35 CONSUMER BEHAVIOR, CONSUMER PROBLEMS AND CHALLENGES

M. R. Thilakam

A.  CONSUMER BEHAVIOR Learning Objectives

This lesson will enable the students to understand the concept of consumer behaviour, consumer problems and challenges.

INTRODUCTION

Consumer” is a potential purchaser of product or services offered for sale, whereas “customer” is the actual purchaser whether he consumes or not. The term “consumer” is used for both individual buyer and “Business buyer.” While the individual buyer buys things for his own personal and family consumption, the business buyer is a commercial buyer who buys things to manufacturing other products or for reselling or for use in running his enterprise.

Behaviour is the process of responding to stimuli. Consumer behavior is the study of what people consume but where, how often, and under what conditions goods and services are consumed. It refers to the actions and decision process of people who purchase goods and services for personal consumption.

According to Prof. Walter C.G and Prof Paul G.W., “Consumer behavior is the process whereby individuals decide whether, what, when, where, how and from whom to purchase goods and services- Consumer behavior is all the psychological, social and physical behavior of potential customers as they become aware of, evaluate ,purchase, consume and tell others about the products or services.”

Consumer behavior is deeply and delicately influenced by individual characteristics, product characteristics and situational characteristics.

HUMAN WANTS AND CONSUMER CHOICE

Wants form the economic basis of human life. There are no limits to human desires. Desires are unlimited. Every individual is constantly making efforts to fulfill ones desires and feels satisfied when desires are fulfilled. Wants can be satisfied only on the basis of available resources.

The following are the most important characteristics of wants.

1. Wants are unlimited

Famous economist Marshall has rightly said that human wants are countless in number and are varied in kind. As soon as one want is satisfied another want takes its place. This endless circle of wants continues throughout life. Thus, we see wants never come to an end.

2. Any particular want is satiable

Though the wants are unlimited, but it is possible to satisfy a particular want, provided has the means (resource).For example, when a man is hungry he needs food to satisfy his hunger. As soon as the want for food is fulfilled he feels satisfied.

3. Recurrence of wants

Wants once satisfied will recur after a short interval. For example, the desire to eat and satisfy hunger will recur after a few hours. This recurrence of want will be satisfied once again it has to be fulfilled.

4. Wants are complementary

It is a common experience that we want things in groups. Several wants must be satisfied together in a group. A single article out of group cannot satisfy human wants by itself. It needs other things to complete its use, e.g to write a letter one requires paper, pen and ink.

5. Wants are competitive

A person has several wants at the same time. But the means to satisfy them are limited. Therefore, he has to choose between several wants and arrange them in order of priority. He satisfies urgent wants and postpones many others to be satisfied in future.

6. Wants are alternative

There are several ways of satisfying a particular want. If we feel thirsty, we can have cool drinks, hot coffee or any other beverage. The final choice depends upon availability of money and the relative prices.

7.  Wants vary with time, place and person

Wants are not always the same. It varies with individual to individual. People want different things at different times and in different places. They are also influenced by many factors likeincome, customs, fashion, advertisement etc. For example, medicines are needed when we feel sick. Cool drinks are needed in summer season only; People in hill stations require warm garments.

8. Wants vary in Urgency and Intensity

All wants are not equally important and intense. Some wants are urgent while some are less urgent.

9. Wants multiply with civilization

With the advancement the wants multiply. Therefore the wants of people living in urban area are more than the villagers. With civilization the demand for entertainment gadgets, four wheelers etc, are increasing.

10. Wants change into habits

When a particular want is satisfied continuously, a person may get used to it and it may grow into a habit. For example regular drinking of tea, coffee, alcohol, etc. becomes a habit for many people.

11. Wants are influenced by income, salesmanship and advertisement

If income is higher more wants can be satisfied with the surplus income. Customers demand a particular brand due to salesmanship or advertisement.

12. Wants are the result of custom or convention

Due to custom and convention people purchase certain things to celebrate various functions. e.g. Gold jewels

13. Present wants are more important than future wants:

A person uses most of his limited resources for the satisfaction of present wants. Priority is accorded to present wants, because they are definite but whereas future is indefinite. For example, providing for the education of children in the present is more important than providing for old age security in future.

14. Wants change and expand with development

A simple example to show how wants are changing is the telephone. Earlier, in the rural areas there were not many telephones, but today telephone has become a necessity for everybody for keeping in touch with their near and dear ones. People using telephone earlier, are now using mobile phones. They want more and more facilities in their mobile phones such as, Camera, Internet and so on.

CLASSIFICATION OF WANTS

The wants can be classified as under.

A. Necessaries: These can be sub divided as

• Necessaries of existence: The things without which we cannot exist e.g. water, food, clothing, shelter.
• Necessaries for efficiency-These wants are essential for improving human health and working efficiency. e.g table and chair for a student help to increase the efficiency.
• Conventional necessaries: The things which we are forced to use by social custom.

B.   Comforts: in order to make the life more comfortable, comfort seeking wants are necessary. For example providing fans in class rooms which increases the efficiency of the students.

C.   Luxuries: Luxury means surplus consumption. After getting comforts, man desire luxury. Luxurywants neitherincrease the efficiency of work nor they are necessary for life. Costly goods are possessed just for status symbol. e.g. gold and silver etc.,

UTILITY APPROACH

When a commodity is consumed a want of a person is satisfied. The meaning of utility is related to the satisfying power of a commodity or a service.

Marginal utility

Marginal utility is the satisfaction gained from every single unit of consumption. It is the satisfaction derived from the additional unit of commodity by a person.

Definition-Marginal utility of any quantity of commodity is the increase in total utility which results from a unit increase in consumption.

Law of diminishing marginal utility

Human wants are unlimited. In order to satisfy a want at a particular time, resources are needed, which are very limited because they have alternative uses. All the wants cannot be satisfied at a point of time.

The law of diminishing marginal utility

According to Prof Marshall, “The additional benefits which a person derives from a given increase of a stock of a thing, diminishes, other things being equal, with every increase in the stock that he already has”.

The definition reveals that the utility derived by the consumer from the additional unit of the same commodity will decline. The marginal utility decreases with every addition of the same unit and becomes zero and thereafter, it is negative.

Law of Equi-marginal utility

The law of equi-marginal utility is based on the law of diminishing marginal utility. This law operates when different unit of varied commodities are consumed in order to maximize the satisfaction level with in limited resources. Every consumer tries to gain maximum satisfaction with his expenditure of resources. If the utility of a commodity starts decreasing, then the consumer start purchasing other commodity which gives him maximum satisfaction, the law is called the law of substitution. The consumer should allocate his resources on different units of commodities so that the marginal utility of every unit of consumption is equalized.

The law is defined as “In case of a single commodity, which can be put to several uses, the consumer will distribute it among these uses in such a way that it has the same marginal utility in all, only then his utility will be maximum”

A consumer attains its maximum satisfaction when the marginal utility of all the goods consumed / purchased are in the proportion of their prices. i.e., the marginal utility of all the consumption are equalized. Family income is spent on various goods and services namely food, clothing, shelter, education, health, etc., to gain maximum satisfaction out of it. The wants are arranged according to the intensity and the order of satisfaction. All the wants are satisfied in such an order till the marginal utility of all the goods is equalized with respect to money spent.

B.CONSUMER PROBLEMS AND CHALLENGES

PROBLEMS OF INDIAN CONSUMERS

Indian consumers face several unique problems requiring more involvement and support from the Government and the consumer organizations to protect their rights. Some are given below:

1.Consumerism is still in its infancy and not well organized. Majority of Indian consumers are not consciously aware of their rights.

2.Shortages of essential commodities occur very often in India. Such imbalances lead to hoarding and black-marketing, profiteering and corruptions.

3.Many consumers are ignorant and uneducated and in such situations, the marketer exploits the consumer. There are many such cases in India.

4. Producers advertise their products, not with a view to serve the public, but with a view to dispose of their dead products at a good profit.

5.Consumers become easy victims, in the absence of information, and buy sub-standard and defective products.

6.The court procedure in India is a time consuming and tiresome process. Thus, consumers avoid legal actions. People are unaware of the simple procedures under the Consumer Protection Act.

7. Supplier, and not the consumer, becomes the king in the market etc.

8. Consumer had to depend on the condition of the market. Market conditions are changing constantly with respect to economic change and changes in the marketing policy systems. New commodities are introduced in the market every day. Basic knowledge and information is not available about the commodities. Consumers are unable to decide which product is more suitable to meet, their requirements.

   9. All goods and commodities available in the market are not standardized. Consumers are not sure of the quality of the product for which they are spending their money.

10. A single product may be available in various brands, trade mark, quality, grade and it becomes difficult for the consumer to make the right choice.

11.  Misleading advertisements, free gifts, and similar promotional methods, may confuse consumer to make the right decision.

CONSUMER EXPLOITATION IN INDIA

Consumers at large become a prey to the exploiters. Examples are not few but countless:

1. Supplied materials are of sub-standard.

2. Goods, in many cases, fall short of their weight.

3.Goods and services are priced high.

4.Interested persons or profiteers create artificial scarcity to earn illegitimate profits.

5. At the time of price rising stages essential commodities are stored and black marketed at boosted price.

6. Rude behavior of rationing shops – controlled by government

7.Funs and contests advertisements have been a method of cheating innocent people.Advertisement contains least information and emphasizingwords like super, wonderful, magical action etc., has no meaning in reality.Consumers are tortured with false advertisement.

8.Mail order business is another form of crookedness.

9. Consumers have been harassed during the guarantee period, where free repair is warranted.

10.Adulterations are at the maximum and make good profits to the businessmen. About 50% of the food items, we are consuming now, are adulterated.

11. Pricing theory says that the price is related to quality and quantity, but in reality it is not so. Price of daily required commodities like soaps, toothpaste, washing powder etc., are fixed by the producers. Producers generally fix the price which 10%- 20% above the real price.

12.Duplicates of popular brands of products are produced and sold. For almost every original product spare parts, components, duplicates are available in the market. The consumer is not in position to distinguish duplicate from the original. e.g. automobile parts, cosmetics, jewellery.

13.There is a general tendency among the middlemen or manufactures that reducing the quality and quantity of the products after gaining popularity for their product.

14.Concealed sub-standard, reduced quantity and defective items are sold in good packages.

15.There are many harmful medicines; electrical appliances are sold without giving adequate information about the products to the consumers.

15.The product quality and durability along with suitability etc., may come under category of product fitness. For example battery having a label ”leak proof” starts leaking, and products, having a label of “unbreakable” break at use. For all these calamities, the owner of the products becomes responsible instead of the producer.

Summary

The lesson dealt with meaning of consumer behavior, human wants and consumer choice, utility approach- law of diminishing marginal utility, law of equi-marginal utility and also consumer problems and challenges.

References

• Sankaran.S,1994, Micro Economics, 7 th edition, Margham Publications, Chennai.
• Pillai R.S.N., Bagavathi,2009,Nodern Marketing Principles and Practices,4thEdn.,S.Chand and company Pvt. Ltd New Delhi.
• Sontakki.C.N.,2006, Consumer behaviour, Himalaya Publishing House,Mumbai.
• Bela Bhargava,2005,Family Resource Management and Interior Decoration, University Book House Pvt., Ltd., Jaipur.