Consumer Behavior and Market Demand Analysis
1. What Is a Market and How Can We Classify the Type of Buyer?
A market is a set of consumers (individuals or organizations) who have a need, have purchasing power, and, moreover, are willing to buy. The externalization of these requirements is measured by the demand. Depending on the type of buyer, the market can be classified into the following categories:
- Individuals: The relationship of the buyer to the seller is not commercial. They respond to final demand because the consumer purchases goods for their own consumption.
- Companies: Businesses acquire goods and services to incorporate into their production processes. Their demand is derived from the consumer market. The relationship is between companies buying and selling.
- Public Bodies: Businesses acquire goods and services for incorporation into their production processes. Their demand is derived from the consumer market. Value is exchanged between businesses and public bodies.
- Other Institutions: This includes products with derived demand from institutions such as professional associations and cultural, charitable, and sports activities.
2. How Can We Define the Demand for a Product? What Is the Difference Between Final Demand and Derived Demand?
From a quantitative point of view, we define the demand for a product as the total volume of the product purchased at a fixed time period and from environment conditions and certain commercial effort. As for the difference between final demand and derived demand, final demand is intended for end users to meet their needs and desires, while derived demand is aimed at other entities to transform these goods to be sent to the final consumer or used in the development of their activities.
3. What Is the Measurement of Demand?
It consists of quantifying the extent of demand, both current and potential (formed by consumers who have some interest in a particular product and that can be achieved with the instruments of marketing). The measure of demand can be done in three ways:
- Physical Units: Indicating the number of products demanded.
- Monetary Value: Multiplying the demand by its unit value.
- Market Share: The relationship between sales of a company and the total market demand (market share). It is expressed in net sales.
4. What Is the Explanation of Demand?
It is to identify the factors that determine demand, find out how they influence behavior, and the interactions that may exist between them. We can classify these factors:
- Controlled Variables: Commercial effort, economic valuation of the 4Ps (commercial budget).
- Uncontrollable Variables: Do not depend on company performance (macro), legal structures, technological, economic, etc.
The explanation of the variables that influence the demand will quantify the extent to quantify the level of demand. Elasticity, for example, is a way of quantifying the sensitivity of demand.
5. What Is Forecasting of Demand?
It is to obtain a forecast level of sales in the future. The forecast will be more successful the better the measurement and explanation of it. The prognosis is unlikely to be effective if the measurement and explanation are not done correctly. These three tasks underscore the importance of demand analysis. A correct measurement and explanation of the phenomena that determine the demand will allow a more accurate prediction of future behavior and better use of instruments and marketing for more effective environmental management, which will ultimately make better decisions.
6. What Peculiarities Present the Study of Individual Consumer Behavior?
The study of consumer behavior can improve the ability to communicate with customers, gain their trust, ensure their loyalty, and, overall, enable more effective planning of commercial activity. All this translates into benefits not only for the entity in terms of an increase in the products sold but also for the consumer, who sees the supply of products adapted precisely to their needs.
7. What Are Routine Decisions?
Give an example that illustrates your answer.
Routine decisions, low complexity, or low involvement products are those that the consumer takes without any conscious effort, making the decision in a mechanical act. Consumers buy a brand that has successfully acquired before, the alternatives are well known, and the criteria for evaluating them are clearly stated in the buyer’s mind. An example of this is if you buy rice while “The Fallas” are happening, and it turns out well, you might consider always buying the same brand.
8. When Studying the Behavior of Individual Consumer Buying, What Are Complex Decisions?
Give an example that illustrates your answer.
In this kind of decision, the buyer is faced with a problem or complex purchasing situation, which requires more time and effort to make a decision. The involvement of the buyer in these cases is very high and, therefore, they will be very sensitive to all the information to guide their decision. Typically, these arise in situations of buying a new brand or a new category, for example, buying a house, in order to assess all the information we have, our experience, our perception of risk, and our interests.
9. Briefly Outline the Main Stages of the Buying Decision.
- Stage 1: Recognizing the Problem: The entity identifies clients’ needs and tries to “persuade” them to consume their products. For this, they act at three levels:
- Influence Mood
- Influence Perceptions of Real State
- Influence the Time of Recognition of Problems
- Stage 2: The Search for Information: After accepting that there is a problem and delimiting it, the individual begins to seek information on the various products and brands that can help meet the need. To do this, they first perform an internal search (using their stored information), and if it is not sufficient, external searches (gathering information from external sources).
- Stage 3: The Evaluation of Alternatives: Once the consumer has identified a number of products or brands, they have to choose (evoked set), made the same assessment with the aim of reaching a decision. Marketing strategies based on the evaluation of alternatives include:
- Influencing the Consumer’s Evoked Set
- Influencing the Evaluation of the Options
- Stage 4: Decision Making: It covers the purchase decision, the selection of the place of purchase, and all activities directly associated with the transaction.
- Stage 5: Post-Purchase Assessment: Depending on the degree of customer satisfaction, they will return to buy our product. If expectations are met, the satisfied customer will buy again. If expectations are not met, the unsatisfied consumer will not buy again.
10. Within the Purchasing Decision Process for Individual Consumers, What Are the Five Basic Types of Risk That Consumers May Perceive in Buying?
The five basic types of risk that the buyer can take are:
- Social
- Psychological
- Physical
- Functional
- Monetary
11. One Component of That Risk Is Monetary. What Is This Risk?
Give an example that illustrates your answer.
Buyers who are more sensitive to this risk are individuals with low income and wealth. The main risk is the money and property. An example that illustrates this type of risk is high-ticket items like cars, apartments, etc.
12. One Component of That Risk Is Functional. What Is This Risk?
Give an example that illustrates your answer.
It is the risk that the most practical consumers suffer in products in which the brand is not working properly or fails completely. This usually occurs in purchase and use products that require exclusive commitment of the buyer (like a washing machine).
13. One of the Components of That Risk Is Physical. What Is This Risk?
Give an example that illustrates your answer.
It is the risk that most people suffer, especially the elderly, weak, or sick, in products that come into play physical vigor, health, and vitality. This usually occurs in mechanical and electrical products, medical treatments, food, and beverages.
14. One Component of That Risk Is Social. What Is This Risk?
Give an example that illustrates your answer.
It is the risk to relationships and social conditions experienced by people who do not respect themselves or who are unattractive to others. This usually occurs in socially visible or symbolic products, such as clothing, jewelry, cars, etc.
15. One of the Components of That Risk Is Psychological. What Is This Risk?
Give an example that illustrates your answer.
It is the risk to self-esteem and confidence suffered by insecure individuals. This usually occurs in the purchase of luxurious and expensive personal items that can generate feelings of guilt, on durable, etc.