Moreover, the particular information required varies from one problem to another. A few integral psychological factors driving the behavior of consumers are : Where do they go other than work? For a fee of about $500, First Mortgage Corp., a Texas-based bank, offered to make a homeowners mortgage payment for six months if he or she got laid off (Jares, 2010). When you are hungry or have cash, you may purchase more than you would at other times. Some companies, such as Johnnie Walker, have managed to capture market share by introducing lower echelon brands without damaging their luxury brands. One systematic way of using cost data for this purpose is standard costing. Costs and Expenses 6. 52 Penner et al reported that the probability of engaging in helping behavior would decrease with an increase in cost. Its no coincidence. The fastest-growing subculture in the United States consists of people of Hispanic origin, followed by Asian Americans, and African Americans. Maslow theorized that people have to fulfill their basic needsfood, water, and sleepbefore they can begin fulfilling higher-level needs. How do Maslows hierarchy of needs and learning affect how companies market to consumers? Most market researchers consider a persons family to be one of the most important influences on their buying behavior. Please enable scripts and reload this page. What might someone, with behaviours that you find challenging, be trying to say? As we mentioned earlier in the chapter, consumer behavior is influenced by many things, including environmental and marketing factors, the situation, personal and psychological factors, family, and culture. This includes the values and beliefs that individuals of society adopt as a part of society. Have you ever eaten the food samples in a grocery store? Businesses try to figure out trends so they can reach the people most likely to buy their products in the most cost-effective way possible. 7 (2008): 56267. As early as 1927, the noted economist J. Using VALS to combine psychographics with demographic information such as marital status, education level, and income provide a better understanding of consumers. A social class is a group of people who have the same social, economic, or educational status in society5. If a person has been treated badly in the past, then he or she may. Are you going to turn her down or be a friendly neighbor and buy a box (or two)? To further understand consumers and connect with them, companies have begun looking more closely at their lifestyles (what they do, how they spend their time, what their priorities and values are, and how they see the world). Contrarily, businesses have generally assumed that marginal cost is constant, at least over the output range of normal experience. Todays companies are using different techniques to reach opinion leaders. In other words, learning occurs through repetitive behavior that has positive or negative consequences. Situational influences are temporary conditions that affect how buyers behave. While some products may appeal to people in a social class, you cant assume a person is in a certain social class because they either have or dont have certain products or brands. Managerial oversight, external economic conditions and firm characteristics are an example of such attributes hypothesized to influence a managers decisions in a demands fluctuation. life experiences - family, culture, friends, life events. To some degree, consumers in the same social class exhibit similar purchasing behavior. Most of them said the product tasted like regular beer. These are perception, motivation, learning, beliefs, and attitudes. When youre at a friends Pampered Chef party, you dont want to look cheap or disappoint your friend by not buying anything. When you were a child, the last thing you probably wanted as a gift was clothing. The owner of the other firm inherited the building the firm uses and, therefore, has to pay no rent. Ries, L., In the Boardroom: Why Left-Brained Management and Right-Brain Marketing Dont See Eye-to-Eye (New York: HarperCollins, 2009). Perhaps you have seen Girl Scouts selling cookies outside grocery stores and other retail establishments and purchased nothing from them, but what if your neighbors daughter is selling the cookies? Table 3.1 An Example of Social Classes and Buying Patterns shows seven classes of American consumers along with the types of car brands they might buy. Much of the original research on subliminal advertising, conducted by a researcher trying to drum up business for his market research firm, was fabricated (Crossen, 2007). For decision-making purposes, the costs for both are the same even though the second firm pays no rent for using the factory building. Schmitt, G., Hunters and Gatherers, Dealernews 44, no. 1 The housing market is affected by economic status, interest rates, real income, and population density changes. Behaviour is affected by factors relating to the person, including: Behaviour is also affected by the context, including: This means that a worker needs to consider a range of factors in order to understand behaviour, including their personal response and role. However, companies dont want to risk cheapening their brands. The obvious advantage of restricting cost figures to those based on historical costs is that objectivity-records of transactions should exist from which the figures can be verified. Selecting, organizing and interpreting information in a way to produce a meaningful experience of the world is called perception. Some of the internal factors influencing pricing are:- 1. One-second ads were later rolled out to movie theaters (Adalian, 2008). University of Piraeus - Department of Business Administration. Starbucks has done a good job in terms of locating its stores. Such an envelope is the long-run cost curve. 2 (2007): 10721. mental health, aspirations, prior attainment) Immediate environmental factors (e.g. The cost of the college students. They dont want to sell a new drug to everyone. The aging suit has elastic bindings that hamper a car designers movement and goggles that simulate deteriorating eyesight. These potential changes are within the managements discretion, i.e., the management can decide for or against such actions in the light of their expected effects on profit. Therefore, it follows by transitive logic, that just as cost theory provides the foundation of supply, production theory provides the foundation for the theory of cost. When this is true, we often use the terms cost and expenses synonymously. A change in the process of production, i.e., the production engineers change the equipment, materials, or methods used in production. The childrens bedrooms feature fun beds with appealing comforters so children will be prompted to identify and ask for what they want8. Following the economic crisis that began in 2008, the sales of new automobiles dropped sharply virtually everywhere around the worldexcept the sales of Hyundai vehicles. Other effects on cost may arise due to external factors over which management has little control. Apparently, consumers too broke to go on vacation or shop at Saks were instead watching television and treating themselves to the products (Ward, 2009). what the person needs and wants. At other times, people forget information, even if its quite relevant to them, which is called selective retention. To start with, we shall discuss a few important concepts. Purchasing a gift might not be an emergency situation, but you might not want to spend much time shopping for it either. The companys whiskeys come in bottles with red, green, blue, black, and gold labels. Fig. Businesses try to figure out trends so they can reach the people most likely to buy their products in the most cost-effective way possible. While looking into why or why not people help based on inner attributes, altruism and ego centrism often come up. Your ideal self is how you would like to see yourselfwhether its prettier, more popular, more eco-conscious, or more goth, and others self-concept, or how you think others see you, also influences your purchase behavior. In many countries, people are expected to marry within their own social class. You might spend quite a bit of money each month eating at fast-food restaurants like McDonalds and Subway. 1,000 of fuel oil was purchased for cash. 12, ed. Some critics accuse companies of deliberately manipulating children to nag their parents for certain products. 6More Cars Sold in China than in January, France 24, February 10, 2009, http://www.france24.com/en/20090210-more-cars-sold-china-us-january-auto-market (accessed October 14, 2009). Sure, you could buy one online in a jiffy, but you probably wouldnt do that. We noted that most costs eventually become expenses. If youre single and working after graduation, you probably spend your money differently than a newly married couple. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. Another potential problem that advertisers (or your friends) may experience is selective distortion or misinterpretation of the intended message. Economists have long speculated that marginal costs rise continuously as output rate increases above some given level. So did seed sellers as people began planting their own gardens. Plan and manage your Azure costs. Finally, what about those products (Aqua Globes, Snuggies, and Ped Eggs) you see being hawked on television? Major risk factors affecting cost performance were identified through an extensive literature review complemented by a workshop with construction contractors in Mozambique. Not all physical factors are under a companys control, however. Subject-Matter on Theory of Cost 2. You wanted to have friends and get a date. Content Guidelines 2. Your self-concept is how you see yourselfbe it positive or negative. 2.1.1 Culture. These are the individual characteristics such as age, sex, culture, income, family size, occupation, marital status, etc. Keep in mind that a products price is to some extent determined by supply and demand. In 1988, Rs. To create buzz about the television show The Mole in 2008, ABC began hyping it by airing short commercials composed of just a few frames. Psychological Factors 5. . These factors are namely Psychological, Social, Cultural, Personal, and Economic factors. There are three different perceptual processes which are . The term cost is not synonymous with expense. We may now set forth the fundamentals of the theory of cost. Women influence fully two-thirds of all household product purchases, whereas men buy about three-quarters of all alcoholic beverages (Schmitt, 2008). Internal factors include genetics, hormones, and biological mechanisms such as neural activity. In fact, high wages and low material prices allow a large amount of wastage and rejects. Marketing to men is big business. The above changes may occur simultaneously. Economics, Microeconomics, Theory of Cost. If you blinked, you missed it. Your culture prescribes the way in which you should live and has a huge effect on the things you purchase. Ford and other car companies have created aging suits for young employees to wear when theyre designing automobiles2. 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