6 cb & org buying

CONCEPTS IN MARKETING

Understanding Consumer Behavior & Organizational Behavior

WHY STUDY CONSUMER BEHAVIOR

Consumers make buying decisions all the time. The Marketing Task is to understand

• What do they buy … Product & Services• Where do they buy … Channel decisions• When do they buy … Timing of purchase• Why do they buy … Motivation to purchase• How do they buy … Decision process• How often do they buy … Purchase cycle

CONSUMER BEHAVIOR

• Consumer behavior can be defined as the behavior that consumers display in – searching for– Purchasing– Using– Evaluating and– Disposing off

products and services that they expect will satisfy their needs and wants.

CONSUMER BEHAVIOR & MARKETING PLANNING

• As marketers, it is important for us to recognize why and how individuals make their consumption decisions so that we can make better strategic decisions.

• Marketing firms use their knowledge of consumer behavior to segment markets, to design marketing strategies and to measure marketing performance.

THE BUYER : an Enigma

• The consumer buying decision remains an enigma for the marketer---sometimes responding the way the marketer wants/expects and on other occasions just refusing to buy the product from the same marketer.

• The marketer provides certain stimuli– Product, Price, Place & Promotion, but is unsure whether the buyer will respond.

• The consumers mind is another Black Box

THE BLACK BOX

Marketing Stimuli•Product•Price•Place•Promotion

Other Stimuli•Economic•Technological•Political•Cultural

BuyersCharacteristics

Buyers Decision Process Not to

Buy

Buy

Decision on•Product Choice•Brand•Dealer•Timing•QuantityResponse

Evaluate & takeCorrective action

FACTORS INFLUENCING CONSUMER BEHAVIOR

• Cultural : Culture, Sub-culture, Social class

• Social : Reference groups, family, roles & status

• Personal : Age & life cycle, Occupation, Lifestyle, Personality, Economic

• Psychological : Motivation, Perception, Learning, Beliefs & attitudes

Social class & typical consumption behaviorSocial class

Upper-Upper

Lower-Upper

Upper-Middle

Lower-Middle

Upper-Lower

Lower-Lower

Characteristics

Social elite, inheritance

High income professionals, social position earned

Career oriented professionals, highly educated

Respectable, hard working, conscious re standards

Blue collar, moderate education & skill

Near poverty line

Consumption behavior

Consume high quality often become standards for others

Conspicuous consumers of luxury products, innovators

Hi-quality products that reflect success & position, gracious life style, experimenters.

Influenced by standards, careful shoppers, price sensitive, home conscious

Impulsive, brand loyal, self perception

Unskilled shopper, purchase on credit & pays more

PSYCHOLOGICAL FACTORS

• Consumer buying choices are influenced by major psychological factors---motivation, perception, beliefs & attitudes

• Motive---is a need that is sufficiently pressing to drive the person to act

• Needs could be– Biological…arising from state of hunger,thirst or comfort– Psychological…arising from need recognition, esteem,

belonging

A need becomes a motive when it is aroused to a sufficient level of intensity.

Theories of Motivation

• Sigmund Freud Theory of Motivation• Maslow’s theory of Motivation

• Freud…suggests that a person does not fully understand his or her motivation

• E.g A consumer wanting to buy a Camera– Initial motive …..as a hobby or a career– Deeper level…….to impress others with creative talents– Still deeper level….to feel young & independent

• Maslow believes that human needs are arranged in a hierarchy, from the most pressing to the least pressing.

MASLOWS HIERARCHY OF NEEDS

Self Actualization

needs

Esteem Needs

Social needs

Safety needs

Physiological needs

Adapted from Principles of Marketing: Kotler & Armstrong. PHI, 9th edition

Self development& realisation

Self esteem, recognition status

sense of belonginglove

security,protection

hunger, thirst

THE BUYING DECISION PROCESS

• Buying roles -- who makes the buying decision Initiator, Influencer, Decider, Buyer, User

• Buying Decision behavior —buying decision varies with type of product

– Complex Buying behavior

• Buying Process -- how the decision is made

Need recognition

Search forinformation

Evaluation ofalternatives

Purchasedecision

Post purchasebehavior

TotalSet Aware-

nessSet

Consid-eration

SetChoice

Set Decision

Decision Making Sets

BUYING DECISION BEHAVIOR

High involvement Low involvement

Significant Difference Betweenbrands

Few differencesBetweenbrands

ComplexBuyingbehavior

Variety seekingBuyingbehavior

DissonanceReducingBuyingbehavior

Habitual Buyingbehavior

Complex buying behavior

Organizational Buying Behavior

Organizational Buying Behavior

• Business Markets…. all organizations that buy goods & services for use in the production of other products & services that are sold, rented or supplied to others.

• Business buying process….the decision making process by which business buyers establish the need for purchased products & services and identify, evaluate and choose among alternative brands & suppliers

Characteristics of Business Markets

• Demand Characteristics - derived demand - relatively inelastic

- erratic demand

• Market demographics - fewer but larger buyers- geographically

concentrated

• Buyer-Seller relationship - closer relationship- multiple buying influences- professional buyers buy- follow prescribed specifications/procedures

Industrial Marketing vs Consumer goods Marketing

Product

Price

Promotion

Distribution

Customer relationships

Decision making process

Industrial marketingMore tech in nature; accompanying services important; form may vary.

Competitive bidding for specific items; list prices for standard items

Personal selling

Shorter channels; more direct selling

Frequent & more enduring but complex

Involves diverse group of organizational members

Cons goods MarketingStandard form; service important but less.

List prices

Advertising

Long chain of intermediaries

Less frequent & shorter duration

Individual or household decides

Characteristics of Organizational Buying Process

OrganizationalBuying Process

Multiple buyinginfluence

Technicalcomplexities

Time lags

Rational & EmotionalBuying motives

Objectives &Distinctive character oforganization

Business Buyer Behavior

• What buying decisions do business buyers make ?

• Who participates in the buying process ?

• What are the major influences on buyers ?

• How do business buyers make their buying decisions ?

What buying decisions : Implications of Buying situations

Buying situation

Straight re-buy(no change in specs)

Modified re-buy(changes in specs/terms)

New Task(first time purchase)

IN Supplier

Maintain quality; be alert to changing customer needs;initiate auto ordering; reinforce relationships.

Respond quickly; reinforce relationships;preempt changes using CI

Equal opportunity for both; info need is high;seller can influence specs

OUT Supplier

Offer something new/diff;exploit dissatisfaction;get foot in the door;ask to split order

Opportunity to get in;offer alternatives; offer value addition;minimize risk of shifting

Buying motivations of Business buyers

Rational & emotional factors influence decisions

• Rational factors - Price…base price & price stability- Quality..reliability,consistency, quality-price relationship- Service…where intangibility high, scope for differentiation- Deliveries..continuity/reliability, may

not have exclusive suppliers- Reciprocity…”you buy from me, I buy

from you”

• Emotional factors - Status & reward…motives of individual- Perceived risk…fear of wrong decision—

displeasing boss or losing reward- Friendship/relationship…help a known

supplier by providing information

Forces influencing Organizational buying behavior

• Environmental forces - economic, political,& legal, cultural, physical & technological

- uncertainty makes decision making complex

• Organizational forces - Organizational climate & rules

- avoid uncertainty, role of purchase- centralized/decentralized, ripe for personal selling

• Group forces - group buying behavior-affected by influences of others,

- goal conflict amongst members

• Individual forces - Individuals not entities make buying decisions.

- personal biases affect decision making, - background of individuals affects

evaluation

Implications for Marketing Strategy planning

• Environmental - how will the environment impact purchase plans of the industry/organization

• Organizational - What unique company attributes (size, structure) influence buyer behavior

• Product specific - how far has the firm progressed in the buying process

- what is the likely buying situation- what is the extent of perceived risk

• Group - Group or individual decision, if group who are the members

- what is the relative influence of each

• Individual - what criteria are important to each member in evaluating suppliers

- how do buyers rate suppliers