Introduction
It is generally accepted that human beings are irrational by their nature and operate in accordance with their feelings rather than logic. Even people who consider themselves rational might unconsciously make themselves believe their truth, but in reality, they will still tend to be emotional. The causes and effects of customer buying behavior are why behavioral economics is such an essential field of science.
The way people choose personal or family products by utilizing their available resources, such as time, money, and effort, is what is meant by their buying behavior. Many factors motivate people to buy different goods, including socioeconomic and psychological reasons. However, behavioral economics is critical for research because it emphasizes motivational factors and decision-making processes behind every purchase, which can be used in the science and retail sectors.
Motivational Factors in My Consumer Choices
Motivation is a crucial component in analyzing customer behavior. Maslow made a good point when he remarked that in today’s society, everyone wants to be loved and appreciated by others (Kler et al., 2022). As per Maslow’s hierarchy of human needs, each person’s existence depends on a sense of safety, security, and belonging (Kler et al., 2022). Maslow added that people often choose branded products to boost their self-esteem, particularly when the brand has partnered with the consumers’ idols, including famous actors or actresses, politicians, or those associated with the elite in society (Kler et al., 2022). Therefore, people typically select goods that they believe will meet their expectations.
I can confirm from personal experience that Maslow’s assumptions are true. The Wall Street Journal subscription is a particular product I recently purchased and pay for frequently. The first motivational factor that influenced me to make such a purchase is the socio-economic one. My profession is in the field of business, as well as my major, and it would be impossible for me to isolate myself from the world of finance and business-related news.
The second motivational factor is culture, where several points play their role. As mentioned, individuals often choose to make a purchase based on external influence, such as role models. I have recently been learning about Warren Buffett, his life experience, and his passion for investing.
Under this influence, I decided that in order to know just as much as my role model, I would need to immerse myself in a similar environment of information. This involves stocks, bonds, and markets, and my subscription gives me information about them. Moreover, the circle of people I am currently in includes people who take a high interest in investing and cryptocurrency, and, under peer pressure, I felt the need to maintain a similar level of awareness.
Finally, psychological factors contributed to my decision to purchase and pay for a subscription to The Wall Street Journal. With the current events in the world, it can be overwhelming to avoid the news or not know what is happening. Many people, including myself, need to keep abreast of all events, and therefore, there is a need for a reliable source. After reviewing the alternatives, I decided the Wall Street Journal is the optimal option. Therefore, culture, socio-economic factors, as well as personal and psychological factors, aid in understanding the need and are the four key factors that affect consumers’ behavior.
Decision-Making Processes and Factors
After reviewing personal experience, it can be seen that motivation is a force that triggers goal-oriented action, such as making purchasing decisions. Motivating elements like the product, location, price, brands, environment, subculture, community, friends, family, etc., work as a catalyst for consumers to behave in a way that efficiently satisfies their requirements (Kler et al., 2022). Therefore, these criteria become crucial since they impact customers’ purchasing intentions. When the customer’s demand is stimulated to a large degree of intensity, it may also be said that this aspect has the most impact on the consumer’s buying motive (Kler et al., 2022). In my case, the decision-making factors that contributed to my purchase decision were the brand, price, and culture.
However, factors are not the only elements that help understand consumer behavior. There are additional decision-making processes, and consumers use this technique to weigh their options before making a purchase. The five fundamental consumer decision-making phases are problem identification, information search, alternative assessment, purchase decision, and post-purchase assessment (Reyes, 2020). The first step, problem identification, was the moment when I understood that I needed a subscription, which was under the influence of peer pressure, the necessity to be aware of the news, and the influence of my role model.
The second step was the search for information, when I started to look for journals that provided the most helpful and comprehensive material. However, the third step was a bit complicated since I had to compare alternatives. My options were The Wall Street Journal or The Economist, two of the most famous journals in the world of finance. Since the price of the former was almost six times cheaper than the latter, and it did not focus solely on economic news, I chose The Wall Street Journal, which was the fourth step. Finally, being at my fifth stage, post-purchase assessment, I do not regret my decision and will continue to renew my subscription.
Research on Consumer Behavior
Customer perception and decision-making have always been the center of research on consumer behavior. Consumer behavior examines how people or groups choose, buy, utilize, and process goods or services, often to fulfill wants and expectations (Xu & Shen, 2021). In this case, behavioral economics blends principles of economics and psychology to comprehend how and why individuals behave. It varies from neoclassical economics, which assumes that most individuals have clearly defined interests and base their actions on those interests in a well-informed, self-interested manner (Witynski, n.d.). Therefore, behavioral economics is inseparable from psychology and general economics and is essential for at least two reasons.
The behavior of consumers is important for research to understand human psychology in terms of economics. Despite their age or intellect, people, according to behavioral economists, are very self-centered when it comes to what is best for them (Madsen et al., 2020). As mentioned before, the premise of behavioral economics is that people make illogical decisions (Madsen et al., 2020). As a result, people are prone to temptation and frequently choose hasty and bad judgments, even if it is obvious that there are better alternatives that would result in better long-term consequences. Many human acts are obviously irrational, as any keen observer of human nature will certainly concur. As a result, established behavioral patterns can be used to predict people’s behavior in different economic cycles, such as a recession.
However, it is noteworthy that research on consumer behavior is also necessary for retailers. Over half of all online purchases are believed to be canceled before being finalized (Bell et al., 2020). Retailers are interested in so-called consumer dropout, sometimes referred to as shopping cart abandonment.
It defines the behavioral result of abandoning an online buying experience with products still in the cart. Data gathered from investigations of real online transactions suggests that abandonment rates range from 25-75% of purchases (Bell et al., 2020). In this case, businesses will want to know how to predict such behavior and, more importantly, eliminate it in order to create more revenue.
Moreover, behavioral economics allowed the introduction of a nudge strategy, which is used to influence consumers’ decisions and persuade them to take specific actions (Witynski, n.d.). An illustration of a nudge to encourage students to select healthier alternatives is placing fruit at eye level or close to the pay register in a high school cafeteria (Witynski, n.d.). Thus, one can see how behavioral economics research allows one to predict and manipulate consumers’ decision-making.
Conclusion
Hence, in addition to allowing researchers to observe specific behavioral patterns under varied economic conditions, behavioral economics additionally gives businesses the ability to influence their customers. The Wall Street Journal subscription is one item I recently bought and regularly pay for. The four main elements that influenced my shopping behavior were socioeconomic factors, culture, personal and psychological issues, and finally, aspects of culture.
Problem identification, information search, alternative assessment, purchase choice, and post-purchase evaluation are the five basic steps in the decision-making process for customers. Finally, behavioral economics is fundamental for at least two reasons and is inextricably linked to both psychology and general economics. Therefore, it is clear how behavioral economics research may be used to anticipate and even influence customer behavior.
References
Bell, L., McCloy, R., Butler, L., & Vogt, J. (2020). Motivational and affective factors underlying consumer dropout and transactional success in ecommerce: An overview. Frontiers in Psychology, 11, 1546. Web.
Kler, R., Prasad, S., Prasad, A. B., Goswami, R., & Mitra, G. S. (2022). Factors affecting consumer buying motivations: An empirical study in the behavioral economics perspectives. Journal of Positive School Psychology, 6(2), 711-717. Web.
Madsen, A. O., Buxrašvili, P., & Chkoniya, V. (2020). Anthropological approaches to understanding consumption patterns and consumer behavior. IGI Global.
Reyes, M. (2020). Consumer behavior and marketing. IntechOpen.
Witynski, M. (n.d.). Behavioral economics, explained. The University of Chicago. Web.
Xu, L., & Shen, X. (2021). Research on consumer behavior based on the perspective of behavioral economics. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 316-320). Atlantis Press. Web.