Consumer Decision-Making - Internal Factors - Coursework Example

Name: Professor: Course: Date: Introduction The consumer is the eventual user of the product that is being placed in the market. Indeed, the customer is the person at the final end of the production and beyond which the process of production only continues in the form of feedback to the persons in the channel of production. The consumer thus constitutes of persons both in contact and those that are not in contact with the initial producer of raw materials (Michael, 2009). The consumer is always placed in a position to make decisions on the product to use in the event two or more of the same products are in the market. The customer may also be placed in a position to choose between products that are not similar but have the same use. In all these situations, the customer’s decision is paramount to the amount that is eventually consumed (Landsburg, 2010). Theorists have tried to analyze the decisions that are made by the consumer and the behavior patterns that are taken by the consumer. Among the theorists, the works of Nicholas Bernoulli, John von Neumann, Oskar Morgenstern, Herbert Simon and, Daniel Kahneman have had their opinions on the behavior and the strategy that the consumer uses being most debated across the years (Bray, 2008). The theorists rotate their schools of thought on the utility, the value they gain and the proximity of the product to argue their point. The arguments that are held by the said theorists are more progressive than contradictive. The theories are each based on the argument already presented by the former theory (Michael, 2009). For the purpose of the analysis of the customer decision making, I focus on the rental apartments that are provided by either landlords or the rental agencies. Rental apartments or houses that are meant for use by persons other than the original owners at a fee. The products are offered and available around the globe (Wright, 2006). Internal factors that influence consumer decision making Factors that influence consumer decision making refer to the elements that the consumer considers before purchasing A instead of B. There are internal and external factors that are considered by the consumer. The internal factors are factors that are more affiliated to the taste and preference and the ability of the consumer (Michael, 2009). The internal factors are also limited by the knowledge of the consumer on the worthiness of a certain product. Some of the internal factors that affect decision making by a consumer include: taste, preference, monetary ability, knowledge about products in the market, consistent with trends that the consumer has had in the past and the pride of the consumer (Landsburg, 2010). The ability to balance between the usefulness of the products and the value of the product also lies within the internal factors of the decision making process. The theories that are discussed in this paper are mainly internal factors as they are presented by different schools of thought. However, where necessary, the paper focuses on external factors like distance and security. Where this is done, the authorship does so with an emphasis on the internal factors. Utility Theory Utility theory is a theory that pegs the decision of the consumer for the product that he or she chooses on the utility of such a product. The context of utility in this theory refers to the usefulness of a commodity. The theory states that the customers take their time to consider all the products that are in the market. The customer both reflects on the real time importance of the commodity and the lifetime importance of the commodity (Landsburg, 2010). According to the theorists who are credited with the theory; Nicholas Bernoulli, John von Neumann, and Oskar Morgenstern, the customer is expected to be a person of a sound mind and a person who is able to make a sound decision. The theory suggests that, the consumer is well informed of the utility of all the products that are in the market. In the real estate industry where the rental apartment product is classified, the usefulness of the product revolves around one area; accommodation (Michael, 2009). The rental house must be able to accommodate all the needs of shelter for the tenant who is the eventual consumer of the product (Wright, 2006). The needs for shelter may include; the family, the family car, the guests, the pets and other assets that include furniture, fittings, clothing’s, and other hardware items that the tenant could be in possession of. It is also, the utility of a rental apartment if it can be able to give the tenant security that is required, the electric supply, water supply and other amenities that are required for good habitation (Wright, 2006). The theorists could therefore suggest that, the consumer of a rental product is in a position to determine the size of the rental apartments as opposed to the size of the family and their hardware and the guests that could be visiting the apartments. The accessibility of the rental apartment is also another important factor which the consumer is expected to have considered (Bray, 2008). Of more importance is the ability of the consumer to logically and correctly evaluate the value that the apartments will offer him as opposed to any other apartment. It is thus expected that the consumer makes his decision as the apartments are the best in the market (Landsburg, 2010). The opponents of this school of thought have always argued that, the consumer is not a professional in all areas that he requires a product. They also argue that in many instances, the consumer may not be willing to invest into professional minds that would help him in making the last decision on which product to pick. Satisficing theory of decision making Satisficing theory was brought on board by John von Neumann who is a Nobel peace prize winner. John is of the view that while the proponents of Utility theory may be right, there is always a limitation of distance. Satisfying theory thus is a theory that shows that decision making by customers is done at various levels. The customer must in the first instance decide the range where he is willing to search for the product. Further, John argues that the first product that seems to entertain the customer is the decision. The customer in this theory is reflected to be conscious of time factor and the distance factor than any other factors (Michael, 2009). In the rental apartment product then, John von Neumann would argue that the tenant would first need to decide where the apartment shall be located. This is seen as a very logical view of the theory. An example may be taken for a student who has just joined a campus. The accommodation need for the student is limited to either within the college or outside the court but in a proximity that will allow the convenience of the student to attend the classes (Wright, 2006). The tenants at all times are thus limited by the convenience of places that their daily chores are mostly located. The main references that are common in seeking the rental apartment are; the schooling needs of a student or members of a family, the places of work, and closeness to public means of transport. The ability of a customer to evaluate the products that are available in the areas outside the location that he/ or she has included in Satisficing is not however undermined (Nutt, & Wilson, 2010). The consumer may be in a position to evaluate the product and even appraise them but they are outside his consideration for decision making. Critics of this theory state that, in most cases, the theory is applicable. However, the theory is limited to certain products and a certain class of consumers. The financial ability of the consumer and the budgetary extravagance that the consumer exercises are the main determinants in decisions made in regards to products that are not static (Michael, 2009). The critics however agree that the static products like land and buildings fall within the school of thought of the theorists. According to the critics, the theory does not put in mind the class that is relatively rich in the society and who have the ability to go to any hospital in the world. Shop in any mall and attend any school. The critics further put it that the class that does not adhere to this theory is usually the rich in the community (Landsburg, 2010). Also, the critics argue that there are also customers who would be limited by distance rather than limiting the distance where their decision lies. A case in example is persons who seek rental apartments farther from the college apartments where there enough finance to allow them to commute daily to the college. Prospect Theory As noted earlier in this paper, the theories of decision making are progressive. It is in this line that the authorship of this paper would like to draw the attention of the two theories discussed earlier in this paper and which by chronology are arguably predecessors of the prospect theory (Bray, 2008). Prospect theory tends to join the elements of the utility theory and satisficing theory and yet add other elements that are not in the first two theories. In his article Consumer Decision-Making Models, Strategies, and Theories, Michael argues that the element of utility as advocated by Utility Theorists and the issue of limitation of distance in satisficing theory are all a matter of consideration in consumer decision making (Landsburg, 2010). However, the prospect theory put in place the issue of the gains and losses that are attributed to the decisions made. The value of a certain product is measured against the gains that a consumer would get from the same product (Nutt, & Wilson, 2010). Introducing prospect theory, Daniel Kahneman argues that the customer would rather prefer a product of less utility if it would lead to a loss on his part (Bray, 2008). The proponents of the theory seem to look at the consumer as a professional accountant able to carry out a cost-benefit analysis on the decisions that are being made. In attaining a rental apartment, the consumer who is the tenant may have different options; the first options would be to buy an own house, the second option would be to seek boarding in lounges that charge per night (Wright, 2006). In face value, purchasing or constructing an own house could be the most preferable option as far as utility is concerned. This is so because, the house would include all the facilities needed by the tenant and he would have all the authority on any alterations to be made on the structure of the building (Nutt, & Wilson, 2010). However, the owning of the house could be a loss rather than a gain and not worth the value of a student who would only require the product for a period of four years. This is so regardless of the ability of the consumer in purchasing the house. On the other hand, the lounges that charge per night would not be much useful to the student (Wright, 2006). This would have a lower utility to any of the two other options. The student thus makes the final decision after considering many factors. The theory is faulted by critics who argue that the theory is too professional. As noted the theorists assume that the consumer is professional in accounting and would therefore be able to make accurate decisions on the gains that he is probable to get from such decisions. The consumer is assumed to have all the information that is also required in doing a cost benefit analysis of certain products. The customer is also assumed to have the time that is required to make such decisions. In answering the critics, the theorists argue that the decision on gains and losses that are credited to the decisions that are made need not be professional (Nutt, & Wilson, 2010). The accuracy of the gains or losses is merely dependent on the consumer and his knowledge of the products that are offered in the market. The theorists further argue that the increase in the level of technology which is progressive from the oldest ages creates at all times new channels of accessing information that is required by the consumer in cost benefit analysis (Michael, 2009). Conclusion All the theories discussed in this paper are right in their own perspective. The insufficiencies that are provided in these theories prove just how hard it is to adequately analyze the dynamism of human behavior. It is however good to note that each of the theories is practical both in professional and in an unprofessional manner. References Michael, R., (2009). Consumer Decision-Making Models, Strategies, and Theories. New York: Wiley Landsburg, S., (2010). Price Theory and Applications. New York: Cengage Brain Wright, R., (2006). Consumer Behavior. London: ICI Nutt, P., & Wilson, D., (2010). Handbook of Decision Making. Florida: Willey Bray, J., (2008). Review of decision making models. New jersey: SAGE Read More