mktgmgmt session 3
TRANSCRIPT
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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