Economic behavior and psychology, or why we buy
A common mistake is that economics is an exact science in which numbers, percentages, and graphs play a predominant role. This misconception arises from the overwhelming need to explain the world in terms of measurable values, and from the belief that it can be explained by economic behavior that applies to all areas of life, classified and standardized.
Economic behavior - homo economicus
Contrary to a tempting but intellectually lame concept homo economicusa, man is not a rational being at all, always guided by the maximization of profits. Economic behavior is a complex decision-making process with a plethora of influencing factors. The profit and loss account is only one of them, rarely equal. Let's look at some examples of economic behavior and the variables that influence it.
Economic Behavior # 1
Consumer A has a choice of two laptops. Both have identical components and collect similar reviews from experts. The number 1 laptop was produced by an extremely popular brand - most of Consumer A's friends have such a model. The number 2 laptop is ⅓ cheaper, but its brand is not that strong. Our hero does not take into account the price-performance ratio and buys a laptop number 1.
Group pressure, conformism, and the fact that brands have whole sets of values associated with them are the most underestimated determinants of economic behavior. People buy certain goods because they want to be seen in a specific way, as part of a group, as someone with a high social status, etc. On the other hand, if a brand is very popular (like Apple), the price factor is of little importance. The product may even be a lot more expensive, but the power of the trademark distorts perception.
Economic Behavior No. 2
Consumer B rushes into the store to buy peanut butter. He reaches for a product that is positioned at eye level. It does not notice the remaining, cheaper offers, located slightly lower.
In this case, neither the brand nor the price had any influence on the economic behavior. The purchase of a specific product was due to merchandising, i.e. skilful display of goods on a store shelf.
Economic Behavior No. 3
Consumer C wants to buy a TV set. Our hero does not have access to the Internet and does not read the trade press. He lives in a small town, from where he has difficult access to the nearest shopping mall with an RTV store. Consumer C buys a model that he could buy at another point cheaper. In addition, this TV set is more expensive than similar ones that can be found in the store - the economic behavior was stimulated here by the incentive of the salesman and the ignorance of Consumer C.
Concept homo economicus assumes that each of the market participants has full knowledge of the available products. It goes against common sense - some people just don't care about electronics or cars. Some consumers do not have access to (non-advertising) sources of information. Economic behavior is also determined by access to distribution sites and the effort required to reach them.
Economic Behavior No. 4
Consumer D chooses product number one, relatively expensive and not very well rated, because it has a nice packaging. Why was his economic behavior not rational?
The answer is simple - man is not a rational being, guided solely by intellectual premises. Here, emotions were at work - the sense of aesthetics took precedence over calculation, which might not even occur at all. Price is not the most important thing for everyone.
Economic Behavior No. 5
There are three packages to choose from in the corporate directory of Internet Services. The first one was chosen most willingly - he won of the entire pot. The second one was decided by ⅓ clients. The third, least favorable, was chosen by no one. In this situation, the company decided to remove the third package. In theory, the economic behavior of consumers should not change, eventually the offer dropped out of an option that no one wanted. However, it turned out otherwise - the proportions of the choices between the first and the second package changed by 180 degrees. Why did this happen?
The context of economic behavior was crucial here. The presence of an unfavorable offer (the third package) showed the rest of the packages in a certain light. Consumers had a point of reference that changed the way they perceived other offers.