mktgmgmt session 3

8/8/2019 MktgMgmt Session 3

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Consumer and Organizational

Buying Behavior


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Session Objectives.

Understanding buyer behavior.

Understanding different buying roles.

How consumer makes purchase and what affecttheir purchase?

Understanding consumer decision process.

Difference between consumer and organizational

buyer behavior. What affect organizational buying.

Roles in organizational buying process.


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Wal Mart Story

Wal-Mart opened its store in Latin America.

The sales have been disappointing and

questions are raised whether Wal-Mart magic

can work in Latin America. Wal-Mart designed

its store like any other Wal-Mart store in US:-

narrow aisles with a lot of merchandise, huge

parking lots, many products with red, whiteand blue banners, and so on. Why did Wal-

Mart magic could not work ?


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Why Did Wal-Mart Fail ?

Latin Americans shop with their families and

require large aisles.

Most of them do not own cars hence requiredoor to door transportation service.

Red, white and blue banners gives impression

of Yankee imperialism.

The bottom line is Wal-Mart forgot to study

the Customer.


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Buyer Behavior

Behavior

yAs you look at history its apparent that human

behavior is much more easier to predict thanthe weather.

y

Behavior is a mirror in which everyone showsimage.


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Buyer Behavior Defined

Consumer behavior is all psychological, social

and physical behavior of potential customers

as they become aware of, evaluate, purchase,

consume, and tell others about the products

and services.


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Buyer Behavior

The study of buyer behavior includes thestudy of:

What they buy?

Why they buy?

How they buy?

When they buy?

How often they buy?

From where they buy?


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Factors affecting Buyer Behavior

Cultural factors.

Social factors.

Personal factors

Psychological factors.


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Cultural Factors:

Culture

Basic cause of persons wants and behavior.

Sub-culture

Group of people which share values.

Social class

It is measured as a combination of occupation,

income, education, wealth and other

variables.


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Social factors.

Reference group.

Primary and secondary groups

Formal and informal groups

Membership and symbolic groups.

Family

Roles and Status.


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Psychological factors.

Motivation.

Perception.

Learning beliefs andAttitudes.


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Consumer Decision Process

PostpurchaseBehavior

Purchase

Evaluationof Alternatives

Information Search

Need Recognition

Cultural, Social,Cultural, Social,Individual andIndividual andPsychologicalPsychological

FactorsFactorsaffectaffect

all stepsall steps


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Need Recognition

When a current product isnt

performing properly

When the consumer is running

out of an product

When another product seems

superior to the one currently used

Marketing helps consumers

recognize (or create) an

imbalance between present

status and preferred state


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The information search stage

An internal search involves the scanning of one'smemory to recall previous experiences or knowledge

concerning solutions to the problem-- often

sufficient for frequently purchased products.

An external search may be necessary when pastexperience or knowledge is insufficient, the risk of

making a wrong purchase decision is high, and/or the

cost of gathering information is low.

Personal sources (friends

and family)

Public sources (rating

services like Consumer

Reports)

Marketer-dominated

sources (advertising orsales people)

The evoked set:a group of brandsfrom which the buyer can choose


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Determinants of External Search


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Consumer decision making varies with the

level of involvement in the purchasing

decision

Extensive: problem solving occurs when

buyers purchase more expensive, less

frequently purchased products in an

unfamiliar product category requiring

information search & evaluation; mayexperience cognitive dissonance.

Limited: problem solving occurs when buyers

are confronted with an unfamiliar brand in a

familiar product category

Routine: response behavior occurs

when buyers purchase low cost, low risk, brand

loyal, frequently purchased, low personal

identification or relevance, items with which they

are familiar.

Increase in

Consumer

evaluationprocesses


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Factors affecting

Consumer involvement

Previous experience: low level involvement

Interest: high involvement

Perceived risk of negative consequences: high involvement

Situation: low to high due to risk

Social visibility: involvement increases with product visibility

Offer extensive information on high involvement products

In-store promotion & placement is important for low involvement products

Linking low-involvement product to high-involvement issue can increase sales

So


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Evaluation of Alternatives

In this stage, the consumer compares theoptions identified as potentially capable ofsolving the problem that initiated the decision

process.During this comparison process, consumersform beliefs, attitudes, and intentions aboutthe alternatives under consideration.The goal of alternative evaluation is to gainthe information needed to make final choice.


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Evaluation of alternatives

CAR

Safety

Fuel efficiency

After sales service

Driving comfort

Maneuverability

Financing options

Resale value

Appearance of the model**

UBP (Unique buying proposal)


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Postpurchase Behavior

Can minimize through:

Effective CommunicationFollow-up

GuaranteesWarranties

Underpromise & overdeliver

Cognitive DissonanceCognitive Dissonance

Did I make a good decision?Did I make a good decision?

Did I buy the right product?Did I buy the right product?

Did I get a good value?Did I get a good value?


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Sour Grapes

a story ofcognitive dissonance

after being unable to reach the grapes the fox said, these grapes are

probably sour, and if I had them I would not eat them.

--Aesop


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Cognitive Dissonance

psychological discomfort caused by inconsistencies among apersons beliefs, attitudes, and actions

varies in intensity based on importance of issue and degree of

inconsistency

induces a drive state to avoid or reduce dissonance by

changing beliefs, attitudes, or behaviors and thereby restoreconsistency

Tendency to avoid information can be countered by eliciting interest,

norm of fairness, or perceive usefulness of information

Post-decision buyers remorse may be increased by importance or difficulty or

irreversibility of decision

Counter-attitudinal action, freely chosen with little incentive or justification, leads to

attitude change (e.g., new product at special low price)

Applications:


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The pride of your home

What is the latest consumer durable product you have bought for yourhouse?

Whose idea was to get that product? Why did he/she feel that you neededthat product?

Who fixed the budget? What was the procedure for fixing budget? Who

paid for the product? Whom did you consult before deciding?

Why did you select the particular brand and not the other?

Who selected the particular brand?

Where did you buy it and why from there only?

What is your feeling after buying and using that product?

Any other aspects worth mention?**

Time 15 mins. Randomly selected 3 to present.


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Initiator Influencer Payer Decider Buyer User


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OrganizationBuying Process


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What is a Business Market?

The Business MarketBusiness Market -- all the organizations that

buy goods and services to use in the productionof other products and services that are sold,rented, or supplied to others.

involve many more dollars and items do consumermarkets.


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Classifications of Industrial Goods

Raw materials

Component parts and materials

Installations Accessory equipment

Maintenance, repair, and operating supplies

(MRO) Business services


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Types of Decisions & the

Decision Process

Characteristics of Business Markets

Market Structure and Demand Fewer, larger buyers

Geographically concentrated Demand derived from consumers Inelastic demand Fluctuating demand

Nature of the Buying Unit

More buyers More professional purchasing

effort

More complex decisions Process is more formalized Buyer and seller are more

dependent on each other Build close long-term relationships

with customers


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Organizational Buying vs. Consumer Buying

Derived demand

Fewer buyers

Larger purchases

Some geographic concentration among buyers

Multiple buying influences

Less likely to use middlemen

Multiple sales calls

Systems buying often used


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Organizational Buying vs. Consumer Buying

(contd)

Professional buyers are often involved in the

purchase

Closer buyer-seller relationships

More rational & structured buying processes

Reciprocity

Leasing

Sometimes influenced by make-or-buy options


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OrganizationalBuying Process

1. Problem

Recognition

2. General

Descriptionof Need

3. Product

Specifications

4. SupplierSearch

5. Acquisition

and Analysis

of Proposals

6. Supplier

Selection

7. Selection

of

Order Routine

8. Performance

Review


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Three Buying Situations

1. New task

2. Modified rebuy

3. Straight rebuy


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Three Buying Situations1. New Task

New taskthe problem or need is totally

different from previous experiences.

Significant amount of information is required.

Buyers operate in the extensive problem solving

stage.

Buyers lack well defined criteria.

Lack strong predispositions toward a solution.


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Three Buying Situations2. Modified Rebuy

Modified rebuydecision makers feel there

are benefits to be derived by reevaluating

alternatives.

Most likely to occur when displeased with the

performance of current supplier.

Buyers operate in the limited problem solving

stage. Buyers have well defined criteria.


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Three Buying Situations3. Straight rebuy

Straight rebuythe problem or need is a

recurring or continuing situation.

Buyers have experience in the area in question.

Require little or no new information.

Buyers operate in the routine problem solving

stage.


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Forces Influencing Organizational Buying Behavior

Environmental

Forces

Organizational

Forces

Group

Forces

Individual

Forces

Organizational

Buying

Behavior

Economic Outlook:

Domestic & Global

Pace of Technological

Change

Global Trade Relations

Goals, Objectives, and

Strategies

Organizational Position

of Purchasing

Roles, relative

influence, and patterns

of interaction of buying

decision participants

Job function, past

experience, and buying

motives of individual

decision participants

A projected change in

business conditions candrastically alter buying

plan.


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Roles in B2B procurement buying

center concept

Group of people involved in the buying

process buying center

Webster/Wind model shows5

different roles not institutionalised

This causes probleme in identifying and

targeting the right people within the decision

process


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Participants in the Business Buying

Process: The Buying Center

Buying

Center

UsersGatekeepers

Deciders Influencers

Buyers


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Buyer

Formal authority to sign contracts

Member of purchasing department

Influences the vendor selection Not in technical details

Main criteria: price + terms and conditions of

the contract


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User

Person working with the product

Interested in benefits and unobstructed

function of the product to buy

Large knowhow and preconceived opinion


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Influencer

A person with high technical knowledge and

practical experience

definition of minimum requirements on

technical or company standards


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Gatekeeper

Controls the flow of information within the

buying center

Assistant of decision maker

Influence by preparing the decision and the

relevant documents


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Decider

Right to say yes or no

Mightiest person


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Mag. Maria Peer 46

Initiator

Person who brings new ideas and solutions

into the company


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Mag. Maria Peer 47

Specific marketing considerations in the

industrial facilities business

Long decision taking process

High risk

Complex buying center The specific competitive situation


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The behavior oforganizational buyers is

influenced by

environmental,

organizational, group,

and individual factors.

Major Elements of Organizational Buying Behavior

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