Are you going to turn her down or be a friendly neighbor and buy a box (or two)? Such factors affecting cost are: (i) Volume of production, (ii) Product mix, ADVERTISEMENTS: (iii) Internal efficiency, . An example would be monthly payments on a loan from a development bank like the Industrial Finance Corporation of India. You might be very interested in purchasing a Smart Car, but your best friend might want to buy a Ford F-150 truck. Zior_ Another Vampire Photo CC BY-NC-ND 2.0. Attitudes tend to be enduring, and because they are based on peoples values and beliefs, they are hard to change. Attitudes are mental positions or emotional feelings, favorable or unfavorable evaluations, and action tendencies people have about products, services, companies, ideas, issues, or institutions3. Carlos Ayala Johnnie Walker Black Label CC BY-NC 2.0. Companies engage in operant conditioning by rewarding consumers, which cause consumers to want to repeat their purchasing behaviors. Discounters like Half-Priced books saw their sales surge. Herd behavior helped drive up the price of houses in the mid-2000s before the prices for them rapidly fell. In 2008, a store employee was trampled to death by an early morning crowd rushing into a Walmart to snap up holiday bargains. Teenagers will be more interested in buying colorful clothes and beauty products. Have you ever read or thought about something and then started noticing ads and information about it popping up everywhere? operating and labor costs, such as by offering a single-plane platform and an . However, companies dont want to risk cheapening their brands. Various political factors affect the international factors. You know the old stereotypes. So did seed sellers as people began planting their own gardens. The cost of the college students. In sticky costs literature cost behavior is evaluated by correlating the current growth in Selling General and Administrative costs with current revenue growth. Explains Valdis Krebs, the companys founder: Pharmaceutical firms want to identify who the key opinion leaders are. The blue label is the companys best product. For a time, Tiffanys sold a cheaper line of silver jewelry to a lot of customers. One of the most widely used systems to classify people based on psychographics is the VALS (Values, Attitudes, and Lifestyles) framework. Companies try to make the physical factors in which consumers shop as favorable as possible. Purpose of Cost Data 4. Therefore, any analysis must be made with regard to its limitations. Reference groups are groups that a consumer identifies with and wants to join. As you became a teen, however, cool clothes probably became a bigger priority. Describe how buying patterns and purchase decisions may vary by age, gender, and stage of life. The obvious advantage of restricting cost figures to those based on historical costs is that objectivity-records of transactions should exist from which the figures can be verified. There are three different perceptual processes which are . Unfortunately, herd behavior has also led to the deaths of people. Such an envelope is the long-run cost curve. Matilla A. S. and Jochen Wirtz, The Role of Store Environmental Stimulation and Social Factors on Impulse Purchasing, Journal of Services Marketing 22, no. The purchasing power of U.S. Hispanics continues to grow, exceeding $1 trillion in 20104. For example, stocking density has an effect on feeding behavior. These factors are namely Psychological, Social, Cultural, Personal, and Economic factors. Production cost per unit goes down with lot size, but storage and risk cost per unit goes up. 1. In fact, some become an expense virtually at the same time as the cost is incurred. One survey found that approximately 45 percent of married men actually like shopping and consider it relaxing. For example, even though tickets for Hannah Montana concerts ranged from hundreds to thousands of dollars, the concerts often still sold out. To some degree, consumers in the same social class exhibit similar purchasing behavior. This study focuses on costs, both direct and indirect, involved in a visit by an individual to a health provider. 16,17 One plausible explanation of this finding . Are extraverts wild spenders and introverts penny pinchers? Finally, what about those products (Aqua Globes, Snuggies, and Ped Eggs) you see being hawked on television? A persons cognitive age affects his or her activities and sparks interests consistent with his or her perceived age (Barak & Gould, 1985). However, as one writer put it, exploiting pester power is not always ultimately in the long-term interests of advertisers if it alienates kids parents (Waddell, 2009). But in the real world, one can take a positive view of costs. Men and women need and buy different products (Ward & Thuhang, 2007). It may thus be desirable to buy more reliable and more expensive plant and equipment, or spend more money on advertising or sales promotion, or use higher quality but more costly materials. When asked, people tend to say they are middle class, which is not always correct. To create buzz about the television show The Mole in 2008, ABC began hyping it by airing short commercials composed of just a few frames. The term expense connotes sacrifices made, the cost of services or benefits received, or resources consumed during an accounting period. 2 (2007): 10721. 1 (2005): 7582. This cookie is set by GDPR Cookie Consent plugin. Cost (affordability) 2. Cookie Settings. Perception is how you interpret the world around you and make sense of it in your brain. This analysis helps in understanding the behaviour of profits in relation to Output. Cost may be incurred at a fixed point in time, but expense is a flow (i.e., so much per period). Can you belong to more than one culture or subculture? While demographic variables such as income, education, and marital status are important, we will look at gender, age, and stage of life and how they influence purchase decisions. But this is not really so. Share Your PPT File. Factors affecting direct/indirect cost classification -Several factors affect the classification of a cost as direct or indirect: The materiality of the cost in question. To learn more, visit How you combine these senses also makes a difference. For example, many resorts offer consumers discounts to travel to beach locations during hurricane season. Opinion leaders are people with expertise in certain areas. Keywords: Stickiness, Sticky Costs, SG&A costs, Resource Adjustment, Suggested Citation: One study by Resource Interactive, a technology research firm, found that when shopping online, men prefer sites with lots of pictures of products and women prefer to see products online in lifestyle contextsay, a lamp in a living room. To read more about the Otherkins and seven other bizarre subcultures, visit (3) Prices of inputs (materials and labour). However, not all costs change with business activity. You have probably heard of the hip-hop subculture, people who in engage in extreme types of sports such as helicopter skiing or people who play the fantasy game Dungeons and Dragons. Beach resorts, outdoor concert venues, and golf courses suffer when it is raining heavily. Thats why, for example, Nike hires celebrities such as Michael Jordan to pitch the companys products. 1,000 of fuel oil was purchased for cash. They include the immediate monetary cost, and long-range cost affecting the buyer such as economy . 8Teen Market Profile, Mediamark Research, 2003, (accessed December 4, 2009). They dont want to sell a new drug to everyone. Culture prescribes the way in which you should live and affects the things you purchase. Another potential problem that advertisers (or your friends) may experience is selective distortion or misinterpretation of the intended message. To further understand consumers and connect with them, companies have begun looking more closely at their lifestyles (what they do, how they spend their time, what their priorities and values are, and how they see the world). It has the process down to a science; you can scarcely drive a few miles down the road without passing a Starbucks. The behaviour of an individual is based on the personality, attitudes, beliefs and values that he or she has been exposed to. If it is the former, income is unaffected, if it is the latter, income gets reduced. One man sees Pledge, an outstanding furniture polish, while another sees a can of spray no different from any other furniture polish. spend the least of their allowance in transportation, books and. Using surprising stimuli or shock advertising is also a technique that works. What effect can misinterpreting behaviour have? Some people enjoy shopping. Diapers and day care, orthodontia, tuition, electronicsregardless of the age, children affect the spending patterns of families. The cookies is used to store the user consent for the cookies in the category "Necessary". This page was processed by aws-apollo-5dc in 0.157 seconds, Using these links will ensure access to this page indefinitely. Behaviour is affected by factors relating to the person, including: Behaviour is also affected by the context, including: This means that a worker needs to consider a range of factors in order to understand behaviour, including their personal response and role. Maslow theorized that people have to fulfill their basic needsfood, water, and sleepbefore they can begin fulfilling higher-level needs. The above changes may occur simultaneously. Consumers are bombarded with messages on television, radio, magazines, the Internet, and even bathroom walls. Cost of the Product 5. The problem for firms is figuring out whos who in terms of their personalities. A change in product line, i.e., a new product is added or an existing product dropped. Furthermore, flexibility for adaptation of plants to new types of products as they develop is an important part of long-run decisions. There are three broad purposes for which cost data are required: If the expected effects on profits of any possible action or decision, appears to be important, estimates of the cost effects of the decision do have obvious relevance. Men see what they want and buy it, but women try on everything and shop til they drop. Theres some truth to the stereotypes. Buying Motives of Consumers 7. Weve definitely seen a drop-off of this idea of shopping for entertainment, says Kimberly Grabel, Saks Fifth Avenues senior vice president of marketing (Rosenbloom, 2009). Barak B. and Steven Gould, Alternative Age Measures: A Research Agenda, in Advances in Consumer Research, vol. Internal factors include genetics, hormones, and biological mechanisms such as neural activity. Although sexually transmitted infections are behavior-linked diseases that result from unprotected sex (IOM, 1997; USDHHS, 2000), other factors contribute to their rapid spread in a population. In this case your cost is Rs. People with higher incomes are more likely to have access to care, a regular provider of medical care, and health insurance coverage. Your self-concept is how you see yourselfbe it positive or negative. Producing more output requires more inputs. If this approach is taken, cost minimization and profit maximization may not imply the same thing. Costco and Walmart experienced heightened sales of their low-cost Kirkland Signature and Great Value brands as consumers scrimped1. Like it or not, you are more like your parents than you think, at least in terms of your consumption patterns. Hence, in a manufacturing organization, the labour to construct a product becomes part of the cost of the product. Cultural Factors, Sosial Factors, Personal Factors, Physicological Factors Characteristics Affecting Consumer Behavior 3. The financial or economic factor play a vital role in considering the Consumer behavior which is influenced by the factor like Savings, Personal Income, Income expectations, Family income, Consumer credit, Liquid assets of the customer or consumer and also there are other economic factors. 1. Economic Factors 4. You may be trying to access this site from a secured browser on the server. Examples of such costs are wages and salaries, rent, cost of materials, depreciation, the amount paid for a machine, and interest payments. Marketing products based on the ethnicity of consumers is useful but may become harder to do in the future because the boundaries between ethnic groups are blurring. Environmental Factors. Share Your PDF File Why do peoples cultures and subcultures affect what they buy? life experiences - family, culture, friends, life events. You might spend quite a bit of money each month eating at fast-food restaurants like McDonalds and Subway. The environmental factors of business buying behavhior include government regulation, technological innovations, demand level, competition, social responsibility, cost of funds, availability of natural resources, etc. Orgnets software doesnt mine sites like Facebook and LinkedIn, though. Companies want people to have positive feelings about their offerings. Many businesses today are taking greater pains to figure out what men want. Products such as face toners and body washes for men such as the Axe brand and hair salons such as the Mens Zone and Weldon Barber are a relatively new phenomenon. It does not pass through the minimum points of all the short-run cost curves except one, because there is in general some slightly different sized plants that can produce that output at even lower cost. If none of this fuel oil was consumed in 1988, there was no expense in 1988. Also, we will look at the costs of feed in the bunk. Rosenbloom S., (New York Times News Service), Where Have All the Shoppers Gone? Fort Worth Star-Telegram, March 18, 2009, 5E. For example, if a firm buys supplies for sales people only as the supplies are needed, and the supplies are used immediately to help generate sales, we usually call the outlay for supplies an expense. Credit card companies such as Visa, American Express, and MasterCard must understand cultural perceptions about credit. If they cant, they utilize other tactics such as discounts. The suit gives the designer an idea what kinds of car-related challenges older consumers face. Legal/Regulatory Factors 6. When this is true, we often use the terms cost and expenses synonymously. Jares, A., New Programs Are Taking Worries from Home Buying, Fort Worth Star-Telegram, March 7, 2010, 1C2C. Luxury brands therefore try to keep the supply of their products in check so their prices remain high. Hill J. and Susan K. Harmon, Male Gender Role Beliefs, Coupon Use and Bargain Hunting, Academy of Marketing Studies Journal 11, no. Saks Fifth Avenue wasnt so lucky. In prosocial behavior when referring to internal factors, we are looking into personality traits that either enhance or inhibit helping. In the complex decision to seek medical attention, cost is a significant factor. accountants, economists and engineersare concerned with the study of costs for different purposes there are various ideas about costs, many of which are adapted to different purposes. Most market researchers consider a persons family to be one of the biggest determinants of buying behavior. Adalian, J., ABC Hopes Mole Isnt Just a Blip, Television Week, June 2, 2008, 3. Major risk factors affecting cost performance were identified through an extensive literature review complemented by a workshop with construction contractors in Mozambique. . We may now set forth the fundamentals of the theory of cost. Both use equal amounts of the same resources to produce the same amount of the goods. Lasn, K., Culture Jam: The Uncooling of America (New York: William Morrow & Company, 1999). Since different peopleviz. 2.1Cultural factors. To promote its new line of coffees, McDonalds offered customers free samples to try. Situational influences are temporary conditions that affect how buyers behave. Successful managers are certainly aware that it is the level of cost relative to revenue that determines the firms overall profitability. Moore, P., Smells Sell, NZ Business, February 2008, 2627. Describe the personal and psychological factors that may influence what consumers buy and when they buy it. To find the lowest-cost operating pattern for a given output rate often involves a choice among several dimensions of operation. Many people considered the practice to be subversive, and in 1974, the Federal Communications Commission condemned it. The study of this change is the cost behavior analysis. Management typically performs cost behavior analysis through . Much of the original research on subliminal advertising, conducted by a researcher trying to drum up business for his market research firm, was fabricated (Crossen, 2007). How hard would it be to get back online and return the ring? Waddell, R., Miley Strikes Back, Billboard, June 27, 2009, 78. Often the information contradicts the persons belief. Disclaimer Copyright, Share Your Knowledge Cost is distinguished from expense, which is the value of assets given up to generate revenue. A subculture is a group of people within a culture who are different from the dominant culture but have something in common with one another such as common interests, vocations or jobs, religions, ethnic backgrounds, and geographic locations. Most of the controversy disappears as soon it is realized that cost information is required for various purposes and for different kinds of problems. Cost behaviour is the result of various forces. Marketing organizations need to assess the strengths and weaknesses of these factors and analyze how they . Crossen, C., For a Time in the 50s, A Huckster Fanned Fears of Ad Hypnosis, Wall Street Journal, November 5, 2007, eastern edition, B1. When one part of a transaction results in a decrease in cash or an increase in a liability the accountant must often answer the question: Is the other part of the transaction an increase in an asset, or is it an expense? A couple of frames about The Mole might make you want to see the television show. Learn more about how Pressbooks supports open publishing practices. By setting cost levels for various divisions of the company or perhaps for individual products, the company can develop a standard on the basis of which it can monitor and evaluate subsequent performance. Store locations also influence behavior. Age Age is a major factor that influences buying behavior. Learning is the process by which consumers change their behavior after they gain information about or experience with a product. Examples of variable cost would be cost of raw materials, and use of machines on rental basis. How does the process of perception work and how can companies use it to their advantage in their marketing? The companys point-of-sale systems at its checkout counters monitor what is selling well and when, and stores are restocked with those items immediatelysometimes via motorcycle deliveries that zip in and out of traffic along Japans crowded streets. But opting out of some of these cookies may affect your browsing experience. What if shes your neighbors daughter? Have you ever eaten the food samples in a grocery store? 2.1.1 Culture. The upscale retailer Neiman Marcus began introducing more mid-priced brands. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. The cost of raw material and intermediary products are very high in India. It could be that classical conditioning occurred. personal and emotional factors - personality, beliefs, expectations, emotions, mental health. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. Some of the important psychological factors are as follows Motivation Motivation to do something often influences the buying behaviour of the person. For example, the electricity cost will move up if a business extends the working hours. 13 Similarly, individuals' donation behavior decreased as donation's cost increased. r. . What could be more comfortable than shopping at home? Frequently there is controversy over the nature of costs, the definition of costs and what costs are relevant for managerial decision-making. Why is the coupon rate a bad estimate of a firm's cost of debt? These costs may include direct materials, direct labor, and overhead costs that are incurred from developing a product. Some of the internal factors influencing pricing are:- 1. Your personality describes your disposition as other people see it. How often do you see the same commercial aired during a single television show? Thats why, for example, Smart Cars, which are made by BMW, dont have the BMW label on them. Stability and plan ability of output lead to various cost savings. Their sales were the best ever. Societal factors are a bit different. Some of the personal factors are: i. We use cash to acquire labour services and the labour services are used to acquire completed units of a product. Companies have found that many consumers feel younger than their chronological age and dont take kindly to products that feature old folks because they cant identify with them. As we mentioned earlier in the chapter, consumer behavior is influenced by many things, including environmental and marketing factors, the situation, personal and psychological factors, family, and culture. Sure, you could buy one online in a jiffy, but you probably wouldnt do that. Prizes and toys that come in Cracker Jacks and McDonalds Happy Meals, free tans offered with gym memberships, a free sandwich after a certain number of purchases, and free car washes when you fill up your car with a tank of gas are examples. The need for such changes may arise due to changes in tastes and preferences of buyers, in market conditions, or technological progress which may make available new products or improved production processes. Just give me a nap and a candy bar.). How are companies trying to reach opinion leaders. This cookie is set by GDPR Cookie Consent plugin. The article references the 2006 Behavioral Tracking Study by Miller Brewing Company. Agency Cost/Operators Facility Costs Capital Costs Capital costs are among the primary factors influencing transportation costs through agency expenditures. Other companies give consumers free samples. 4. Women influence fully two-thirds of all household product purchases, whereas men buy about three-quarters of all alcoholic beverages (Schmitt, 2008). The link between peoples personalities and their buying behavior is somewhat unclear. However, before we discuss various cost concepts, it is necessary to identify at the outset certain general factors which affect cost behaviour in a modern business firm. Explain what physical factors, social situations, time factors, and/or moods have affected your buying behavior for different products. government policies, social media) While looking into why or why not people help based on inner attributes, altruism and ego centrism often come up. A teacher walks into the Classroom and says If only Yesterday was Tomorrow Today would have been a Saturday Which Day did the Teacher make this Statement? There are also many products such as kayaks and mountain bikes targeted toward women that werent in the past. Below are the following factors affecting the spending behaviour of students: A. Lisa Rudes Sandel, the founder of Not Your Daughters Jeans (NYDJ), created a multimillion-dollar business by designing jeans for baby boomers with womanly bodies. unpredictable client behaviour . Grocery stores frequently place bread and milk products on the opposite ends of the stores because people often need both types of products. By studying customers loyalty cards, the French hypermarket Carrefour hoped to find ways to get its customers to purchase nonfood items that have higher profit margins. These peoples purchases often lie at the forefront of leading trends. Otherkins are primarily Internet users who believe they are reincarnations of mythological or legendary creaturesangels, demons, vampiresyou name it. The phones displays are then read by barcode scanners when the ticket purchasers arrive at the events theyre attending. what the person needs and wants. A few integral psychological factors driving the behavior of consumers are : Having an online presence is another way to cope with weather-related problems. Consumers respect these people and often ask their opinions before they buy goods and services. However, when the blindfolds came off and they drank the beer, many of them described it as watery tasting (Ries, 2009). Your chronological age, or actual age in years, is one thing. You do so via stimuli that affect your different sensessight, hearing, touch, smell, and taste. What forces determine the behaviour of costs, e.g., account for differences in cost per tonne of steel produced in different plants, both in the private and public sectors and from month to month? Some data were . Explain how the leaves remained intact, rather than being decomposed, at the bottom of the lake. These implicit costs are just as real as explicit costs and both are important for decision-making purposes. Another significant factor, which is responsible for influencing the purchasing decision of the consumers, is the income level and gender of the consumer. Keep in mind that a products price is to some extent determined by supply and demand. Lack of political stability in the country directly impacts the operations of . Reference Groups and Its Types and Other Details. Gaumer C. J. and William C. Leif, Social Facilitation: Affect and Application in Consumer Buying Situations, Journal of Food Products Marketing 11, no. For cycles of rising demand and limited supply, house prices will go up, rents will rise, and the threat of insecurity will increase. Elizabeth C. Hirschman and Morris B. Holbrook (Provo, UT: Association for Consumer Research, 1985), 5358. To get buyers in the shopping mood, companies resorted to different measures. Even cultures that share many of the same values as the United States can be quite different. Cost behaviour is also affected by the variability of the product-mix. Additionally, headlocks may affect feeding behavior. Whether these- costs are fixed or variable, they are the amounts that firms must pay to owners of the resources in order to bid these resources away from alternative uses. Likewise, if you need customer service from, theres no need to wait on the telephone. That is, the food produced a good feeling and you may associate the person with the food, thus producing a good feeling about the person. Shocking advertising and product placement are two other methods. It is important that the income level of the consumer should be medium or high in order to positively influence the decision related to purchasing of shoes. Selecting information we see or hear (e.g., television shows or magazines) is called selective exposure. Explain how someones personality differs from his or her self-concept. Psychological Factors 5. . Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Additional cost savings occur due to learning effect and technological progress. Technological change often leads to a fall in average cost but raises the productivity of existing resources. On the other hand, variable costs react . Sorros, John and Karagiorgos, Alkiviadis, Understanding Sticky Costs and the Factors Affecting Cost Behavior: 'Cost Stickiness Theory and its Possible Implementations' (March 5, 2013). To start with, we shall discuss a few important concepts. Who do they like to talk to? Moreover, high wages also promote substitution of capital equipment for labour and stimulate technical research in automatic machinery and the use of mechanical energy. The payments to variable factors of production are treated as variable costs. If youre single and working after graduation, you probably spend your money differently than a newly married couple. Children have a great deal of influence over many household purchases. As early as 1927, the noted economist J. The term cost is not synonymous with expense. In this article, we will discuss some of these factors. . We noted that most costs eventually become expenses. Fast food has a negative connotation, so Wendys is trying to get consumers to think about its offerings as being better. Campbell, A., Marketing to Opinion Leaders, Small Business Trends, June 28, 2004, (accessed October 13, 2009). 8 (2008): 72. 4. The smaller the amount of a cost - that is, the more immaterial the cost is - the less likely that it is economically feasible to trace that cost to a particular cost object. External Factors. What if your significant other turned you down and you had to return the ring? This book analyses the factors affecting the online consumer's behavior and examines how e-marketers can influence the outcome of the virtual interaction and buying process by focusing their marketing efforts on elements shaping the customer's virtual experience, the Web experience.
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