Consumer Behavior, Economic Models, and Market Dynamics

Consumer buying behaviour is mainly classified into four types:

1. Complex Buying Behaviour

The product is expensive.

Example: Buying a car, laptop, or house.

2. Dissonance-Reducing Buying Behaviour

High involvement but few differences between brands.

3. Habitual Buying Behaviour

Low involvement and frequent purchases.

4. Variety-Seeking Buying Behaviour

Low involvement but significant differences between brands.

Consumer Product Classifications

• Convenience Products: Bought frequently and with minimum effort. Examples: Milk, bread, soap, toothpaste.
• Shopping Products: Bought after comparison of price, quality, and features. Examples: Clothes, shoes, furniture, electronics.
• Specialty Products: Unique products with strong brand loyalty. Examples: Branded cars, designer clothes, luxury watches.
• Unsought Products: Products that consumers do not think about buying normally. Examples: Life insurance, fire extinguishers.

Economic Models of Household Consumption

• Absolute Income Hypothesis (AIH): As income increases, consumption also increases.
• Relative Income Hypothesis (RIH): Consumption depends on income relative to others.
• Permanent Income Hypothesis (PIH): Consumption depends on long-term (permanent) income.
• Life-Cycle Hypothesis (LCH): Consumption depends on lifetime income and stages of life.

Consumption Patterns

Types of Economic Indicators

• Leading Indicators (Future): Show what may happen in the future.
• Lagging Indicators (Past): Show what has already happened.
• Coincident Indicators (Present): Show the current condition of the economy.

Steps in the Buying Process

1. Need Recognition: Consumer realizes a need or problem.
2. Information Search: Consumer looks for information about products.
3. Evaluation of Alternatives: Comparing different brands or products.
4. Purchase Decision: Final decision to buy a product.
5. Post-Purchase Behaviour: Feeling after buying the product.

Financial Management

Financial management means planning, organizing, directing, and controlling the financial activities (money) of a business or individual.

Common Types of Advertising Fraud

• False Claims
• Exaggeration (Puffery)
• Hidden Information
• Bait and Switch
• Fake Testimonials

Government Policies for Consumer Well-Being