A behavioural model for studying consumer purchasing decisions in a product line

• Main Author: Tan, Mark Wei Liang
• Other Authors: Chen Songlin
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Engineering::Mechanical engineering
• Online Access: http://hdl.handle.net/10356/64590
• Institution: Nanyang Technological University

The study of consumer behaviour allows the firms to understand consumers’ unique consumption habits. The sales and profits of a firm are dependent on the consumers’ purchasing decision. The identification of a consumer motive is an important step as it ensures that a product will satisfy the consumers’ needs, which is vital for long term success and survival of a firm. This project involved the development of a behaviour model based on the principles from the Prospect Theory. The aim of it is to study the role of consumer behaviour which affects purchasing decisions in a product line. The behavioural model can help firms to predict consumer purchasing decisions and anticipate demand and revenue in a product line. The value function of the proposed behavioural model has three distinct characteristics. It is defined in terms of gains and losses relative to a reference point. The S shape of the curve is convex before the reference point and concave after it. It is steeper in the domain of losses than in the domain of gains. In this project, a case study on consumer purchasing decisions for smartphone is demonstrated. A total of 350 students were surveyed and their data were used to build the behavioural model. Next, another 109 students were surveyed and their results were used as a tool to validate the behavioural model’s prediction performance with the actual data result and another established model, the Standard Logit. The reference point for the consumers was set at iPhone 5s as they were presented with its specifications before making their choice for a smartphone. This project demonstrated that the validity of the methodology and the proposed behavioural model performed better than the Standard Logit. The proposed behavioural model has better prediction accuracy and it can be used to generate an insight into the Apple smartphones product line. By developing a behavioural model to study consumer purchasing decisions in a product line, the knowledge can help the firms to study and predict the consumption patterns and behaviours of people.