Understanding Consumer Behavior and Market Dynamics

Posted on Nov 26, 2024 in Economy

Understanding Markets

Market Definition

A market is a group of potential consumers who share a need or desire and are willing to satisfy it through exchange. We distinguish between:

  • Theoretical Market: Consumers who could potentially buy a product (e.g., perfume buyers).
  • Target Market: The specific group of consumers a business aims to reach within a certain timeframe (e.g., a specific demographic of perfume users).
  • Potential Market: Consumers who don’t currently buy a product but might in the future (e.g., individuals who may develop an interest in fragrances).

Market Limits

  1. Physical/Geographical/Territorial: The reach of products (local, regional, national, international).
  2. Consumer Characteristics: Adapting to consumer needs.
  3. Product Use Characteristics: The specific area where the product is used.

The Final Consumer

The final consumer is the person who benefits from a product. Studying consumer behavior is complex, as it’s influenced by many factors.

External Influences on Consumer Behavior

Attitude

Attitude is a person’s learned predisposition towards something. It develops through stages, often influenced by family, education, and personality. For example, someone’s attitude towards Facebook might be shaped by information from friends.

Components of attitude:

  • Cognitive: Understanding of the product (e.g., learning about Facebook through a website).
  • Affective: Feelings towards the product (e.g., having a positive image of Facebook).
  • Conative: The intention to buy (e.g., connecting with people on Facebook).

Functions of attitude:

  • Utility: Practical benefits (e.g., staying in touch with people).
  • Values: Determining what’s good or bad (e.g., choosing the best communication network).
  • Defensive: Protecting beliefs (e.g., justifying Facebook use as a good communication tool).
  • Information: Evaluating information (e.g., appreciating Facebook’s service).

Perception

Perception is how individuals interpret stimuli. It’s influenced by factors like age, need, context, prejudice, price, and packaging. Understanding consumer perception helps with product design, pricing, and advertising.

Personal factors influencing perception:

  • Demographics: Characteristics of the population in a given area.
  • Socioeconomic Status: Profession and income level.
  • Psychographics: Personality and lifestyle.

Motivation

Motivation is the driving force behind a purchase. It’s divided into three phases:

  1. Deficiency: Lack of something.
  2. Dynamics: Taking action to fulfill the need (rationally or emotionally).
  3. Satisfaction: Reward for fulfilling the need.

Theories of Motivation

Maslow’s Hierarchy of Needs

Maslow’s theory proposes five levels of needs:

  1. Physiological: Food, shelter, clothing.
  2. Safety: Job security, property, savings.
  3. Social: Belonging to a group.
  4. Esteem: Prestige, recognition.
  5. Self-Actualization: Finding oneself.

Each level must be met before moving to the next.

Sigmund Freud’s Psychoanalytic Theory

Freud’s theory emphasizes the influence of the subconscious on thoughts and emotions. Psychoanalysis involves:

  1. Research Method: Analyzing unconscious meaning through free association.
  2. Psychotherapeutic Method: Techniques for addressing psychological issues.
  3. Theories of Psychology and Psychopathology: Explaining mental processes and disorders.
Herzberg’s Two-Factor Theory

Herzberg’s theory identifies two factors influencing motivation:

  • Motivational Factors: Lead to satisfaction (achievement, recognition, responsibility).
  • Hygiene Factors: Prevent dissatisfaction (salary, work environment, relationships with coworkers). Their absence causes dissatisfaction, but their presence doesn’t guarantee long-term satisfaction.

External Influences (Macroenvironment)

  • Culture: Shared norms, beliefs, and customs.
  • Demographic Environment: Impacts shopping habits.
  • Economic Environment: Income, employment, interest rates, inflation.
  • Legal and Political Environment: Regulations and policies.
  • Technological Environment: Product innovation.
  • Environmental Concerns: Growing interest in organic products, recycling, and sustainability.