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Why Is Consumer Choice Important In Healthcare Marketing?

Why Is Consumer Choice Important In Healthcare Marketing
Limited education and language skills, as well as age-related declines, are barriers to engaging large segments of the American population in consumer choice. – CAHPS evaluations identified a number of challenges to surveying people about their health care experiences and making the resulting information about quality easy to understand and use by others.

  • Readability: The current CAHPS core questionnaires require a seventh-grade reading level for full comprehension, exceeding the reading ability of more than one-half of welfare recipients.
  • Surveying Spanish speakers: Distinct linguistic variations among U.S. Spanish speakers create significant challenges to producing one culturally appropriate survey for this entire subgroup of the U.S. population. An ongoing CAHPS effort is addressing this issue by working with Spanish speakers in San Diego, Los Angeles, New York, and Miami.
  • Reaching the Medicaid population: The lack of a permanent address for many Medicaid recipients hampers efforts to survey them about their health care experiences. Mail delivery problems may be one reason why only one-half of the New Jersey Medicaid beneficiaries said they received the CAHPS report during field-testing.
  • Reaching Medicare beneficiaries: 39 million Medicare beneficiaries now have access to CAHPS ratings, but numerous issues need to be addressed before older Americans take an active role in choosing their health plans. The biggest challenge is making them aware that information about quality exists: Only about 16 percent of Medicare beneficiaries noticed the CAHPS information when it was reported for the first time in the Medicare & You 2000 handbook they received.

Also, low education and reading levels, plus age-related physical and cognitive declines, make it difficult for many Medicare beneficiaries to interpret such information. After pilot testing the new Medicare & You materials containing CAHPS information on quality, the Center for Medicare & Medicaid Services dropped the star charts altogether.

Why is consumer choice important?

Consumer Choice Definition – The consumer choice definition that is widely accepted in economics is one that hypothesizes why people make the consumption choices that they do when they are faced with trade-offs. A trade-off is an option that you forgo if you make a different choice.

The theory of consumer choice attempts to understand why consumers choose one good or experience over another, working versus leisure, or saving versus spending their money. Consumer choice examines why people make the economic choices they do when facing trade-offs, restrictions, and changes in their environment that affect their ability to consume.

A trade-off is a choice that you forgo when you make a different choice. If you choose to spend more money on one good, then you cannot buy as much of another good. If you want to enjoy more leisure time, you give up the time you could be working and making more money for the future.

  1. If a consumer decides to spend more of their income now, they will have less money to spend in the future.
  2. If they receive a raise at work, their budget will change.
  3. The idea of consumer choice relies on the fact that people will make rational decisions to satisfy their wants.
  4. People want to make the choice that best fits their budget, their preferences, and optimizes the amount of pleasure they will get from their choices.

Of course, to make these choices, consumers need some bits of information. The price of a good is an important factor in a consumer’s decision-making about how they can gain the most satisfaction based on their budget and their preferences. If the price of a good is too high then the consumer will buy less of it, or they will buy another lower-priced good if they are unwilling to make the trade-off.

What is the consumer choice theory in healthcare?

A healthy consumer has to make decisions about health care consumption before he is sick and after : Before he is sick, he may decide to behave healthily in order to prevent health costs, and he may choose which health insurance and thus which coverage for health expenditures he may obtain.

What is consumer choice in marketing?

Consumer Choices Consumer choice is the choice of a consumer to buy a product or not. Usually, consumption or the behavior to buy products increase with increasing income. Moreover, it also depends on the happiness the consumer derives out of the product he/she buys.

In other words, a consumer will choose to buy a product if his budget exceeds the price of the product. Typically, when incomes increase, the budgets for consumption increase automatically. However, utility or the satisfaction derived from buying a product does not necessarily increase with increasing incomes.

In fact, the utility may be related to a lot of factors, such as geography, climate, cultural factors, and personal choices of consumers. In microeconomics, the theory of consumer choices connects the preferences of consumers to consumption and consumer demand curves.

What does consumer mean in healthcare?

A health care consumer is an individual who uses the services of a health care provider including patients receiving medical care or treatment. IHI Global Services. (n.d). What is health consumer. Retrieved March 15, 2023, from https://www.igi-global.com/dictionary/empirical-study-patient-willingness-use/33258

What are the two effects of consumer choice theory?

Example: homogeneous divisible goods – Consider an economy with two types of homogeneous divisible goods, traditionally called X and Y. The consumer will choose the indifference curve with the highest utility that is attainable within their budget constraint. of good X and of good Y. Indifference curve analysis begins with the utility function. The utility function is treated as an index of utility. All that is necessary is that the utility index change as more preferred bundles are consumed. The tangent point between the indifference curve and the budget line is the point at which consumer satisfaction is maximized.

Indifference curves are typically numbered with the number increasing as more preferred bundles are consumed. The numbers have no cardinal significance; for example, if three indifference curves are labeled 1, 4, and 16 respectively that means nothing more than the bundles “on” indifference curve 4 are more preferred than the bundles “on” indifference curve 1.

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The income effect and price effect explain how the change in price of a good changes the consumption of the good. The theory of consumer choice examines the trade-offs and decisions people make in their role as consumers as prices and their income change.

What is a key assumption of consumer choice theory?

Consumer Choice Theory Economic Importance It is based on the assumption that individuals maximize their utility and are willing to pay a specific price for a product or service if they perceive it as better than an alternative.

What are the factors that will affect your choice in selecting a particular health?

FACTORS AFFECTING CHOICES OF MEDICAL SPECIALTY – Many factors influence the specialty choices of medical students and medical practitioners. These factors range from individual characteristics such as age, gender and type of personality, the moment of choice, elements of influence and role models, to the characteristics of the specialty itself such as the types of problems and people encountered and served in the practice, the continuing development of new technologies, and the anticipation of specialty-related income.8 – 12 These factors also include the type of curriculum used in the undergraduate medical education, exposure during the internship year and the type of rotations and whether the exposure to the different subspecialties during internship.

For example, students who choose general medicine are guided in their choice by the opportunity for a better contact with patients; patient type (e.g. chronic); to be in medicine is to be a general doctor; opportunity for broad and comprehensive caregiving; diagnostic challenge; intellectual content; satisfaction in deepening the study of the patient; ambulatory practice; opportunity to be involved in psychological and social aspects of medicine; desire to contribute to the community; need to keep options open; and by the little value they place on remuneration and lifestyle.2, 13 – 23 On the other hand, students who choose surgical specialties justify their choice in terms of the opportunity for practical procedures and operations; the effective almost immediate results; their enjoyment of emergency care; the practical application of scientific knowledge; the research opportunities; the predominance of in-hospital practice; the prestige of surgery within the medical profession; the opportunity for leadership and to exercise authority; the greater remuneration; and the greater respect enjoyed by residents in this field.2, 13 – 23 Recently, specialty-related lifestyle has drawn increased attention.

Studies have suggested that it has become a determinant in student’s criteria for the selection of specialties.24 – 26 A “controllable lifestyle” characterized by personal time free of practice for leisure, for family, and avocational pursuits, and control of total weekly hours spent on professional responsibilities.

  1. This is related to the amount of time remaining for activities independent of medical practice and is a reflection of both total hours worked and number of nights on call.
  2. In their study that included medical students from nine US medical schools, Schwartz et al 8 found that students prefer to select specialties that had fewer practice work hours per week, allowed adequate time for the pursuit of avocational activities, and seemed to have a fewer call nights.

These aspects of lifestyle were found to be more influential than more traditional motivators, such as remuneration, prestige, and length of training.27, 28 In addition, Jarecky et al 25 suggested that lifestyle is a main factor in later career changes by physicians in practice.

  • In the USA, the controllable lifestyle has significant implications on the preference of senior medical students for specialties with subsequent alteration in the distribution of US physicians by specialty.
  • For example, Family practice and general surgery residency programs have experienced significantly lower fill rates during the last 6 years.29 This influence of lifestyle on specialty choice may be representative of a larger societal trend.

Individuals aged 24 through 38 years in 2003 reportedly want time to devote to life outside work (for avocational pursuits) and thus weight lifestyle more heavily when choosing jobs.30 – 31 However, although a controllable lifestyle is likely to be important, clearly other factors are also part of what is a complex career decision-making process that ultimately determines a specific specialty choice.

  • The “controllable lifestyle” may interact with other variables, such as income, work hours, and the years required for certification.
  • Other factors, such as the growth of group practices and the increasing separation of outpatient and inpatient responsibilities, may affect the lifestyle of different specialties and allow the practitioner more control over the timing of professional commitments.

Future research will be required to gauge the impact that these and other changes have on the contingencies between lifestyle and specialty choice. In addition, although many studies have reported a strong association between the recent specialty preferences of medical seniors and controllable lifestyle, these do not establish a causal relationship.

What is an example of a consumer choice theory?

Start Up: A Day at the Grocery Store – You are in the checkout line at the grocery store when your eyes wander over to the ice cream display. It is a hot day and you could use something to cool you down before you get into your hot car. The problem is that you have left your checkbook and credit and debit cards at home— on purpose, actually, because you have decided that you only want to spend $20 today at the grocery store.

  1. You are uncertain whether or not you have brought enough cash with you to pay for the items that are already in your cart.
  2. You put the ice cream bar into your cart and tell the clerk to let you know if you go over $20 because that is all you have.
  3. He rings it up and it comes to $22.
  4. You have to make a choice.
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You decide to keep the ice cream and ask the clerk if he would mind returning a box of cookies to the shelf. We all engage in these kinds of choices every day. We have budgets and must decide how to spend them. The model of utility theory that economists have constructed to explain consumer choice assumes that consumers will try to maximize their utility.

For example, when you decided to keep the ice cream bar and return the cookies, you, consciously or not, applied the marginal decision rule to the problem of maximizing your utility: You bought the ice cream because you expect that eating it will give you greater satisfaction than would consuming the box of cookies.

Utility theory provides insights into demand. It lets us look behind demand curves to see how utility-maximizing consumers can be expected to respond to price changes. While the focus of this chapter is on consumers making decisions about what goods and services to buy, the same model can be used to understand how individuals make other types of decisions, such as how much to work and how much of their incomes to spend now or to sock away for the future.

How do consumer choices influence market economies?

Consumers and the Invisible Hand – There are two primary mechanisms by which consumers affect—and are affected by—the invisible hand. The first mechanism is initiated through competitive bidding for various goods and services. Through decisions about what to buy and what not to buy, and at what prices those exchanges are acceptable, consumers express value to producers.

Producers then compete with one another to organize resources and capital in such a way to provide those goods and services to consumers for a profit. The scarce resources in the economy are continuously rearranged and redeployed to maximize efficiency. The second major effect arrives through the risk-taking, discovery, and innovations that occur as competitors consistently seek ways to maximize their productive capital.

Increases in productivity are naturally deflationary, meaning consumers can purchase relatively more goods for relatively fewer monetary units. This has the effect of raising the standard of living, affording consumers more wealth even when their incomes remain the same.

What is meant by customer choice?

(kənˈsjuːmə tʃɔɪs ) the range of competing products and services from which a consumer can choose.

What are the 7 important factors that influence the buying decision of a consumer?

An individual’s decisions are influenced by personal factors such as a buyer’s age and life cycle state, occupation, economic situation, lifestyle, and personality and self-concept. Consumers’ change during their life and buying of products alter depending on age and stage of life.

What are the basic elements of consumers choice?

Factors Affecting The Theory Of Consumer Choice – Factors associated with the purchasing power of the consumers affect the choices of the consumer. This is why these are the factors that affect the demand as well as sales of the product in the market. Figure 2: Factors Affecting Consumer’s Choice (Source: Jing et al., 2019) Income – The income of the consumers is the key aspect that decides her buying power. Every human has a fixed budget and even people can be categorized as per their affordability according to their budget.

This is why the budget is a huge factor impacting the consumer’s choice (Jing et al., 2019). Price – The price of the product also affects the preferences of the consumers to buy it. The higher price creates pressure on the people with limited budgets whereas the lesser prices of the product create a positive effect on such consumers.

Substitute :- There are always multiple products of the same category in the market. This creates a scenario where a consumer gets a lot of options for the selection of a single kind of product. Thus, the substitute product surely influences the choice of the consumer.

Wai et al. (2019) noted that the presence of another product in the maker can attract the attention of the consumers and make the consumer purchase it. However, this logic is not that simple, even this inclination of the consumer’s choice towards a particular product is based on the multiple factors affecting the consumer’s preferences.

The factors that impact the consumer’s choices change the statistics based on which the product is being projected into the market and also the way consumers perceive the product. These three factors affecting the choices of the customers and their effects are known as substitute effects, effect of purchasing power, and income effect.

What is an example of a consumer choice theory?

Consumer Choice Definition – The consumer choice definition that is widely accepted in economics is one that hypothesizes why people make the consumption choices that they do when they are faced with trade-offs. A trade-off is an option that you forgo if you make a different choice.

  • The theory of consumer choice attempts to understand why consumers choose one good or experience over another, working versus leisure, or saving versus spending their money.
  • Consumer choice examines why people make the economic choices they do when facing trade-offs, restrictions, and changes in their environment that affect their ability to consume.

A trade-off is a choice that you forgo when you make a different choice. If you choose to spend more money on one good, then you cannot buy as much of another good. If you want to enjoy more leisure time, you give up the time you could be working and making more money for the future.

If a consumer decides to spend more of their income now, they will have less money to spend in the future. If they receive a raise at work, their budget will change. The idea of consumer choice relies on the fact that people will make rational decisions to satisfy their wants. People want to make the choice that best fits their budget, their preferences, and optimizes the amount of pleasure they will get from their choices.

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Of course, to make these choices, consumers need some bits of information. The price of a good is an important factor in a consumer’s decision-making about how they can gain the most satisfaction based on their budget and their preferences. If the price of a good is too high then the consumer will buy less of it, or they will buy another lower-priced good if they are unwilling to make the trade-off.

What is the model of consumer choice?

The more a small businessman understands how consumers make their choices – their buying decisions – the better the company marketing mix can be designed. According to authors Philip Kotler and Gary Armstrong, the basic model of consumer decision making involves a 5 step process: need recognition; information search; evaluation of alternatives; purchase decision; post purchase behavior.

What is the theory of consumer choice under risk?

The Friedman-Savage Hypothesis: – The Neumann-Morgenstern method is based on the expected values of utilities and therefore, does not refer to whether the marginal utility of money diminishes or increases. In this respect, this method of measuring utility is incomplete.

  • When a person gets an insurance policy, he pays to escape or avoid risk.
  • But when he buys a lottery ticket, he gets a small chance of a large gain.
  • Thus he assumes risk.
  • Some people indulge both in buying insurance and gambling and thus they both avoid and choose risks.
  • Why’? The answer has been provided by the Freedman-Savage Hypothesis as an extension of the N-M method.

It states that marginal utility of money diminishes for incomes below some level, it increases for incomes between that level and some higher level of income, and again diminishes for all incomes above that higher level. This is illustrated in Figure 2 in terms of the total utility curve TU where utility is plotted on the vertical axis and income on the horizontal axis.

Suppose a person buys insurance for his house against the small chance of a heavy loss from fire and also buys a lottery ticket which offers a small chance of a large win. Such a conflicting behaviour of a person who buys insurance and also gambles has been shown by Friedman and Savage with a total utility curve.

Such a curve first rises at a diminishing rate so that the marginal utility of money declines and then it rises at an increasing rate so that the marginal utility of income increases. The curve TU in the figure first rises facing downward up to point F 1 and then facing upward up to point K 1,Suppose the person’s income from his house is OF with FF 1 utility without a fire.

  • Now he buys insurance to avoid risk from a fire.
  • If the house is burnt down by fire, his income is reduced to OA with AA utility.
  • By joining points A 1 and F 1, we get utility points between these two uncertain income situations.
  • If the probability of no fire is P, then the expected income of this person on the basis of the N-M utility index is Y = P (OF) + (1 -P) (OA).

Let the expected income (Y) of the person be OE, then its utility is EE 1 on the dashed line A t F r Now assume that the cost of insurance, (insurance premium) is FD. Thus the person’s assured income with insurance is OD (= OF-FD) which gives him greater utility DD 1 than EE 1 from expected income OE with probability of no fire.

Therefore, the person will buy insurance to avoid risk and have the assured income OD by paying FD premium in case his house is burnt down by fire. With OD income left with the person after buying insurance of the house against fire, he decides to purchase a lottery ticket which costs DB. If he does not win, his income would fall to OB with utility BB 1,

If he wins, his income would increase to OK with utility KK 1 Thus his expected income with probability P’ of not winning the lottery is Y 1 = P'(OB) + (1 -P’) (OK) Let the expected income F, of the person be, then its utility is CC 1 on the dashed line B 1 K 1 which gives him greater utility (CC 1 ) by purchasing the lottery ticket than DD 1 if he had not bought it.

Thus the person will also buy the ticket along with insurance for the house against fire. Let us take OG expected income in the rising portion F 1 K 1 of the TU curve when the marginal utility of income is increasing. In this case, the utility of buying the lottery ticket is GG 1 which is greater than DD 1 if he were not to buy the lottery.

Thus he will stake his money on the lottery. In the last stage when the expected income of the person is more than OK in the region K 1 T 1 of the TU curve, the marginal utility of income is declining and consequently, he is not willing to undertake risks in buying lottery tickets or in other risky investments except at favorable odds.

  1. This region explains St.
  2. Petersburg Paradox.
  3. Friedman and Savage believe that the TU curve describes the attitudes of people towards risks in different socio-economic groups.
  4. However, they recognise many differences between persons even in the same socio-economic group.
  5. Some are habitual gamblers while others avoid risks.

Still, Friedman and Savage believe that the curve describes the propensities of the main groups. According to them, people in the middle income group with increasing marginal utility of income are those who are willing to take risks to improve their lot.

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