanation. It also identifies relationships among observable facts and combines the facts to carry certain meanings to the user.

The explanation of phenomena or facts is also presented in theory in an orderly or systematic way to make it meaningful to the users. The role of theory in science may be summarized according to the following points:

Consumer behavior theories of modern time are based on empirical results. By empirical, we mean that which is observable as well as measurable. A result may be termed as empirical, provided anybody interested may observe it later, and measure it. What theory does is that it defines this empirical orientation. The definition is given by focusing on the data that are required to explain the theory. You should know that applying a particular theory; you do not need to consider all available data on the field. Theory tells you which relevant data you should concentrate on and which you should sidestep.
Data that you consider in using a theory may fall into many categories. If you consider them together without distinguishing them according to their nature, you may lead in the wrong direction. Data should be classified systematically to make them more useful and meaningful to be on the right track. Theory indicates the method of such classification in an orderly manner.
Theory, you know, is an explanation of facts. Based on the facts, we try to generalize on certain aspects. The generalization should be made in such a way that it is considered empirical. It must have the properties of ‘observability’ and ‘measurability.’ After classifying data following a systematic manner, theory summarizes them. Based on this, it generalizes on the area in question empirically.
The theory considers facts. It is an explanation of facts in an orderly manner. Moreover, it also helps researchers or users to predict facts that one may observe provided the circumstances remain the same. The prediction of facts helps marketers enormously develop their strategies to combat the competition more effectively.
You should agree with us that there are still many areas of consumer behavior that are unexplored. As many areas remain unexplored, we have gaps in our knowledge of different aspects of consumer behavior. The theory identifies these unexplored areas. If the areas are known, research may be carried on, and the findings minimize our knowledge gaps.

Theory of Inner versus Other Direction

This theory has been put forwarded by sociologist David Reisman. According to this theory people and societies around the globe may be classified according to three sociological types. An individual consumer behavior will be dependent on where he fits in to one of these classes. The classes are:

Tradition directed society,
Inner directed society, and
Other directed society.

Let us briefly consider these classes in turn:

Tradition directed society

A tradition directed society is that where changes take place very slowly. In such a society people are fully dependent on extended family ties. People of these societies are less mobile in terms of their outlook, living areas, profession, and virtually every areas of their lives including consumption.

Inner directed society

An inner directed society, on the otherhand is one, where people are highly mobile in everything. In such societies industrialization takes place very fast and people enjoy accumulating capital.

People in such a society are well informed of the market scenario, and are highly demanding which puts enormous pressure on the marketers.

Marketers operating in such a society must carefully plan, price, promote, and distribute products to win consumers’ hearts in order to survive in the face of severe competition.

Other directed society

The other directed society, on the other hand, is an imaginary one. It is believed that these societies have surpassed

the need for industrialization and socialize their individuals as consumers rather than producers. They are not at all concerned about personal achievement and inner satisfaction.

But, in reality, it will be hard to find a society that has surpassed the need for industrialization. Therefore, such a society still remains a dream.

Marginal Utility Theory in Consumer Behavior

This theory was developed by classical economists. According to them, a consumer will continue to buy such products that will deliver him the most utility or maximum satisfaction at relative prices. He continues buying and consuming a product so long the total satisfaction increases thus he avoids dissatisfaction.

How a consumer calculates his total satisfaction? According to Kotler, he calculates it by taking into account the consequences or results of purchases.

As a customer you will buy a good because you feel it gives you satisfaction or utility. A first unit of a good gives you certain amount of psychological utility or satisfaction.

Now imagine consuming a second unit. Your total utility goes up because the second unit of the good gives you some additional utility. What about adding a third and fourth unit of the same good?

As you consume more of the same good, your total (psychological) utility increases.

However, let us use the term marginal utility to refer to the extra utility added by one extra last unit of a good.

Then, with successive new units of the good, your total utility will grow at a slower and slower rate because of a fundamental tendency for your psychological ability to appreciate more of the good to become less keen.

This fact, that the increments in total utility fall off, economists describe as follows:

Table below showing the Law of Diminishing Marginal Utility

(1)	(2)	(3)
Quantity of a good consumed	Total Utility	Marginal Utility
0	0	0
1	4	4
2	7	3
3	9	2
4	10	1
5	10	0

As the amount consumed of a good increases, the marginal utility of the good (or the extra utility added by its last unit) tends to decrease known as the law of diminishing marginal utility.

“At some point, the addition of one more unit of that item will have no effect whatsoever upon total utility”.1 The table above shows the law of diminishing marginal utility.

The above table shows that consuming the first unit of an item gives the consumer an utility of say 4 unit. In this instance both the total and marginal utility is 4.

The second unit of the item will also give him some utility, but not same as the first one as his urge reduces. After consuming the second unit, his total utility is 7 and the marginal utility is 3 as he gets 3 units of satisfaction from the second unit.

As he consumes more of the same item, marginal utility gradually drops. This pattern will continue through the third and fourth item until finally, by the fifth perhaps, fails to offer any satisfaction whatsoever.

This theory holds the view that man is rational in all his activities and purchasing decisions are the result of economic calculations.

he lesson marketers may take from this theory is that, no matter how attractive the product is, it cannot be sold in unlimited quantities to an individual as he decides based on the diminishing marginal utility.

Marketers’ production and marketing planning should, therefore, be based on this concept. Marketers, however, do not accept this theory all the time, on the ground

that it fails to explain how product and brand preferences are formed. Further, economic factors alone cannot explain variations in sales.

Indifference Theory in Consumer Behavior

Indifference theory states that consumers form preferences for some combination of products over others. It also states that they (consumers) remain indifferent to some other combinations. The combinations of products that consumers view indifferently may be plotted on a graph which will give some points.

If joined, these points will give us a curve termed as an indifference curve. All of the combinations of products that will fall right to or above the indifference curve will definitely be considered more satisfactory by the consumers, and as a result they will undertake activities to buy and consume those.

The combinations of products that will fall left to or below the indifference curve will be viewed negatively as they are considered less satisfactory than the combinations falling on or above the indifference curve

Consumers as a result, will try to avoid buying and consuming products of these combinations (that fall below the indifference curve).

The lesson that marketers may take from this theory is that, they should do their best to produce and offer products in such a way that are considered falling above the indifference curve. If viewed so, chances are that they will sell better than competing products.

Income and Savings Theory in Consumer Behavior

This theory is based on the fact that purchasing power is the real determinant of buying. Purchasing power, on the other hand, is dependent on disposable income, i.e., the income left after payment of tax and savings.

To facilitate how people allocate changes in their total income between spending and saving, there are two concepts as given by the economists:

The marginal propensity to consume, and
The marginal propensity to save.

Marketers are interested in examining the effect or changes in income on spending and saving as this will have a direct bearing on buying habits.

The theory states that personal consumption spending tends both to rise and fall at a slower rate than disposable income. In certain situations, spending rises faster than income, and, at certain other times, a higher proportion may be saved.

Though the theory does not explain consumer behavior in specific terms, the concept is used in the planning and analysis of demand.

Rising Income Theory in Consumer Behavior

The rising income theory was given the present shape by Ernst Engel. This theory states that consumer spending pattern changes with the change in his income. As income increases, expenditures on most of the

items are likely to increase. But, the increases do not follow the same pattern.

According to Engel, as income rises, the percentage spent on food tends to decline, and the percentage spent on housing and furniture tends to stay constant. He, however, noted that the percentage of income spent on luxuries and savings tends to increase.

Learning or Stimulus Response Theory

Purlon, Skinner, Thorndike and Kotler developed this theory on the basis of experiments they conducted on animals. According to them, learning occurs as a person responds to some stimulus and is rewarded with need satisfaction for a correct response. They proved that most recent and frequent stimuli are remembered and responded. This approach is the basis of repeated advertisements.

Stimulus response theory, after constant refinements, is now based on four central processes. They are drive, cue, response, and reinforcement. Drives are needs or motives that are stronger, whereas a cue is a weaker stimulus. The response is the resultant reaction of some stimuli. If it is based on a cue, the response may be shifting from one brand to another based on previous experience.

In other words, cues will create different degrees of responses under different occasions. Reinforcement is the process by which rewarding experiences in the past are strengthened. It is here that brand preferences are strengthened leading to brand loyalty. The purpose of giving free samples of newly introduced product is nothing but to activate this reinforcement.