Consumer Behaviour: Study of how individuals, organizations, or groups select, purchase, use, and dispose of goods, services, and ideas to satisfy their needs and wants. It includes actions and reactions in the marketplace.
Who is a Consumer?
Consumer: Person who buys goods and services for personal use and cannot resell them.
Impact: Consumer needs and choices influence organizational decisions.
Importance of Consumers
Demand Creation: Consumers create market demand for diverse products and services.
Service Diversification: Consumer demand enhances service diversification (e.g., banking, healthcare).
Consumer Goods: Includes durable (lifespan > 3 years) and non-durable goods (lifespan < 3 years or single-use).
What is Consumer Behaviour?
Definition: How consumers allocate their income on different goods and services based on preferences and options.
What is Utility?
Utility: Satisfaction a consumer derives from consuming a specific good; subjective in nature.
Utility Impact: Varies among individuals; higher need leads to higher utility.
Study of Consumer Behaviour
Cardinal Utility Approach
Concept: Utility can be measured numerically (e.g., 20 units of utility from chocolates).
Measures:
Total Utility: Total satisfaction from a fixed quantity of a commodity.
Marginal Utility: Change in total utility from consuming one additional unit.
Ordinal Utility Approach
Concept: Utility cannot be measured numerically but can be ranked based on preferences.
Example: Consumer prefers apples over bananas, indicating higher utility from apples.
Comparison: Cardinal vs. Ordinal Utility
Cardinal Utility:
Measurement: Numerical (utils).
Realism: Less realistic.
Approach: Quantitative.
Analysis: Marginal Utility Analysis.
Ordinal Utility:
Measurement: Qualitative (ranks).
Realism: More realistic.
Approach: Qualitative.
Analysis: Indifference Curve Analysis.
Law of Diminishing Marginal Utility
Definition: As consumption increases, marginal utility from each additional unit decreases.
Foundational Concept: Basis for the law of demand.
Assumptions:
Continuous consumption.
Consuming standard units of the commodity.
Satisfaction measured quantitatively.
Constant quality, income, and price.
Rational consumer behavior.
Indifference Curve
Definition: Graph showing combinations of two goods providing the same satisfaction level.
Application: Helps in understanding consumer preference without numerical satisfaction values.
Conclusion
Consumer behaviour, utility, and preference measurement are key to understanding market dynamics and consumer decision-making.