Consumer Preferences

Why do people choose?

As an individual, our wants are unlimited but so is not the resources available in the market. Since we can't get everything we want, we make choices. The choice we make differs from others because a consumers preference depends on factors like income, socio - economic background, age, quality and time period for which the product is needed. Not only this, for different consumers different factors are their priority. 

For example, Alisha and Samriddhi want to buy a hair straightener. They have the same budget but Alisha wants a straightener ceramic or titanium pleated as she has curly hair and wants to straighten her hair daily whereas Samriddhi wants a flat iron as she has normal hair and only wants to straighten them only on special occasions. 

From the example we see that even if they have the same budget, their choice of product is not same as their preferences are different.  

There are many more instances from our day to day life where we have to make a decision and prefer one over the other. A consumer always tries to consume those products which give them maximum satisfaction. The satisfaction derived from a commodity can be measured in terms of utils under cardinal approach and by ordinal approach, consumer can rank its choices and consume the product which provides him maximum satisfaction. That is in case of Alisha and Samriddhi, the utility derived from titanium or ceramic pleated hair straightener is more for Alisha and the utility derived from flat iron is more for Samriddhi. If they would have not known their preferences, they would have ended up with products that would not provide them the maximum satisfaction. 

Why do consumers act irrationally?

A consumer always aims to act rationally and select the bundle of goods which provide maximum satisfaction. But in reality, when making day to day decisions, consumers rarely behave in a well-informed and fully rational way. Their decisions are often based on incomplete information and negligence which causes a loss of individual's resources (money, time, effort) and affects the market as a whole.

Ashu wants to buy green lays. But the store only has blue and red lays available. So instead of going to another store Ashu bought  red lays and thus thinking irrationally he spent his money to buy a product which will not give him the satisfaction that he would have otherwise recieved. 

Why to study consumers preference?

New techniques of advertising which focuses on luring customers and distorting their choices is one of the reasons of consumer's eccentric behavior while making decision. As every decision made by a consumer narrows down to being rational, its relevant to study consumer behavior as it gives insight on how a consumer decides to spend his limited resources for his unlimited wants. 

When companies have the knowledge of how diverse its market is and what are the individual preferences, it helps them to grow and stabilise in the market smoothly and add to the positive outcome in consumer behaviour.