Skip to main content

What mental accounts do you have in your mind about purchasing products and services? Do you have any rules you employ in spending money? Are they different from what other people do? Do you follow Thaler's four principles in reacting to gains and losses?

Mental accounting is the set of cognitive operations used by consumer to code, categorize and evaluate financial outcomes of choices. Researchers have found the consumer handling their money by using mental accounting.
While purchasing product and services I have following mental accounts in my mind:
·Product importance and its need: Before buying the product, the very first thing I see is the need of that product and its importance in my life and accordingly I'll make the decision of buying.
·Quality: I will also see at the product quality. If it meet the standard quality of what I am looking in that product and make the decision of buying it.
·Price:I'll also look at the price, see it reasonable or not so that I could afford, or is the price is set as per its quality and is it worth to buy in that amount, and make the decision accordingly.
·Availability:While purchasing I'll also see whether that product is easily available or not and what kinds of products of which brands are available in the market.
·Warranty and guarantee:While buying an expensive product I'll make sure to see whether it offers any warranty and guarantee for that product and if it offers any maintenance services and make purchase considering these points.
I buy any product which I need most urgently at first and the less priority product I purchase it later. But I do compare the quality with the price, whether it is worth paying that amount of money to that kind of quality or not. Otherwise, I do not have any strict rules while spending money. As different people have different needs and perceptions for the products so the rules for spending money does vary with other people.
According to Richard Thaler, mental accounting is based on a set of key core principles. They are:
·Consumers tend to segregate gains
·Consumers tend to integrate losses
·Consumers tend to integrate smaller losses with larger gains
·Consumers tend to segregate small gains from large losses
Yes, I do follow Thaler's four principles in reaching to gain or losses while purchasing expensive products so as to make sure that I get the maximum utility for the money which I spend.
Reference: 
Keller, Philip Kotler and Kevin Lane. (2006). Marketing Management (12 ed.). New Jersey: Prentice Hall.


Comments

Post a Comment

Popular posts from this blog

Marketing Insight: "Endorsements as a Strategy,” - The Making and Marketing of Professionals into Celebrities

 Read the following sources listed in the Marketing Insight: "Endorsements as a Strategy,” a)    Irving Rein, Philip Kotler, and Martin Scoller, The Making and Marketing of Professionals into Celebrities (Chicago: NTC Business Books, 1997); b)    Greg Johnson, "Woods Cautious Approach to the Green,” Los Angeles Times, July 26, 2000, p. A1; Bruce Horovitz, "Armstrong Rolls to Market Gold,” USA Today, May 4, 2000, p. 1B; c)    Theresa Howard, "Pepsi Takes Some Fizz off Vanilla Rival,” USA Today, November 16, 2003; d)    Keith Naughton, "The Soft Sell,” Newsweek, February 2, 2004, pp. 46-47; e)    Betsy Cummings, "Star Power,” Sales & Marketing Management, (April 2001): pp. 52-59.  Celebrity is the well known public figures who have high influencing power to public and are have high very large numbers of followers. The celebrities could be from any field such as music, dance, politics, sports and many ...

"Enron, Ethics and Organizational Culture",

"Enron, Ethics and Organizational Culture” Answer: 1 Enron Corp. was a wholesaler of natural gas and electricity. It was running nicely in profit for outside world but inner fact was something else. There was no accounting transparency which made the company's financial condition look sound. When the outer experts start questioning the Enron's financial statements, its reality was revealed. The reasons of Enron's ethical melt down are unethical organization culture and The Boss. Enron had a code of ethics, a reporting system as well as training video on vision which is essential part of comprehensive ethics. But ethical behavior was not depended on ethical rules. The executive director of Enron's Ethics Officer Association believes that the formed laws cannot be complete as it cannot actually accumulate each and every possible situation's behavior. This gives the employees opportunity to formulate their own unethical ways to fulfill their goals. Secondly, the...

Identify the four market segment groups based on brand loyalty status and list what a company can learn from analyzing the degrees of brand loyalty.brand loyalty

Brand loyalty is the degree to which consumers prefers to purchase product from the same brand from the same manufacturer repeatedly than from other suppliers. It enables the marketing during the crisis period enabling the business to run in long term. The four market group segments based on brand loyalty status are: Hardcore Loyal: These are those buyers who buy only one brand all the time. Customers show their strong desire and use the same brand always. Since they feel comfortable and sense pride by using the product, people become hardcore loyal towards the product. The more the customers are hardcore loyal, the more it represents the products strengths. For example, there are large numbers of customers who only prefer to wear and buy Nike shoes not the other brand shoes available in the market, which shows that these customers are hardcore loyal only towards the brand Nike. Split Loyal: These are those customers who are loyal to two or three brands. After making the comparison fro...