Consumer preferences - this is such a tool for studying demand, which allows you to identify which products and to what extent are in demand among the target audience. Buyers' decisions regarding the consumption of specific goods are the basis for creating market demand. Understanding the needs of your potential buyer is the key to making guaranteed profits. Therefore, marketing research aimed at identifying these preferences is relevant both at the stage of production planning and at all stages of product sales, including quality control. Of course, consumer preference alone cannot provide accurate data sufficient to predict how much demand a product will use. After all, demand is formed under the influence of many factors.
Consumer preferences can be measured. In their analysis, the concept of marginal utility is used. It was used more than 150 years ago by the German Gossen, whose followers became the founders of the Austrian and mathematical schools in economics. It was Gossen who first began to study consumer preferences so closely, and marginal utility, by his definition, is the additional utility received from each subsequent good consumed. A classic example is a lone settler in the forest and several bags of grain. Then the first bag is designed to save him from starvation, then the fifth - to feed a parrot entertaining the owner with his chatter. It is clear that in this case the usefulness of the fifth bag will be marginal.
Based on experiments and psychological observations by economists of the 19th century. the law of diminishing marginal utility was derived. It was found that as a certain utility is saturated, the value of a thing decreases in the eyes of its owner. Does marginal utility affect the market price? Yes, of course, because the price is determined including the marginal utility of the last part of the consumed good. So, the less accessible the product, the more difficult it is to satisfy the need for it - the higher will be the marginal utility, and, accordingly, the price. How is this law related to consumer preferences? It's simple: the buyer constantly weighs the marginal utility of the product and thus compares different benefits, compares them with each other. If the product loses its usefulness, the buyer will replace it with another.
Usually, consumer preferences are considered not in relation to one particular product, but to a whole group. We study the range of goods that are systematically consumed by a specific target audience. That is, we are talking about a comprehensive study of preferred products: shoes, clothes, food. At the same time, objective factors (personal income, quality and cost of goods) and subjective (personal tastes) are factors that influence preferences.
When studying and measuring consumer preferences, it is most convenient to use charts. If a cardinalist approach is used in their construction, the graph of total or marginal utility is a function of the quantity of goods consumed. It is assumed that the buyer ranks the benefits within his basket of consumption by the level of their usefulness.
Ordinalistic approach involves the construction of indifference curves, that is, such graphs, each point on which are goods of equal value to the consumer with the same level of utility. More details on these approaches to measuring consumer preferences and examples of charts can be found in the specialized literature.
The next stage in assessing demand is the correlation of identified preferences with financial capabilities, i.e. budget analysis. The choice of the consumer is the result of optimization, when the buyer distributes the income so that the last monetary unit spent on each product gives the same marginal utility.
According to the reaction of consumers to changes in prices and incomes, you can combine them into groups according to various criteria ( income level , types of consumption) and graphically display market and individual demand.