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a) Financial Accounting- Financial Accounting provides what has been there in the past in the organization. But it is very necessary for the business organization to know where the company was placed last year. With this, the company can make very important and essential plans and forecast future. It contains adequate information that is required for decision making. Tools and techniques are there in management accounting but what bases will be used for the tools and techniques will be taken from the financial statements. Due to this, it is very important for management to have an effective financial accounting system.
b) Cost Accounting- It is an accounting method which provides technique to determine the cost of manufacturing a product or rendering a service. Cost is the most important factor in deciding the price of the product. Thus, a company relies heavily on the cost accounting system. Cost accounting provides tools like budgetary control, operating costing etc. which is very much important for the organization in decision making.
c) Financial Management- Planning and controlling of the financial resources comes under the financial management. Financial management answers the question that from where the funds will be generated and how it will be used. A primary objective of financial management is to maximize the earning of the company by efficiently utilizing the financial resources. Although it is a separate subject managerial accounting includes the operation of financial management.
d) Interpretation of Data- Financial data interpretation is done by the management accountant. He checks out on various financial statements. This helps in comparison the firm’s performance with the past performance or industry’s performance. If any wrong information is generated from the interpretation, then the conclusion will be wrong as well.
e) Management Reporting- Precise and appropriate reporting and timely reports are essential management tools in reaching decisions that make the best use of a firm’s resources. Thus, it is a duty of the management accounting to keep their management informed about the various operations of the organization.
- This reply was modified 4 years ago by amandeep kathuria.
According to the Institute of Management Accountants (IMA): “Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy.”
In simple words, it is a process which uses financial information to make a decision in the organization. It is used by internal management to make plans and have control over the system. The primary concern of Managerial Accounting is the requirement of the internal users of the organization. It involves various techniques and tools which help the management in making plans regarding the economic objectives of the organization.
According to American Marketing Association, ‘Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.’
Philip Kotler defines marketing as, ‘marketing is about Satisfying needs and wants through an exchange process.’
There are various objectives for marketing and some of them are-
a) Market Share- A company working in any industry will want to have a good market share of its product. A company with a very less market share would find hard to survive in the market, thus the company needs to gain their market share from their competitors.
b) Brand Recognition- Company wants to establish a brand image in the market so that the customer can differentiate their product from the competitors. Brand recognition becomes very important at the time when there is no difference between the two company’s product. It is just the brand image of the company in the eyes of the customer, which induces them to buy that particular product.
c) Customer Satisfaction- Customer is the kingpin of the market for the company. The company can survive only by satisfying their customers so it becomes a major task for them to satisfy their customers. Marketing activities help the company in satisfying the customers.
d) Customers Retention- A company would never want a customer for just one time. They would want to have them every single day, week, or month. Therefore, the company tries to keep their customers with them through different marketing strategies.
e) Distribution- Company operating in India would always want the people of the United States to buy their products. Distribution channels must be effective for the company and the team of marketing decides it.
f) Market Development- Marketing helps the company in providing insights related to different market segments. The company cannot earn much if they will keep working in one market. Thus, marketing development is one of the important objectives of the marketing.
g) Quality- Quality of the product at a low price can keep the customers with the company. Otherwise, quality-oriented customers would refuse to buy it next time. Thus, marketing activity helps in keeping the standard quality of the product.
h) Price Sensitive- Company may find different ways to charge a higher price to customers who are ready to pay high price and low price to the price-sensitive customers. For example, yield management and revenue management are common strategies for selling inventory at the highest possible price.
i) Promotion- Marketing helps in promotion of the product. Marketing department offers various promotional techniques to the company, which ultimately leads to an increase in sales.
j) Customer Relationships- Marketing helps in maintaining a cordial relationship with the customers of the company.
a) Marshallian Economics
Alfred Marshall, who was an economist, believed that consumers buy their goods and services based on the satisfaction they get. Many people have criticized this theory and said that purchasing capacity also has an impact on the consumer. Some assumptions of this theory are-
- If there is a lower price of a product, sales of that product will be higher.
- When there are a product and substitute for that product, sales of the substitute will be greater if its price is lower than the price of the original product.
- When the income of consumers is higher, sales of a product will, therefore, be higher, provided the product is not an inferior one.
b) Psychoanalytic Theory
Sigmund Freud, the Austrian founder of psychoanalysis, developed this theory. He believed that humans are not able to fully understand their own motivations because the psychological factors that shape them are largely unconscious. According to this theory, consumers respond to symbolic concerns as much as they respond to those of economics. Freud said that external factors like age, income cannot have a full impact on the behavior of the consumer. Because the motivation they have to purchase the product is in the psyche. That’s why he said marketing messages that involve sentiments, emotional character affect largely.
c) Pavlovian Theory
Ivan Pavlov, a Russian psychologist, developed this theory. In theory, he used to ring a bell before feeding to a dog and eventually it came out after some time he could eventually get the dog to salivate just by ringing it. In marketing, marketers while establishing a brand or re-inventing it, they can simply use this theory to create or change consumer’s habit.
d) Veblenian Social-Psychological Model
Economist Thorstein Veblen suggested that humans are social creatures that conform to the standards of the culture and subgroups in which they live. He believed in the formula that individual’s needs and wants are influenced by their group. Veblen focused his theory on members of society’s “leisure class,” whom he hypothesized were influenced by the desire for prestige rather than utilitarian need fulfillment. By understanding this theory, marketers can focus on social influences that impact the consumers to increase the demand for the product.
- This reply was modified 5 years ago by amandeep kathuria.
1) Theory of Reasoned Action- It is created by Martin Fishbein and Icek Ajzen in the late 1960s. It focuses on the pre-existing attitudes of a consumer in a decision-making process. In this analysis, consumers are rational actors who choose to act in their best interests. In this theory, it is seen that consumer only takes a specific action when there is an equally specific result expected. From the time the consumer decides to act to the time the action is completed, the consumer retains the ability to change his or her mind and decide on a different course of action. Marketers must associate the product with a positive result. For instance, Axe body spray linked its product with women.
2) Engel, Kollet, Blackwell Model- It is the extension of the theory of reasoned action. In this theory, there is five-step which consumer uses in decision-making process.
- The first step, Consumer absorbs what marketing material they see on Televisions, Newspaper etc.
- Consumer collects the data.
- Then the consumer moves into information processing.
- Consumer compares it with past performance and expectations.
- Consumers move to the decision-making stage after a period of thought, choosing to make a purchase based on rational insight.
In this process of decision making, consumers are highly affected by external forces. In this model, marketers influence the consumer most in two periods. First when they absorb marketing material and second when there is an external phase.
3) Motivation-Need Model- Abraham Maslow put forward his hierarchy of needs in 1943. According to this theory, people satisfy their needs according to five priority system. First, they satisfy their physiological needs than safety then love then esteem and in the end self-actualization.
Consumers are motivated to prioritize purchases toward the base of the hierarchy, so it is vital that companies draft a message that instills a sense of need or urgency in consumers.
4) Hawking Stern Impulse Buying- Many of the models focused on rationale action of the consumer while Hawking focused heavily on impulse action. Impulse purchases are driven largely by external stimuli, and have almost no relationship to traditional decision-making. In this theory, Stern established four categories.
- Purely impulse buying.
- Consumers make reminded impulse buys.
- Suggested impulse purchases.
- The consumer makes planned impulse decisions.
In this model, marketers are presented with so many opportunities. Right from the packaging to other attributes of the product has an impact on the consumer’s impulse control.
Consumer behavior models predict how consumers make purchasing decisions and show marketers how best to capitalize on predictable behaviors.
Factors which are affecting consumer behavior is divided into categories. These categories are:
1) Psychological Factors
- Motivation- Motivation is one of the major factors that affect the consumer behavior. A need becomes motive when it is too urgent. Everybody is having physiological, biological, social needs etc. For example- Like for clothes, people would buy it first to cover their body and then they will think about the other factors. Same with shoes, core want is to cover their feet rather than elegance in style.
- Perception- Perception refers to interpreting information in such a way that it becomes a meaningful experience for you. Everybody is having a different perspective regarding a product or anything. For instance, a half-filled glass or half empty glass. There are three different processes of perception- selective attention, in this type of approach; the seller tries to attract the attention of the consumer. Whereas in case of selective distortion, customers try to interpret the information in a way that supports what customers already believe. Similarly, in the case of selective retention, marketers try to retain information that supports their beliefs.
- c) Beliefs and Attitudes- There are different beliefs and attitudes of individual towards a product. For example, a non-vegetarian would love to enjoy chicken whereas, for a vegetarian, it is not a good habit. This belief and attitude of the consumers shape the brand image of the product in the eyes of the consumer and thus becomes an important part of influencing.
2) Social Factors
- References Groups- References groups are having a potential to form an attitude or belief of an individual. Impact of the groups on the consumer will be different, for instance, if the product is visible then the impact of the reference group will be high.
- Family- Like it is said, a person learns to behave from his family, in the same way, his buying habit will also be influenced by his family. For example- If a wife has more say in buying a particular product then the marketers will try to impress women rather than impressing men who have very little to say.
- Role and Status- As we all know, there is a different type of individual in our society. And different as in their role and status too. For example- A married working woman has two roles, one, of an employee and another one of a housewife. So, her purchasing decisions will mostly be influenced by both these factors.
3. Cultural Factors
- Culture- Culture’s influence on consumer varies from country to country. But it is not permanent and it changes with society. It is a set of belief and values. For example- fish is regarded as a delicacy in Bengal, and the Bengalis boast of several hundred different varieties, in Gujarat. Rajasthan, fish is regarded as a mostly unacceptable food item.
- Social Class- Every individual is linked to a society. And every society has some class. A society which comprises of poor people will not tend to buy luxury goods more often. So, marketers should make sure that they advertise or put efforts in the right place.
4. Personal Factors
- Age- People consumes according to their age. An old man will not purchase jeans. So, age is one the important factors. With the change in the age, buying habit also gets changes.
- Occupation- The occupation of a person has a significant impact on their buying behavior. For example, a marketing manager of an organization is trying to buy business suits, while a low-level worker in the same organization buy-resistant clothing works.
- Economic Situation- How much financially strong a person is will have an impact on his buying habit? A person with high income and saving will buy more expensive product whereas a person with low income and saving will buy cheaper products.
- Marketers use Consumer behavior to mold it in favor of their product. Many of the times, they make fancy and objectionable techniques to influence the consumers.
- Many times, consumers are exploited by some attractive advertisement.
- By providing different schemes, gifts or lotteries, they try to attract the consumers. In almost all the countries, consumers are exploited by the sales promotions campaigns and schemes. Producers of hair oils claim that it will stop falling of hairs and/or new hairs will start growing. Slim centers claim to reduce weight in magic speedy manner. Someone claims that baldness can be cured by replanting of new hairs in a short period. Someone claims regeneration of vitality even an old person.
Due to some of these disadvantages, the government has come up with various laws and legislation which safeguard the interest of the consumer and works for the consumer.
- This reply was modified 5 years, 1 month ago by amandeep kathuria.
- Consumer behavior theories are concerned with modern marketing theories that involve identifying the customer’s needs and satisfying them more effectively than competitors. It allows the market to be consumer oriented and also it is a key to success.
- Organization’s goal of profitability, survival, and growth can only be possible when they will make their customers happy. Thus, consumer behavior helps in achieving the organizational goals and satisfies the needs of the consumer better than their competitors.
- It also improves the performance of the distribution system. Consumer behavior is not only useful for marketers but it is equally important for the middlemen and salesman.
- Advertising programs, price, quality and decisions related to price, place and product can be prepared more objectively. Relevance will be more if all these decisions are taken on the basis of the consumer behavior.
- As Consumer behavior comes under the Human behavior, which is uncertain. It keeps the marketer in touch with the changes in consumer’s taste and preferences and it also makes sure that there isn’t any deviation.
- For an organization, competition will always be there. To face this competition, the organization needs to understand the demand and expectation of the consumer. So, consumer behavior also helps in taking competitive advantages.
- Consumer behavior is equally important for developing a new product.
- Consumer behavior helps the manager inefficient use of resources. It ensures an exact use of resources for achieving maximum efficiency. Each unit of resources can contribute maximum to objectives.
Now a day, consumers are the kingpin of the market. If you want to earn a higher profit, you need to treat them well with the quality of products and services you are offering to them. So, there are some characteristics of Consumer Behavior: –
- Inseparable- As we know consumer are humans only. So, consumer behavior is a part of human behavior. Human’s nature is uncertain. You never know what their preferences become. Based on his past performance, a manager can only predict that he is going to behave same in the next coming months.
- Complex- Learning consumer behavior is complex as well as difficult as it involves studying the behavior of a human being. Each and every individual behaves differently and according to situations. Today, a consumer may purchase a product because of its size, another day he may purchase the same because of its smell.
- Dynamic- As a part of Human behavior, consumer behavior is dynamic in nature. It keeps on changing. Taste and preferences of the consumers vary, due to which their buying habit also varies.
- Social, Psychological factors- Consumer behavior is always influenced by social, psychological and physical factors. A person will buy an Apple company’s phone over a Samsung brand due to the brand loyalty and social status.
- Continuous Process- It is a continuous process. It starts with producing a product and keeps on continuing even after the launch of the product.
In such a way, Consumer’s behavior also gets affected by the price of the product. If the consumer thinks that the price is not in accordance with the quality, he or she may switch to another company. Thus, consumer behavior is something which is very important for a marketer to do.
Consumer, he/she is a person who purchases goods or services to fulfill his/her needs. In other words, a person who consumes the goods or services is known as Consumer. For example, A purchases car and B purchases mobile. In these cases, A and B are the consumer. Every consumer gets inclined towards a particular good or service. So, consumer interest refers to the willingness of the consumer to purchase the goods or services according to his needs, taste/preferences and money. Thus, consumer behavior is the study of how an individual or any organization select or buy goods and services to satisfy their needs and want. It can also be known as the action of the consumer in the market and their intentions underlying it. Consumer behavior came in the year 1950 as a distinct sub-discipline subject in the marketing area. Through this marketer get to know about the trending product in the market or the product which has become obsolete for the company or they get to know about the best way through which they can present their product.
According to Engel, Blackwell, and Mansard, ‘consumer behavior is the actions and decision processes of people who purchase goods and services for personal consumption’.
According to Louden and Bitta, ‘consumer behavior is the decision process and physical activity, which individuals engage in when evaluating, acquiring, using or disposing of goods and services’.
This study assumes that the consumers are the protagonist in the market. The perspective of role theory assumes that consumers play various roles in the marketplace. Starting from the information provider, from the user to the payer and to the disposer, consumers play these roles in the decision process.
Study of Consumer Behavior gives answers to the question of Why and Why not a consumer buys a product? When does a consumer buy a product and how a consumer buys a product?