Consumer behavior theories are used by businesses in order to optimize their selling and marketing strategies. These theories tend to concentrate on how consumers spend money, what causes them to spend more money, and how the spending of consumer money should impact the planning and strategies practiced by businesses. Different types of consumer behavior theories may focus on the choices consumers make based on their budgets, how consumers make decisions to reach the highest level of satisfaction, how consumers consider the utilities and features of different products, or what and how much consumers know about particular products.
One of the most commonly used consumer behavior theories states that consumers behave rationally. In other words, consumers tend to want to get the most from their products while spending the least amount of money. Likewise, this theory asserts that consumers are unlikely to spend all of their money at once, leaving them with no savings. On the other end of the spectrum, consumers often do not save all of their money, an act which could force them to live without purchasing even basic needs, such as food, shelter, and clothing.
Another important theory posits that consumers have tastes and preferences that dictate which products they show interest in. Marketing experts often perform consumer studies that they break down into different demographics, such as occupation, age, and location, since these factors contribute to consumer preferences. Income is another important factor in this theory since income is what places a limit on on a consumer's budget.
Prices of products are often considered in one of the most commonly used consumer behavior theories. In general, businesses believe that by pricing their products at the lowest possible sums, they can encourage consumers to purchase more of their products. This is because rational consumers tend to buy products that provide them with the greatest degree of satisfaction while costing the lowest sum of money.
The features or utilities of different products tend to change the prices of the products. For this reason, consumers attempt to match features that they can use with added price. This theory can be applied, for instance, to automobile sales. A consumer may determine how much extra he or she would pay for a car that has bonus features, such as extra entertainment or media devices. A professional in the marketing department might try to determine how much extra the company can charge for bonus features without losing sales.
The impact of knowledge on consumer behavior is the focus of another of the consumer behavior theories. Consumers are more likely to choose products that they understand or which they are familiar with. The nature of the information is also important, since a company or product's bad reputation can influence an individual to purchase a competitor's product instead.