Showing posts with label Consumers. Show all posts
Showing posts with label Consumers. Show all posts

Law of Diminishing Marginal Utility

The law of diminishing marginal utility expresses the universal human experience. This law was at first pointed out by H. H. Gossen. So, this law is known as Gossen’s First Law. This law was developed by W. S. Jevons in England and by Karl Menger in Austria about the same time (1871) and modified by Alfred Marshall. This law states that if a person consumes more and more units of a commodity, its marginal utility declines. In other words, larger the stock possessed by a person, the smaller the utility he derives from an additional unit of the commodity.

According to Marshall, “The additional benefit which a person derives from a given increase of his stock of anything diminishes with the growth of the stock that he has.”

In the words of K. E. Boulding, “As a consumer increases the consumption of any one commodity, keeping constant the consumption of all other commodities, the marginal utility of the variable commodity must eventually decline.”

The law can be express in another way as well. As opined by Watson and Getz, “The more you have of anything, the less important to you is any one unit of it.” So, when a consumer gets more and more unit of a commodity he puts it to less and less urgent uses. We can illustrate it by the help of W. J. Baumol’s interesting example. If a man has a cake, he gives it to his child. If he has two cakes, he gives the second cake to his wife. If he has three cakes, he keeps the third one for himself and if he has four cakes, he gives the fourth one to his mother-in-law. This clearly indicates the declines in marginal utility of cake.

There are several reasons for the decrease in marginal utility. They are:

a) Physical and psychological

The consumption or possession of too many units of a commodity brings physical satisfaction. The response to a repeated stimulus diminishes.

b) Possibility of having everything

If a consumer could have everything he wants free of cost, he would choose those quantities of each good that would make the marginal utility of each one zero. This implies that he would maximize total utility for each goods. Marginal utility therefore, would have to diminish to get to zero.

c) Several uses of commodity

Each commodity may have several uses. Each consumer ranks the uses. If the consumer has one unit of a commodity, he puts it to most important use. If he has more units, he puts them to less and less important uses. Marginal utility diminishes, because of the successively less important uses of additional quantities of a commodity.

This law can be illustrated by the help of a table and diagram as shown below:
Marginal and Total Utility
Units of Orange
Marginal Utility
Total Utility
1
2
3
4
5
6
7
8
10
8
6
4
2
0
-2
-4
10
18
24
28
30
30
28
24

The table shows that as the consumer consumes more and more units of orange, the additional utility obtained from successive units goes on declining. It means that the marginal utility declines. As for example, marginal utility from first unit is equal to 10, from 2nd unit is 8, from 3rd unit is 6 and so on. Marginal utility at of 6th unit is zero. The zero marginal utility means that the consumer has all he want of the commodity. He does not want another unit. If he further consumes, marginal utility will be negative or the commodity will have dis-utility. Negative marginal utility means that the consumer has so many units of same thing. He would rather like to have fewer.
Diminishing Marginal Utility

In the figure, OX axis represents quantity (units) of orange and OY axis represents marginal utility. If we join points of marginal utility and quantity combination from point A to F, we get marginal utility curve MU. The MU curve slopes downwards to the right. This means that marginal utility goes on declining. The consumer gets marginal utility equal to 10 from 1st unit, 8 from 2nd unit, 6 from 3rd unit and so on. Marginal utility derived from 6th unit is zero and from 7th unit marginal utility is negative.

Exceptions/ Limitations or Assumptions of Law of Diminishing Marginal Utility


There are should exist certain conditions for the law of diminishing utility to hold. In the absence of these conditions, the law does not apply. The law does not apply in the following conditions.
  1. Similar units: The different units of a commodity should be similar or homogeneous. If the consumer is supplied with superior quality after consumption of first, his marginal utility will increase.
  2. Suitable units: The units of commodity consumed by a consumer should be suitable. It must not be too small. Hence, the units of the commodity must be relevantly defined. The law holds good for a pair of shoes, but not for a single shoe. Likewise, if a man is very thirsty and he gets only a glass of water, the 2nd glass of water will yield him more utility than the first. “In fact this law begins to operate only after certain point, called the ‘origin’ until the origin is reached-that is, until the minimum amount of commodity that can be used effectively has been used – successive increments will show decreasing utility.”
  3. Suitable period: There must not be time-gap in the consumption of different units. If a man takes ‘lunch’ in the morning and ‘dinner’ in the evening, his marginal utility will not diminish. Hence, the commodity must be consumed continuously.
  4. Change in taste: The law holds for individual commodity desired by an individual consumer with given tastes. But if the taste of the consumer changes during the process of consumption, and he likes the commodity more, then the marginal utility of any unit of that commodity increases.
  5. Rare collection: The law may not hold in case of rare collection. The persons with habit of collecting coins, stamps are never satisfied. But it does not mean that the law does not hold. Because, the man does not like to collect same type of article over and over again.
  6. Normal persons: The person should be normal for this law to hold good. The law does not apply to misers, drunkards and gamblers.
  7. Fashion, habit and income: The fashion, habit and income of the consumer must remain same. If a dress, out of fashion comes to the fashion, a nonsmoking man develops habit of smoking or a man unable to purchase motorbike is able to purchase, the marginal utility of the dress, cigarettes and motorbike increase respectively.
  8. Indivisible goods: According to the law, marginal utility diminishes when the commodity is bought in small units, such as orange, biscuit, milk and so on. Such commodities are said to be divisible. But the law is silent as to the commodities that are brought one at a time at long intervals. Such commodities are indivisible goods such as automobile, T.V. set, refrigerator etc. Likewise, the law is silent about the marginal utility of the commodities that are usually purchased once in a lifetime.

Despite the aforementioned exceptions, this law is regarded universal in its application and is a general law of life. There is hardly any situation under which this law does not apply. As for example, we don’t like to hear the same music, see the same movie over and over again. In fact, this law applies to everything.

Importance of Law of Diminishing Marginal Utility


The law of diminishing utility has both theoretical and practical importance as follows:
  1. Basis of other laws: Some of the laws of economics and laws of consumption are based on this law. As for example, the law of demand, law of maximum satisfaction, law of consumer’s surplus is based on this law.
  2. Theory of taxation: This law also serves as the basis of theory of taxation. The more tax is imposed on the rich while less tax is imposed on the poor. Because, the utility of money is less to the rich and more to the poor.
  3. Advocacy of equal distribution of income and wealth: People advocate equal distribution of income and wealth among the people of the country. Because the poor people get more utility from money whereas the rich people get less utility from money.
  4. Determination of market price: This law is also useful in determination of market price. The increase in stock of a commodity gives less utility. Hence the people can be induced to buy more only by lowering price. In other words, when supply increases, price falls.
  5. Regulates daily expenditure: This law regulates the daily expenditure of people. People do not spent all their money in same commodity. They spend part of their money in buying other commodities.

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Most important components that affect to the buying behavior of a consumer

Most important components that affect to the buying behavior of a consumer

There are many major factors that affect consumer buying decision. The major components affecting consumer buying decisions are as follows:

A. Economic Factors: Buying decision primarily depends upon the several economic factors. They are as follows:
  1. Personal income: The ability of the consumers to pay money depends upon the level of their personal income. The higher the level of income, the higher will be the purchasing power and the lower the income, the lower will be the purchasing power.
  2. Income of other members of the family: In a joint family like Nepalese societies, change in income of one family may affect the buying capacity of another member of the same family.
  3. Expected future income: Expectation of future income determines the buying behavior of the consumer.
  4. Liquid assets: When a consumer posses adequate liquid assets, he will be able and willing to spend more on goods and services although his regular income is minimum. Bank balance, short term bank deposit, share, Government bonds, etc. are the examples of consumer liquid assets.
  5. Credit facility: If adequate credit facility is available to the consumer, he will tend to spend more on goods and services although his regular income is low. Refrigerators, cars, scooters and TV, washing machine are sold on an installment basis. Cellular phones are also provided on installment basis.

B. Demographic Factors: Buying decision is affected and determined by demographic factors also. They include the following factors:
  1. Age and life cycle stage: Consumer buys different goods and services over their life time. Consumption is also shaped by the stage of the family life cycle. For instance, a young person is usually fashion conscious, while a middle-aged person is usually status conscious.
  2. Occupation: A person’s buying behavioral pattern is also influenced by his occupation. For example, a company president will buy expensive suit, credit card membership etc.
  3. Gender (Sex): The product needs of male and a female significantly differ.
  4. Life style: Life style is defined as the patterns in which people live and spend time and money. Life style is concerned with the overt actions and behavior of consumers. The life-style categories are different from one person to the other.

C. Socio-cultural Factors:
a) Social factors: The major social factors that affect consumer behavior are as follows: 
  1. Reference group: It is a relatively small social group to which person belongs or aspires to belong and that provide guides to acceptable beliefs, values, attitudes and behavior. Well known athletes, players, musicians, actors, and professionally successful people are reference groups. They influence product and brand choice.
  2. Family: It is also considered as one of the strongest sources of group influence for the individual consumer. The joint family is the most common form family system in Nepal. From the marketers point of view the decision making role in the joint family system is being played by the oldest member of the family.
  3. Roles and status: A person participates in many groups throughout the life. The person’s position in each group can be defined in terms of roles and status. A role consists of activities that a person is expected to perform according to the persons around him. Each role carries a status. A manager has more status than a salesman. Marketers are aware of status symbol potential of products and brands. However, status symbol varies for social classes and also geographically. On the basis of roles and status marketers target their product.
b) Cultural Factors: The major cultural factors that affect consumer’s behavior are as follows:
  1. Culture: Culture is an important determinant of human behavior in the society. Marketers need to understand the major characteristics of culture such as: cultural values keep on changing through the passage of time and they are shared by the society as a whole.
  2. Sub-culture: Sub-cultures include nationality, ethnic group and geographical regions. Many sub cultures make up important market segments and marketers often design product and marketing programmes tailored to their needs. They influence food preferences, clothing choices, recreation etc.
  3. Social class: It is identified as relatively permanent homogeneous group of people having certain identifiable characteristics. There are three types of social classes:
    1. High class
    2. Middle class
    3. Lower class
The marketer has to study the behavioral patterns of these classes so as to formulate marketing strategy and promotional communication.

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Promotion Decisions in Nepal for Successful Marketing

The promotional works give information to target market about the organization and its products, influence them and remind them about the company and its products. Promotion gives complete information to the prospective customers about quality of goods, price, using/handling methods, benefits etc.
Like in other countries, the customers are provided information about products, so is in Nepal also. Promotion is an important element of marketing. Its role is increasing daily. The main elements generally used in practice are as follows:


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Meaning and Objectives of Promotion



1. Advertising


Sellers make various artistic presentations in order to sell their goods, the same is called advertisement. It makes flow of information about goods or services and gives necessary information and knowledge and reminds the customers of the goods or service. So, advertisement has become very popular in promotion of goods or services. This generally used by business firms, social organizations, government and governmental organizations. In order to have mass selling, mass communication is necessary. Nepalese entrepreneurs/producers use different types of advertising media which are mentioned as follows:

a) Print media:

Print media are used to give information to the customers or consumers about products or services. This media include newspapers. Notice, attitudes, ideas/views, descriptions etc. can be published. The many potential customers study such materials. Gorkhapatra, Kantipur, Nepal Samacharpatra etc. are its examples. A large number of customers or consumers look at such newspapers in city areas. But in remote villages, the customers or consumers cannot read such materials since most of them are illiterate.

Magazine is also included in print media. Information about goods or services can be given to the customers or consumers by publishing poems/verses, articles, notices, descriptions etc. in commercial booklets, fortnights, bulletin, journal etc. Such publications attract attention of all customers. House magazine, business journal etc. of the Chamber of Commerce and Industry, Nepal, Himal, New Business Age Core Express, are some examples of Nepalese magazines. Information, advertisement and messages of business firms become comparatively long, descriptive, analytical and explanatory in such type of print media. They may be difficult to understand for the customers living in villages.

b) Audio media:

Information and messages about goods or services also can be broadcasted/ disseminated through radio. So, this medium is also called radio advertisement. Consumer goods, sports goods, household goods, small equipment, etc. are advertised. Radio advertisement has become very popular in Nepal. All the potential customers of all parts of the kingdom can hear and understand notices, messages, description, etc. at a time. So, the Nepalese business firms give priority to radio advertisement.

c) Audio-visual media:

Audio-visual medium is also used to advertise goods or services in Nepal. Information is given about the quality, utility, price, benefits, using methods etc. of the goods which is intended to sell. Colored pictures, scenes of the products are attractively presented decorating at right place through this modern media. Such type of presentation attracts potential customers and wins their heart. Nepal Television is the strong example of audio-visual media in Nepal. Nowadays advertisements are given in front, in the middle and in the end of news.

d) Visual media:

Information and messages about goods or services can also be communicated by pasting posters. Posters can be prepared by writing or printing information or messages with colored pictures and pasted on walls, public places etc. Posters attract the attention of the customers. Such posters are also pasted and exhibited at Tripureshwor Stadium, Pokhara Stadium, Airport, Highways, Bypass roads bus stops etc. Advertisements can be made through bill boards, hoarding boards, etc. at different places such as airport, bus stops, super markets and other important public places. But such boards are located only in some city areas. Electrical signs are also used for advertising goods. Generally, such advertising media are in practice in Nepal.

2. Publicity


The function of providing information and messages about products, company's policy, programs etc. without any fee to the customers is called publicity. Such publicity is made by other sectors than the concerned organization. Such advertisement done through any person, organization, or group becomes reliable and trustworthy for the customers. This type of publicity has also become very effective as well as popular in Nepal. Programs such as press conference, display/exhibition, inauguration by ministers or socially respectable persons etc. are also used for publicity. Organizing annual ceremony of business firm, presenting annual reports etc. also become effective to publicize any company's products or services. This method of advertisement is also practiced in Nepal.

3. Personal Selling


Personal selling is also an important as well as effective tool for promotion. In this method, customers are directly contacted and communicated the messages about company and products. Potential customers are met and the goods are described to them. This is also supposed to be very effective means of promotion. It creates demands in potential customers. The personal seller should be skillful. Personal selling is Nepal has become effective in city areas and has begun to enter in some villages.

4. Sales promotion


Besides personal selling, advertisement, publicity, propagation, and other activities can also be conducted for sales promotion. Among them efforts for creation of demand, promotion of company etc. can be taken. Consumers' promotion, trade promotion, sales force promotion etc. methods should be used to make it effective. Gifts, price-off discount coupon distribution etc. can be provided to attract customers towards goods or services. Most of the Nepalese businessmen have used these methods.

Trade promotion is the second method of trade promotion. In this method, middlemen/intermediaries and channels are encouraged. Allowances, cost free goods, price cut/discount facilities are given to different channel members and sellers to encourage them in selling. Producer can also encourage dealers, wholesalers and retailers by providing facilities. Such activities have become successful to increase sale quantity in target markets in Nepal. Sales force promotion is the third method of sales promotion. It encourages the manpower/sales force involved in selling. The employees/sales forces are encouraged through arrangement of gifts, bonus and commission, sales contest etc. The promotional methods become very effective in sale of goods or services. So, most of the business organizations have used these methods of sales promotion.
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Promotion Mix and Factors Affecting Determination of Promotion Mix

Promotion Mix

Promotion is an important tool of marketing. Promotion is used to provide complete information to consumers about goods/products or services. Mostly, consumers are requested to buy goods by marking them clear about quality, service and operation method. In other word, the way or the media of presenting proposal to
customers for buying goods or services is called promotion. This needs various elements. The task of operating such elements as a whole is called promotion mix. Various types of elements are needed. Promotion mix is to provide information about price, quality, feature etc. of the products to the target customers. For this, personal selling, advertising, sales promotion, publication, propagation should be made.

Promotion is related to the communication process. This function plays an important role to fulfill the objectives of company or organization. Personal selling is an important part of promotion. It encourages potential customers to buy goods or services. Seller may directly go to buyers or buyers may go to sellers. Sellers give information about goods, price, quality features etc. to the customers. Personal sale is actually a conversation between seller and buyer. So, the seller should be skillful in his / her activity.

Advertisement is also equally important in promotion. It provides ample information or message to the customers about goods. Message about goods can be disseminated to maximum customers at minimum cost. Different media can be used for advertisement. Audio video, radio, television, film slide etc. can be used for advertisement. Newspaper, magazines, books, pamphlets, etc. also can be used. Hoarding boards, poster, mobiles etc. can be used for advertisement.

Giving information about goods and organization without any cost is called propagation. This creates demands and plays important roles in heightening dignity of the organization. Nowadays, promotional media have become very popular in Nepal. Propagation can be made through publication, photography, press conference, speech writings etc. Propagation is a kind of promotional strategy by which information and messages can be disseminated without any cost. Request to social and political persons also can be used for sales promotion.

Short term motivation to the potential customers for buying goods or services is called sales promotion. It encourages them to buy goods immediately. It becomes more effective if personal sale and advertisement help. Trade fair, exhibition, decoration, free sample, gifts, coupon, discount, credit facility etc. are provided. Attractive packaging also advertises by itself and encourages customers to take buying decision.

Main Elements of Promotion Mix


Factors Affecting Determination of Promotion Mix


Promotion mix consists of five elements / factors. Promotion mixing is very complicated strategic task. Proper promotion mix should be prepared to conduct marketing successfully. Promotion mix is directly affected by promotion objective, promotion budget, nature of market, product life cycle, marketing promotion strategy. They are mentioned as follows:

1. Promotion objective


One of the main factors affecting determination of promotion mix is promotion objective. If the customers are to be given clear information and make them aware about the goods intended to sell, special emphasis should be given on advertisement and propagation. Similarly, if the promotion objective is to make potential customers believe and give assurance to them, personal selling and advertisement become important. If the objective of promotion is to get order / demand, personal selling and sales promotion should be very active. If the promotion objective is to remind the customers, advertisement becomes more important. If the promotion objective is for brand loyalty, advertisement and propagation become important.

2. Promotion budget


Sufficient budget should be arranged for promotional functions. In the lack of budget, promotional works cannot be conducted. So, promotion budget also affects promotion mix determination. A lot of budget is needed for personal / individual selling and advertisement. If sufficient budget has been allocated for advertisement, highly responsive personal sale can be conducted, long term advertisement policy and high amount of budget is also not needed for publicity. It needs only good opportunity for propagation. This makes it clear that promotional activities can be determined on the basis of promotional budget. In this way, the fixed / prescribed budget affects promotion mix.

3. Nature of market


Nature of market also affects promotion mix. If the size of targeted market is very small one, way / method becomes effective, and if its size is big, other way / method becomes effective. If the targeted market is consumers' market, advertisement and sale promotional activities should be conducted. If it is industrial market, personal sales and promotional sale should be conducted. Similarly, if the targeted market is very small and is limited in a certain geographical area, personal selling and advertisement should be emphasized. If the market is big, national and international advertisement and business promotion should be emphasized.

4. Nature of product


Nature of product also affects the determination of promotion mix. Products may be consumer target or industrial. Their information cannot be effectively communicated through same activities. Generally, advertisement becomes important for consumer goods whereas personal selling becomes important for industrial goods. Similarly, advertisement and sale promotional activities become important for the low priced goods, whereas personal selling and local advertisement become important for high priced goods. In the same way, personal selling and propagation should be given emphasis for special goods.

5. Product life cycle


Different stages of product life cycle also affect promotion mix. Every product goes through different four stages after it has been produced. At the introduction stage of goods / products, advertisement and propagation should be given emphasis. After the product enters growth stage, only advertisement becomes sufficient. Similarly, careful attention should be paid to the product at its mature stage. If the product has entered the last stage of its life cycle, personal selling, sales promotion and propagation are needed. Whatever tools can save products, the same should be used for promotion.

6. Promotion strategy


There may be several strategies of promotional activities. They also affect promotion mix. They are mentioned in short as follows:

i. Push strategy

The producers can push their products using their force. In this strategy, products are pushed to the final consumers through distribution channel. Personal selling and trade promotion become important.

Pushing Strategy

ii. Pull strategy

In this strategy, the customers demand goods from retailers. Retailers demand from wholesalers and wholesalers demand from producers. For such strategy, advertisement becomes very important.

Pulling Strategy


iii. Interpersonal strategy

Interpersonal strategy is also one of the strategies. In this strategy, personal selling becomes more important. So, this tool of promotion should be adopted.

iv. Mass communication strategy

If the promotion strategy is in favor of mass communication, sales promotion should be given special importance. Similarly, advertising and publicity are also equally important.

Factors Affecting Promotion Mix Determination

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Factors Determining Consumer Buying Decisions | Consumer Buying Behavior

Factors Determining Consumer Buying Decisions


Economic, demographic, psychological and socio-cultural factors determine consumer buying decisions. These factors directly affect consumer behavior.

Factors determining Consumer Buying Decision


I. Economic Factors            


Economic factors play an important role in consumer buying behavior decision. It also directly affects purchasing power of the consumers. If consumers’ purchasing power is weak, they cannot make decision to buy goods or services even if they like very much. But, if they have purchasing power, they can take prompt decision to buy goods or services they like. Income level, income of their family members, liquid asset, spending attitude, credit facility etc. are the economic factors to determine consumers’ buying decision.
  1. Consumer’s income level: Income of all consumers’ cannot be same. Some have more and others have low income level. If the income of consumers is high, purchasing power and readiness become high, otherwise their purchasing power and readiness become low. The consumers having high level income take quick decision to buy high quality goods or services. But those having low income take slow decision to buy low quality goods or services.
  2. Income of other members of family: Consumer lives in family. Family expense is managed by adding the income of all members of the family. Any change in income of other members also affects the purchasing decision of the consumer. If income of the other family members increases, purchasing power also increases; if decreases, it also decreases. In the countries like Nepal where joint families live together, income of other family members also should be studied and analyzed while analyzing the economic determining factors.
  3. Liquid assets: If the consumers have liquid assets such bank balance, gold, silver, share, government bond etc., their purchasing power does not drop off even if incomes become irregular or drop down, because such liquid assets increase their purchasing power.
  4. Attitude towards spending: Consumers’ spending attitude becomes different. Some consumers form positive and others form negative attitude towards expense. Such attitude also influences buying decision.
  5. Credit facility: Credit facility also influences consumers’ purchasing power and readiness. If credit facility is available, consumers’ spending level increases. Just the opposite, if no credit facility is available, consumers’ spending level decreases.


II. Demographic Factors             


Demographic factors play an important role in purchasing decision of the consumers. It directly or indirectly influences the consumers’ buying decision. The demographic factors include family size, family life cycle, occupation, age, sex or gender etc.

a) Family size and life cycle: Family size of all consumers may not be same. Size of some family may be small and others may be big. The size of family influences selection of goods and buying quantity. If the family size is big, such consumers, generally, purchase large quantity of same brand. If family size is small, they purchase small quantity of goods of different brands.

Life cycle of a family also influences consumers’ buying behavior. Unmarried, married but have no children, married and have children, old and other consumers have their own behaviors towards selecting and buying goods. Behaviors of consumers are different. Such behaviors also directly influence buying decision.

b) Occupation: Occupation of the consumers also influences their buying behavior. For example, workers buy cheap clothes to wear while working in factory. Teachers, professors, advocates, managers etc. buy costly dresses to wear while working in their offices. So, the occupation affects buying behavior of the consumers.

c) Sex or Gender: Buying behavior and decision also differs between men and women. Women buyers give importance to price, quality and warranty of goods and evaluate alternatives. They take longer time and make efforts for making buying decision. But males give comparatively less importance to price, quality and warranty of the goods. They are influenced by advertisements, sale promotion and other activities. They do not take long time and efforts to take buying decision. They take buying decision promptly. They also do not base on evaluation of alternatives as many as the women base on.

III. Psychological Factors           


Psychological factors also play important role in buying behavior of consumers. Consumer’s psychology becomes more self-centered. These factors include learning, motivation, perception, personality, attitudes, life style etc.

a) Learning: The changes that come in consumers from observation, experiment and experience is called learning. Consumers take buying decision after learning. Without learning and knowing anything about goods, they cannot take buying decision. Learning affects human behavior directly. Learning involves four factors such as curiosity, cue, response and reinforcement. Learning has two main theories. They are:
  • Stimulus response theory: This is called S-R theory. Consumers express response as a result of stimulus. For example; consumers can be simulated by advertisement and they buy goods or services as response to the advertisement.
  • Modern theory: This theory includes drive, cue, response and reinforcement. Drive stimulates consumers to buy goods or services, cue gives information how the consumers respond. If the response is positive, its enforce takes place, otherwise it does not.

b) Motivation: Motivation is the power sprung from the heart of a man. It leads towards objective. Until the man does not achieve objective, he becomes restless. So, whatever activities a man does, they are all the results of motivation. Motivation also affects buying behavior of consumers. Motivation brings purposeful changes in human behavior. Motivated consumer becomes heartily ready to buy goods or services. There are many theories of motivation. Among them Maslow’s Hierarchy of Need Theory and Herzberg’s Two-Factor Theory have been discussed as follows:

i) Maslow’s Hierarchy of Need Theory

Abraham Maslow’s hierarchy of need theory believes that human being acts like motivated by need and need has a certain hierarchy. These needs are fulfilled one after another setting them in hierarchy. But men cannot be motivated by satisfied needs, only unsatisfied need affects human behavior. Abraham Maslow’s hierarchy of need theory can be presented as follows:

Maslow's Hierarchy of Need Theory

  • Physiological needs: Physiological needs of human being are compulsory nature. Food, shelter, clothes, thrust, hunger etc. are physiological needs.
  • Safety needs: When human’s physiological needs are fulfilled, security needs are realized. Security from physical danger, bad health, weak economic condition etc. are included in safety needs.
  • Social needs: After the security needs have been fulfilled, human begins realize social needs. Friendly behavior, socially acceptable, living with love, involvement in social organizations etc. are included in social needs.
  • Ego or esteem needs: After the human’s physiological, safety and social needs are fulfilled, she/he begins to realize ego or esteem needs. Under this, self respect, dignity, honor, freedom, praise, recognition of freedom etc. are included.
  • Self actualization needs: According to Maslow, after the ego or esteem needs are fulfilled, human realizes self-actualization needs. This includes use of special skill, ability, creativeness, self-development etc.


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 ii) Herzberg’s two-factor theory

 Herzberg’s two-factor theory is based on hygiene and motivation factors. According to him, hygiene factor does not motivate human to work, it prevents dissatisfaction only, and motivating factors lead human towards works and increases satisfaction. According to this theory, the lower level needs are classified by Maslow as physiological needs, safety needs and social need and higher level needs as ego or esteem needs that come under hygiene factors and self actualization needs come under motivating factors. The following figure makes it clearer:

Comparison between Maslow's and Hertzberg's Need Theories

c) Perception: The process of understanding about anything and making out its meaning is called perception. In other word, knowledge or understanding meaning or making out view about anything or any situation is called perception. Different persons may have different perception about same thing. Consumers collect information by looking, feeling, hearing, smelling, tasting etc. and make a certain perception. Accordingly the consumers make buying decision.

d) Personality: Consumers’ personality also influences buying behavior. Living style, talking style, interest, wants, personal style etc. as a whole, is personality. Personality is expressed in the form of self control and self confidence. Personality is expressed through dress, speaking style, his vehicle, his house, words he uses, restaurant he goes etc. The characteristics of personality are as follows:
  • Self-confidence or dependency
  • Aggressive or friendly
  • Introvert or extrovert
  • Traditional or dynamic

e) Attitude: Consumer’s knowledge, perception and belief about goods or services is called attitude. Attitude of any person towards goods is not set by birth. Attitude is formed through learning and perception. What a consumer learns from society forms persons’ attitude. Such attitude makes the person decide to buy or not to buy goods.

Consumer’s attitude towards goods many be positive or negative. If it is positive, business organization tries to maintain it; if negative, the organization should adjust marketing mix and make it positive, because if the attitude becomes positive consumer decides to buy goods, otherwise decides not to buy. Attitude includes the following factors:-
  1. Learning: Attitude develops through learning process. For example, consumer learns something about goods through direct experience, information collection, mass communication media etc. As a result, his/her attitude develops.
  2. Consistency: Attitude becomes comparatively consistent but it becomes temporary. Attitude changes after a long time. As situation also affects attitude, it may change even in shorter time.
  3. Favorable or unfavorable: Consumers’ attitude towards goods or services becomes either positive or negative. It never remains neutral.

f) Life style: Living, wearing, eating, spending and other behaviors of men as a whole is called lifestyle. Life style of the person can be understood from different activities, interest, ideas and thinking style. They should be studied and analyzed to find out how the consumers spend time, what is their interest and how is their thought. Consumers’ life style makes difference in their need of goods and choice of brand. Consumers’ life style is influenced by their education, society, context etc. Lifestyle gives preference to the following three aspects of consumers:-
  1. Activities: Activity aspect includes how the consumers pass their time, what works they do, what their interest is, how they buy and how they pass holidays etc.
  2. Interest: Consumers’ interests about home, family, food, job, fashion etc. are included under this aspect.
  3. Opinion: Consumers’ thought, ideas and attitude towards society, politics, business, goods, services etc. are included in this aspect.


IV. Socio-cultural Factors             


Social and cultural factors also play an important role in consumers’ buying behavior. The collective form of persons is called society, and their custom, tradition, wearing and eating, festivals, values and norms, religion, etc. on the whole is called culture. Social and cultural factors include family, reference group, social group etc.

a) Family: If the persons having same blood relations, married to others or adopted persons live in same home, they all are a family. A family includes father, mother, wife, children (sons and daughters), uncle and aunts, nephew etc. Family may be in joint or nuclear form. Different members of a family may play different roles. This influences buying decision. Generally the following roles are found in a family:-
  1. Initiator: The person who first presents suggestion or proposes to buy any goods is called initiator.
  2. Influencer: The person who influences buying decision is called influencer. Influencer plays an important role in buying decision.
  3. Decider: The person who takes last decision about what to buy, how to buy, where to buy and when to buy is called decider.
  4. User: The person who uses goods or services is called user.

The above mentioned roles may change in a family. The roles of each member of a family become different depending upon the nature of goods or services. For instance, all the members cannot have equal role in buying daily necessities for home, buying dolls, buying land or house, or buying expensive ornaments etc. Roles are found changing according to the nature of goods or services.

b) Social Class: High, middle and low class people live in society. Consumers’ class can be identified from their economic condition, life style, profession/occupation, education, premises, norms and values, belief, attitudes etc. The consumers who have high economic condition, prosperous psychology and customized life style are called or counted as high class. In the same way, middle class and lower class consumers can be identified.

The bases to distinguish social class are:
  • Economic condition
  • Life style
  • Values, beliefs and attitudes
  • Occupation/ profession
  • Education

Buying behavior becomes different according to social class. High social class selects high quality, prestigious sophisticated and famous brand of goods. Low social class people select low quality goods and middle class people middle class quality goods. High class people visit foreign countries in holidays, celebrate Good Friday, birthday party. But low and middle class people cannot, due to lack of money even if they want.

c) Culture: Language, religion, belief, food, dress etc. on the whole is called culture. Culture is the behavior learnt from generation to generation. It influences activities of all the people. It naturally influences buying behavior. Men learn different things from culture, which leaves deep and indelible impression. It becomes very difficult to change culture along with the time. Culture may be seen or unseen. Home, food, living style, dress, behavior, working style etc. are seen culture where as language, religion, belief, attitude etc. are unseen culture. Although culture also may change after a long time. Different societies have different cultures which direct the people of their own society. Culture forms deep seated tradition and behavior which cannot be broken easily.

d) Subculture: The community adopting same culture can be classified in different ways on the basis of region, language, caste, religion etc. The culture classified in this way is called sub-culture. For example, Nepal’s culture can be classified into two subcultures as western culture and eastern culture on the basis of region. Similarly, culture can be classified into subcultures on the basis of caste, race like Gurung, Magar, Newar, Brahmin, Kshetri etc. In the same way, it can be classified into other subcultures on other bases. Culture influences consumers’ behavior. As special introduction and identity of consumers’ can be learnt from the study of culture, it helps to make marketing mix more effective.

e) Reference group: The group which influences consumers’ buying behavior is called reference group. Each consumer is associated with one or the other society and is directly influenced by the same. The group influences consumers’ buying behavior by providing information, influencing person’s attitude, giving pressure due to which they decide to buy goods or services. Generally, reference groups are as follows:
  1. Membership group: This includes family, religious group, professional group, trade union, etc.
  2. Aspiration group: The group interested to be member of any desired group is called aspiration group. For instance, political group, social or religious group, sport group, other extra activity group etc.
  3. Disassociate group: The group which breaks up from one and joins any other group is called disassociation. For example, if any political leader renounces politics and starts religious, social or other activities, it is called dissociation.

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