1.- Trying to characterize the consumer
In the different markets, especially those that are governed by a certain balance between supply and demand, that is, those governed by a “market economy” or one where the exchange of goods and services is done directly between people. Markets where there are producers (who offer a certain product, at a certain price) and consumers (who will or will not be willing to pay the price that consumers ask for).
However. Who is and what characterizes a consumer? A consumer is a person or group of people who demand goods or services, who has a series of needs to satisfy and a certain monetary income to do so. And it is difficult to characterize a typical consumer, since over time, the economic configuration of each place is different, which conditions the existence of different consumption patterns. As a general rule, we understand that the consumer is one of the three economic agents in a market: supplier, consumer and market. Thus the degree of interaction between all these agents, as well as the balance of forces between them will characterize the pattern of behavior of a consumer.
However, this would be very easy to understand if the reality were of individual markets, where the interactions between agents were exclusive, individual and isolated. But unfortunately the thing is not so simple. Today, from the first phenomena of globalization, markets began to expand inside and outside their respective borders. So if we think that a country is a market, it interacts as a supplier, consumer and market with other markets. The same is true for suppliers and consumers. This allows to generate an increasingly complex network where each economic agent has a relationship with many economic agents at the same time.
All this, obviously by the hand of the most advanced information technologies, assures personal consumers more and more information regarding a particular product.
On the other hand, producers have developed in such a way that today it is increasingly difficult to appreciate where the difference is between one product and another. This is what we have called the “genericization” of products. And our consumer is immersed in a veritable flood of information and an increasingly similar range of products, where he must make decisions.
For this reason, according to Reich (1991), our consumer, the consumer of this century, “ are symbolic workers, prosumers, camaguros, nonlinear, connected and driven by the digital network and aware of their role, importance and decision-making power. ”
- He is a symbolic worker: he deals with information from information to produce information. They start from data, transform it into information and this transform it into knowledge. They have had to transform their search, selection and information processing mechanisms to transform it into useful knowledge for themselves. He is a "prosumer". The consumer receives information and generates information. It stops being a simple receiver of information and also becomes a producer of it. It is the main characteristic of the "prosumer" (Toffler, 1980). He is a "backstab": Consumers make their choices with a multitude of variables in mind and can make decisions, depending on the moment and the situation they face. They are, then, not very loyal and changeable, they seem to jump from one decision to another,which makes them more difficult to predict. It is "nonlinear": It has the ability to be doing multiple activities at the same time, without neglecting any of them. They tend to move laterally, rather than linearly. They are connected through and driven by a digital network: As social beings, humans constantly require contact with other people. However, today the borders have disappeared and it no longer matters not to know the neighbors as long as you have contact with those who allow it through digital networks.Aware of their role, importance and decision-making power: The new consumer has rescued from the democratization and market orientation processes unsuspected variables some years ago.without neglecting any of them. They tend to move laterally, rather than linearly. They are connected through and driven by a digital network: As social beings, humans constantly require contact with other people. However, today the borders have disappeared and it no longer matters not to know the neighbors as long as you have contact with those who allow it through digital networks.Aware of their role, importance and decision-making power: The new consumer has rescued from the democratization and market orientation processes unsuspected variables some years ago.without neglecting any of them. They tend to move laterally, rather than linearly. They are connected through and driven by a digital network: As social beings, humans constantly require contact with other people. However, today the borders have disappeared and it no longer matters not to know the neighbors as long as you have contact with those who allow it through digital networks.Aware of their role, importance and decision-making power: The new consumer has rescued from the democratization and market orientation processes unsuspected variables some years ago.humans permanently require being in contact with other people. However, today the borders have disappeared and it no longer matters not to know the neighbors as long as you have contact with those who allow it through digital networks.Aware of their role, importance and decision-making power: The new consumer has rescued from the democratization and market orientation processes unsuspected variables some years ago.humans permanently require being in contact with other people. However, today the borders have disappeared and it no longer matters not to know the neighbors as long as you have contact with those who allow it through digital networks.Aware of their role, importance and decision-making power: The new consumer has rescued from the democratization and market orientation processes unsuspected variables some years ago.Today more is demanded every day: more benefits, better prices, better attention, more specialization of products and vendors, more integration of services, more immediacy and more relativism (each one decides what is good and what is bad, what what works and what does not, and when it stops serving)
I think I had already defined the term "customer economy" at some point. Given these particular characteristics, it is interesting to see the efforts that companies make to attract their customers. And it is still the client's complete understanding, of their interests and preferences, which constitutes the key to success in this world of generic products or products with very low differentiation.
2.- About consumer preferences.
If we return to the definition of consumer, we can conclude that consumer preferences will be given by those products that allow them to better satisfy the emerging need, within the corresponding budgetary framework.
However, how does the consumer know which product best meets their needs? That is, which product is more useful?
Let us agree that the concept of "utility" is not related to "utilitarianism", being this part of it. What we refer to with usefulness is the degree of consumer satisfaction with one product than with another, taking into account its different attributes.
The neoclassical theory of the consumer (which is the most used today), indicates that the consumer has a certain budget that can be spent on a wide range of options for goods. From this we deduce that the consumer will not acquire a single good with his budget, but will have among a series of options to choose from. In economic terms, and to facilitate the study, two types of goods are normally used, which very well explain consumer behavior. There are a number of assumptions of consumer behavior, which are key when trying to answer the questions that arise from the study itself:
- The consumer is rational and therefore will not carry out actions that attempt against his benefit. (rationality of the economic agent) The individual consumer can decide which option he prefers or can declare himself indifferent. (indifference in decisions) The consumer is consistent in choosing between combinations of goods. If he prefers a good A to a good B and a good B to a good C, it must be true that he prefers a good A over a good C. (transitivity of decisions or consistency) The human being is insatiable with respect to the consumption of goods by both will always prefer to consume more of a good than less of it. (insatiability of the individual) The consumer has full knowledge of the availability and characteristics of the goods. (market transparency).
3.- On income and combination of assets.
The definitions that the neoclassical consumer theory provides us open the field to reflect on two points that are key when understanding the way in which people establish their preferences: income and the combination of goods.
Suppose a consumer earns a certain sum of money. This sum constitutes the limit of the consumer's spending capacity. You can then consume the maximum amount that is equal to said income. The following graphic illustrates this relationship.
Now, the preferences of the consumers will be given by all the combinations of goods that it is possible to acquire with the existing budget. Thus the different combinations of goods will give the consumer different degrees of satisfaction. And the indifference curve represents all those consumption decisions that provide the consumer with the same level of satisfaction. The following graphic illustrates this situation.
In this case, the consumer might prefer two hamburgers and one soft drink or one hamburger and two soft drinks. Being two combinations of goods that produce the same satisfaction, they must be located on the same indifference curve. The consumer, before the same curve, can be indifferent, that is, he could prefer any of the combinations of goods, since they all give him the same satisfaction.
Properties of the indifference curve:
- They have a negative slope: if you decrease the quantity of a good, to stay at the same level of satisfaction you will have to compensate it with a greater quantity of the other good. Indifference curves do not intersect: if they were interrupted, there would be a point where both curves would have the same level of satisfaction, but since within each curve all its points have the same level of satisfaction, this would imply that all the points of the two curves would have the same level of satisfaction. This would not make sense since on one side of the crossing point one of the curves would be farther from the origin (so it should have a higher level of satisfaction) while on the other side of the crossing point it would be closer to the origin (lower level of satisfaction).The slope of the curve is equivalent to the ratio at which the consumer would be willing to exchange one good for another (called the marginal substitution ratio) to stay on the same indifference curve. For example, if the slope of the curve is equal to 1, it means that the consumer could exchange 1 unit of good A for 1 unit of good B obtaining the same level of satisfaction. On the other hand, if the slope is 2, it means that you would exchange 2 units of good A for 1 of good B and continue to obtain the same level of satisfaction. Thus, within each curve the slope changes along it. This is because the value that a consumer has for a certain good when he has a lot of it is not the same as when he has little.Indifference curves as they move away from the origin represent higher levels of satisfaction. Let's look at the following graph:
From the above, and as the theory points out, the consumer will try to obtain the greatest possible satisfaction from the income that he has for this effect. That is, according to the previous graph, it will try to locate itself on the indifference curve furthest from the origin and that is compatible with the income it has. Recall that according to the first graph, the consumer can only be located in the yellow area (within the budget) or on the blue line (budget limits) since any point outside this is not feasible, since it does not I could afford it. Let's look at the following graph that illustrates as a whole the topic we are dealing with.
4.- Goods or money?
Given the previous background, we might ask ourselves, is it convenient for companies to pay wages to their workers in the goods they normally consume, instead of paying them in money?
And the categorical answer to this question is NO. And you could not think of paying for goods for a very simple reason: costs and the problems involved in this idea:
- Every consumer is different. And the preferences of each one of them are full of abstractions almost impossible to understand. This would imply having to purchase a specific basket of goods for each employee, which obviously would greatly increase costs. An employer that pays in cash enables employees, individually, to move among a wide range of possibilities to purchase goods, according to their preferences. To do otherwise would have a high chance that employee preferences will not be met.
Let's think for a moment about the general practice of companies of delivering a box with merchandise a few days before Christmas or some other holiday. The purpose of this practice was to replace the bonus in currency that companies, by legal obligation, must pay. However, the law allows them to pay with merchandise. What is it done for? It is purchased in volumes, at low prices, and distributed to employees. Which it was the result? Nowadays companies pay their employees bonuses and some of them also deliver the box of merchandise. And why did this happen? Simply because it did not resist analysis the fact of delivering a single box of merchandise for all equally as a substitute of the Christmas bonus, since it would cause many dissatisfactions by not representing the preferences of the employees.If the company gave them money, they can move with that income among the range of possibilities they have to acquire the goods that generate the most satisfaction, within the budget constraint determined by the amount of the Christmas bonus. And in relation to wages, it happens exactly the same.
5. Conclusions
Today, consumers are no longer the same as in previous years. It is therefore necessary that producers know their characteristics, their preferences and their habits, in order to maximize the supply of products that tend to satisfy needs.
Although today the consumer is a difficult individual to convince, not very loyal when it comes to loyalty, changing and very analytical, there are certain assumptions that allow us to have a vision of the way of behavior that they have when purchasing goods and services for consumption. Regardless of the culture they are in, and how mature they are, in economic terms, the assumptions act as a common parameter to all of them. Based on these assumptions, studying consumer behavior is a task for both economic science and producers. And it is the producers who bear the brunt of this, since it is they who have to translate the study into products that customers purchase.
Indifference curves allow us to establish within a common parameter, what are the degrees of satisfaction that certain combinations of goods produce. Unfortunately, the basket is not only made up of two goods, but of many more, which obviously makes the study of behavioral patterns very difficult.
At this point, marketing and especially business intelligence take on particular relevance, since they are the ones who, on the basis of the data that clients provide every minute in different databases, have the mission of forming regular and homogeneous patterns of people, so that the company has a certain knowledge of its customers grouped by segments, so that the offer that companies make can be maximized, based on these parameters.
To finish, and as a complement to this text, we suggest the video-course Analysis of Consumer Behavior, in which Professor Alfonso Rosa García presents the foundations of consumer theory: preferences, utility, budget constraint and optimal or consumer balance. (12 videos - 1 hour and 27 minutes)
