individual. The economic manis the concept that is often used about these
assumptions of human behaviour. The assumptions of the economic man are:
- Human behaviour is guided by rational parameters.
- Humans will attempt to maximize their own satisfaction and strive for
maximum utility in any exchange – self-interest is an important parameter. - Humans have ‘perfect information’ about the available alternatives.
- The exchange between two parties is perceived as an isolated event.
- Consumers are constrained by limited income, which forces them to behave
in a way that will ensure that they get the most out of their income – they will
act to maximize the utility of their income.
The logic is hence applicable both at the market scale and at an individual level,
because it is assumed that the individual will always pursue self-interest and make
consumption decisions that are based on rational parameters, deliver individual
utility maximization and hence make the best rational choice possible. In a
consumption and brand management context this means that a consumer will
always go for the deal that provides the best functional utility compared with the
price of the product. It is hence assumed not only that consumers are able to
oversee all available choices, but also that they are able to and will evaluate all
these choices and choose the best deal from a rational point of view.
The brand–consumer exchange and transaction cost theory
Transaction cost theory is closely linked with the stream of neoclassical micro-
economic logic explained above and describes the relationship companies have
to the market; it defines the firm theoretically in relation to the marketplace. The
32 Seven brand approaches
Box 4.1 Economic man: Individual and societal maximization in a
supermarket checkout queue
A simple example of how the principle of the ‘invisible hand’ works in
practice is how customers behave in the queue for a supermarket checkout.
According to the assumptions of the economic man, each customer will
automatically try to maximize her own self-interest – which in a super-
market checkout queue is to check out in the shortest time possible. Most
people will hence choose the shortest queue whenever getting in line. In
this example customer utility maximizing choice is hence to queue up in
the line with fewest people. From a general perspective this has the conse-
quence that customers queue up in lines that all end up having the same
length. Therefore without the slightest direction and by following only
their own self-interest, customers will automatically have queued up in a
manner that is most efficient on an individual level, but also from a
societal perspective.