Consumer preferences describe the reasons for the choices people make when selecting products and services. Analyzing the factors that determine consumer preferences helps businesses target their products towards specific consumer groups, develop new products and identify why some products are more successful than others.


Advertising plays an important role in consumer preference, especially for non-durable goods such as food or magazines. Advertising informs consumers of available goods and services and also shapes their impressions of these products. Advertising can also create demand; for example, a consumer may not have wanted a new cell phone until he saw flashy new phones on TV.

Social Institutions

Social institutions, including parents, friends, schools, religion and television shows also influence consumers' preferences. For example, kids might want to have the same toys their schoolmates have, while young adults may purchase the same products their parents used to buy.


Consumers usually choose to purchase more of a good if the price falls. For example, a sale or reduced prices may increase consumption of a good. On the other hand, an increase in price may cause reduced consumption, especially if the good has available substitutes.

Consumer Income

Consumers often desire more expensive goods and services when their income increases. If they suffer a decrease in income, they are more likely to choose less expensive goods and services. For example, a business selling luxury goods, such as jewelry, will probably be more successful in a high-income area than a low-income area.

Available Substitutes

If a product has several substitutes -- alternative products that consumers may choose instead a particular brand of product -- consumers will be more sensitive to changes in price. However, if consumers do not perceive similar products to be effective substitutes -- for example, consumers who do not think Coke and Pepsi are equally delicious -- they will be less likely to switch to a substitute based on price. This concept is called the price elasticity of demand.