GACE Marketing (6–12) (716)

Consumer behavior encompasses all activities associated with the purchase, use, and disposal of goods and services, including emotional, mental, and behavioral responses that precede or follow these activities.

The consumer decision process typically follows five stages. Problem recognition occurs when the buyer recognizes a need triggered by internal or external stimuli. Information search involves gathering data from personal, commercial, public, and experiential sources. Evaluation of alternatives means comparing options using evaluative criteria and decision rules. Purchase decision involves selecting a brand and retailer, though situational factors and others' attitudes may intervene. Post-purchase behavior includes satisfaction assessment, product use, and disposal.

Several factors influence consumer behavior. Cultural factors include culture, subculture, and social class. Social factors include reference groups, family, and roles and status. Personal factors include age, life-cycle stage, occupation, economic circumstances, lifestyle, and personality. Psychological factors include motivation, perception, learning, beliefs, and attitudes.

Involvement level affects decision complexity. High-involvement purchases (expensive, risky, self-expressive) prompt extensive problem-solving. Low-involvement purchases (routine, inexpensive) prompt habitual or limited problem-solving.

Business markets include organizations that buy goods and services to use in producing other products and services, to resell to others, or to support their operations. Business markets differ from consumer markets in several ways.

Market structure characteristics include fewer but larger buyers, geographically concentrated customers, and derived demand (business demand derives from consumer demand). Demand often is inelastic (unresponsive to short-term price changes) and fluctuating (small changes in consumer demand cause amplified swings in business demand—the accelerator effect).

Buying unit characteristics include more decision participants, professional purchasing efforts, and formal buying processes. The buying center includes all individuals and units participating in decision-making: users, influencers, buyers, deciders, and gatekeepers.

Decision process characteristics include more formalized purchasing, closer buyer-seller relationships, and direct purchasing without intermediaries.

The business buying process typically follows eight stages: problem recognition, general need description, product specification, supplier search, proposal solicitation, supplier selection, order-routine specification, and performance review.

Economics studies how individuals, firms, and societies allocate scarce resources among unlimited wants. Marketing operates within economic systems and responds to economic conditions.

Microeconomics examines behavior of individual units—consumers, firms, and markets. Key concepts include supply and demand, elasticity, market structures, and pricing.

The law of demand states that, other things equal, quantity demanded increases as price decreases. The law of supply states that, other things equal, quantity supplied increases as price increases. Market equilibrium occurs where supply and demand intersect, determining equilibrium price and quantity.

Price elasticity of demand measures responsiveness of quantity demanded to price changes. Elastic demand (coefficient greater than 1) means quantity changes proportionally more than price. Inelastic demand (coefficient less than 1) means quantity changes proportionally less than price. Factors affecting elasticity include availability of substitutes, necessity versus luxury status, proportion of income spent, and time horizon.

Market structures range from perfect competition (many sellers, identical products, free entry) to monopoly (single seller, unique product, blocked entry). Between these extremes lie monopolistic competition (many sellers, differentiated products, easy entry) and oligopoly (few sellers, standardized or differentiated products, difficult entry). Market structure affects pricing power and competitive strategies.

Macroeconomics examines aggregate economic performance—national output, unemployment, inflation, and growth. The business cycle describes recurring fluctuations: expansion, peak, contraction, and trough. Marketing strategies must adapt to economic conditions; recessions typically require value emphasis and promotional intensity.

Economic indicators help marketers anticipate conditions. Leading indicators (stock prices, building permits, consumer expectations) predict future activity. Coincident indicators (industrial production, personal income) reflect current conditions. Lagging indicators (unemployment duration, business loans) confirm trends.

Gross domestic product (GDP) measures total market value of all final goods and services produced within a country during a period. GDP growth indicates economic health. Inflation, a general rise in price levels, erodes purchasing power and affects pricing decisions. Interest rates influence borrowing costs for businesses and consumers, affecting investment and spending.