Buyer behaviour
14 important questions on Buyer behaviour
What does consumer panel data show?
If we want to examine how people repeat buy we can use consumer panel data that records people’s purchasing over extended periods(often, over a year or longer) so that we can see what brands are brought repeatedly and how often the consumer chooses alternative brands. Typically, panels are large representative samples of people. p.386
What is the main difference between penetration and market share?
Penetration: the number of people who buy an item in a given time period. The penetration of brands may differ a lot but the average purchase frequency of any brand tends to be similar
Modigliani's life-cycle model
- How saving could be used to transfer purchasing power from one phase of life to another
- In early life, labor income is usually low relative to later in working years
- Does wealth (including human capital) and the interest rate explain consumption better than current disposable income?
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Friedman's permanent-income hypothesis
- Friedman discussed the general problem faced by households when their income fluctuates over time
- He distinguished between a "normal" level of income that households expect over their lives, which he called permanent-income, deviations were called transitory income
- Friedman argues that permanent consumption will be proportional to permanent income
- Transitory consumption, unexpected or irregular spending, such as unexpected medical bills or temporary college tuition expenses, where unplanned and independent of permanent income.
Consumption effects of permanent and temporary changes in a household's income
- Both in the life-cycle model and the permanent income model, an increase in income that is expected to be permanent causes a large increase in lifetime wealth
- Thus, consumption rises by about as much as income rises when the change is known to be permanent
- A temporary increase in income affects only the current term in the lifetime-income summation, so it causes a relatively small change in wealth
International dictionary of Management
- Consumer: a purchaser of goods and services for immediate use or consumption
- Buyer: the person who purchases goods either for his own use or for the use of somebody else
- Customer: the one who purchases goods for his own use or for the use of others or else
- Institutional buyer: these are either governmental institutions or private organizations
What is Learning effect?
- Confirmation bias:
- People selectively search for and interpret information to confirm their choices and beliefs
- Hindsight bias:
- People rationalize the priority they gave to living conditions because they believe that they knew the consequences all along
- Short-cuts people make in memorizing:
- Focus on the most memorable part of an experience, which is often the peak and the end of the experience
Characteristics of consumer behaviour
- It is a process where consumer decide what to buy, when to buy, how to buy, where to buy & how much to buy
- It comprises of both mental and physical activities of consumer
- Consumer behaviour is very complex and dynamic which keeps on changing constantly
- Individual buying behaviour is affected by various internal factors and by external factors
- Consumer behaviour starts before buying and even after buying
What are buying motives and which forms are there?
- Product Motives: physical and psychological (or emotional and rational)
- Patronage Motives: those considerations or reasons, which prompt a buyer to buy the product from a particular shop in preference to other shops
- Price, quality, location, services, etc.
- Hedonic Motivations: personal pleasures (more unique and different)
- Utilitarian motivations: personal need, task fulfillment (more similair preferences)
- Motivations result in certain preferences (Whitley et al., 220)
Homo economicus
Utility maximisation based on:
- Complete information
- Perfect computations
- Personal preferences
- Fully rational
- Unbounded will-power
What is a stated choice experiment?
- It allows researchers to uncover how individuals value selected attributed of a program, product or service by asking them to state their choice over different hypothetical alternatives
- Each alternative is described by several characteristics, known as attributes
- A monetary value is included as one of the attributes, along with other attributes of importance
- When individuals make their choice , they implicitly make trade-offs between the levels of the attributes in the different alternatives presented in a choice set (Alpizar et al., 2001)
The stated choice experiment is based on utility theory
- It relies on the assumptions of economic rationality and utility maximization
- In stating a preference the individual is assumed to choose the alternative that yields his/her highest individual benefit, known as utility
- The utility yielded by an alternative is assumed to depend on the utilities associated with its composing attributes and attribute levels.
WTP: Willingness to pay
- After estimating parameters, welfare measures, in the form of marginal willingness to pay (WTP), can be determined
- Estimating the marginal rate of substitution between the change in the label attributes and the marginal utility of income represented by the coefficient of the payment attribute
Optimizing sales (Szmigin & Piacetini, 2015)
- Buyer behaviour: actual purchasing behaviour
- Not about why, BUT about how
- Repeat buying: buying a product several times
- Over a specific time period
- Consumer panel data
- Penetration: number of people who buy the item in a given time period
- Purchase frequency: the average number of times they buy in the time period
- Seem to be quite similar between brands in a near-stationary market
- Double jeopardy: as market share declines, average purchase frequency tends to go down as well
- Sales = penetration * purchase frequency
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