CHAPTER –6 Analyzing Consumer markets & Buying Behavior

Model of consumer behaviour

Marketing stimuli Other stimuli Buyer’s Buyer’s decision Buyer’s
Product Economic characteristics process decisions
Price Technological Cultural Problem Product choice
Place Political Social recognition Brand choice
Promotion Cultural Personal Information Dealer choice
Psychological search Purchase timing
Evaluation Purchase amount
Decision

Major Factors influencing Buying Behaviour

Cultural Factors

Culture: values, perceptions, preferences and behaviours.

Subculture: nationalities, religions, racial groups & geographic regions.
Social Class: homogeneous & enduring divisions, hierarchically ordered, members share
common values.
Indicated by occupation, income, education, etc.

Social Factors

Reference Groups: all groups that have a direct (membership groups) or indirect influence
on attitudes or behavior. These groups
expose us to new behaviors & lifestyles
influence attitudes & self concept
create pressures for conformity that influence brand choice

primary
secondary
aspirational
dissociative
opinion leader

Family: Most important & influential primary reference group.

Family of orientation – parents & siblings
Family of procreation – spouse & children

Roles and Statuses

A person participates in many groups – family, clubs, and organizations. The person’s
position in each group can be defined in terms of role and status. A role consists of the
activities that a person is expected to perform. Each role carries a status. People choose
products that communicate their role and status in society. Thus CEOs drive Mercedes, etc.
Marketers are aware of the status symbol potential of products and brands.
PERSONAL FACTORS
A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s
age and stage in the life cycle, occupation, economic circumstances, lifestyle and personality
and self-concept.
Age and stage in the life cycle
People buy different goods and services over a lifetime.
Consumption is shaped by the family life cycle. Marketers often choose life cycle groups as
their target market. Yet target households are not always family based: there are also single
households, gay households and cohabiter households.

Some recent work has identified psychological life cycle stages. Adults experience certain
passages or transformations as they go through life. Marketers pay close attention to changing
life circumstances – divorce, widowhood, remarriage – and their effect on consumption
behavior.
Occupation & economic circumstances
Occupation also influences a consumption pattern. A company can even specialize its
products for certain occupational groups.
Product choice is greatly affected by economic circumstances: spendable income (level,
stability, and time pattern), savings and assets (including the % that is liquid), debts,
borrowing power, and attitude towards spending Vs saving. Marketers of income-sensitive
goods pay constant attention to trends in personal income, savings and interest rates. If
economic indicators point to a recession, marketers can take steps to redesign, reposition, and
re price their products so they continue to offer value to target customers.
Stages in the Family Life Cycle
1. Bachelor stage: young, single not living at home
Few financial burdens
Fashion opinion leaders
Recreation oriented.
Buy basic home equipment, furniture, cars, and vacations
2. Newly married Couple: Young no children
Highest purchase rate & highest average purchase of durables
Cars, appliances, furniture, vacations
3. Full nest I: youngest child under 6
Home purchasing at peak.
Liquid assets low
Interested in new products, advertised products
Buy: washers, dryers, TV, baby food, vitamins, dolls,
4. Full Nest II: youngest child 6 or over
Financial position better
Less influenced by advertisements
Buy larger sized packages, multiple unit deals
Buy: cleaning material, bicycles, piano
5. Full Nest III: older married couple with dependent children
Financial position still better
Less influenced by advertising
High average purchase of durables
Auto, boats, dental services, magazines
6. Empty Nest I: older married couple, no children living with them, head of house in labor
force
Home ownership at peak
 Interested in travel, recreation, self education
Not interested in new products
Buy: vacations, luxuries, home improvements
7. Empty Nest II: older married couple, no children living with them, head of house retired
Drastic cut in income
Keep home
Buy: medical appliances, medical care products
8. Solitary survivor: in labor force
Income still good but likely to sell home
9. Solitary survivor: retired
Same medical and product needs as other retired group
Drastic cut in income
Special need for attention, affection, security

Psychological Factors:
4 major psychological factors that influence a person are buying choices:
1. Motivation: A person has many needs at a given time –
2. Biogenic Needs – Arising from psychological states of tension such as hunger, thirst,
discomfort.
3. Psychogenic needs – Arising from psychological states of tension such as need for
recognition, esteem or belonging.
4. Motive: A need becomes a motive when it is aroused to a sufficient level of intensity
causing a person to act.

Theories related to Motivation:

Maslow’s theory: Maslow’s theory helps marketers understand how various products fit into
the plans goals and lives of consumers.

5. Self Actualization Needs (Self Development and realization)

4. Esteem Needs (self-esteem, recognition, status)

3. Social Needs (Sense of belonging, love)

2. Safety Needs (security, protection)

1. Physiological Needs (food, water, shelter)

Herzberg’s Theory: Two-factor theory

Dissatisfiers – Factors that cause dissatisfaction.
Satisfiers – Factors that cause satisfaction.
The Seller should do his best to avoid dissatisfiers.
The manufacturers should identify the major satisfiers or motivators of purchase in the
market and then supply them.

Perception: How a motivated person acts is influenced by his or her perception

Perception is the process by which an individual selects organizes and interprets information
inputs to create a meaningful picture of the world.
Perception is individual.

Selective Attention:
People are more likely to notice stimuli that relate to current need
eg :computer ad when req computer
People are more likely to notice stimuli that they anticipate
Eg: computer than radio in computer store
People are more likely to notice stimuli whose deviations are large in relation to the normal
size of the stimuli
Eg: 100 off than to 10off
Selective Distortion: It is the tendency to twist information into personal; meanings and
interpret information in a way that will fit a persons preconceptions. Marketers cannot do
much about this.
Selective Retention: People tend to forget much that they learn but tend to retain information
that supports their attitudes and beliefs. (Marketers use drama and repetitions in sending
messages to their target market)
Subliminal perception:

Learning: When people act they learn.

Learning involves changes in an individual’s behavior arising from experience.
Learning is produced through interplay of:

Drives – A strong internal stimulus impelling action

Stimuli
Cues – Minor stimuli that determine when, where and how a person responds
Responses
Reinforcement

Beliefs and Attitudes:

A belief is a descriptive thought that a person holds about something.
Beliefs may be based on knowledge, opinion or faith. They may or may not carry emotional
charge.
An attitude is a person’s enduring favorable or unfavorable evaluations, emotional feelings,
and action tendencies towards some object or idea

Buying roles:
Initiator – Influencer – Decider – Buyer – User

Buying behavior:
Complex buying behavior – three-step process – develops belief about the product, attitude
about the product and then makes a thoughtful choice.
Dissonance reducing buying behavior – consumer is highly involved in a purchase but sees
little difference in brands. Marketing communication should supply beliefs and evaluations
that help the consumer feel good about his/her brand choice.
Habitual buying behavior – bought under conditions of low involvement and absence of
significant brand differences.
Variety seeking buying behavior – characterized by low involvement but significant brand
differences.
High Involvement Low Involvement
Significant differences Complex buying behavior Variety seeking buying
between brands behavior
Few differences between Dissonance reducing buying Habitual buying behavior
brands behavior
Stages of the Buying Decision Process
Ways to find out the buying decision process by marketers:
Introspective Method: they would think how they would behave
Retrospective Method: Ask people to recall their buying decision process
Prospective process: Ask prospective customers to think aloud
Prescriptive process: Ask customers the ideal way to buy the product
Five stage Process of Consumer Buying Decision

Problem Recognition

Information search

Evaluation of
alternatives

Purchase Decision

Post purchase
Behavior

Problem Recognition
The buying process starts when the customer feels the need for the product
Internal or external stimuli.

Information Search:
An inclined customer would look for more information. At the first level it is called
heightened attention. He simply becomes more receptive for information
At the next level is the active information search looking for more information from friend,
reading material, etc.
Sources of information for the customer:
1. Personal Sources: family, friends
 2. Commercial sources: Ads, sales people
3. Public sources: Mass media
4. Experimental sources: Handling, examining
Successive sets involved in consumer Buying decision process:

Total Set Awareness Consideratio Choice Set: Decision:

All the Set n Set: Strong ????
possible The brands Some initial Contenders
choices that the brands that
consumer is meet basic
aware of requirements

Purchase Decision
Attitudes of
others

Evaluation of Purchase
alternatives Intention Purchase
decision
Unanticipated
factors

Post purchase behaviour:

Post purchase Satisfaction: the customer may either be satisfied, delighted or dissatisfied
after the purchase. these feelings make a lot of difference to the customer’s perception and
behaviour towards the company.
Post purchase actions: the customer may take different actions depending upon his
satisfaction level. The dissatisfied customer may stop buying (exit option) or the customer
may be tell his friends not to buy the product (voice option)
Post purchase use and disposal: Marketers need to monitor what the consumer does with
the product after purchase and how it is disposed off to maintain environmental friendliness
of the product.

How Customers Dispose of Products

CHAPTER 7 ANALYZING BUSINESS MARKETS AND BUSINESS BUYING BEHAVIOR

Organizational Buying is the decision making process by which formal organizations

establish the need for purchased products and services and identify, evaluate and choose
between alternative brands and suppliers.

Business market versus consumer market

Business Market consists of all the organizations that acquire goods and services used in the
production of other products and services that are sold, rented or supplied to others. Main
industries comprising this are agriculture, forestry, fisheries, manufacturing, mining, banking,
insurance, etc.

Characteristics that contrast with consumer market

Fewer buyers
Larger buyers
Close supplier- customer relationship (customization)
Geographically concentrated buyers- reduces selling costs, also because of regional shifts of
certain industries
Derived demand- ultimately demand is derived from that for consumer goods, so one must
closely monitor the buying patterns of ultimate consumers
Inelastic demand- not too affected by price, especially inelastic in short run because it is not
easy to make changes in production methods
Fluctuating demand- more volatile than that for consumer goods and services. Acceleration
effect: a certain rise in consumer demand can cause a much larger increase in the demand for
plant and equipment necessary to produce that additional output.
Professional purchasing- Business goods are purchased by trained purchasing agents who
must follow purchasing policies, constraints and requirements, for example, requests for
quotations, proposals and purchase contracts.
Several buying influences- More people influence buying decisions. Buying committees
often consist of technical experts and even senior management.
Multiple sales calls
Direct purchasing- from manufacturers instead of intermediaries especially in the case of
items that are technically complex or expensive.
Reciprocity- buyers selecting suppliers who also buy from them.
Leasing- instead of buying heavy equipment.

Buying Situations
There are three types:
Straight rebuy- Purchasing department reorders on a regular basis. The buyer chooses from
suppliers on an approved list. The suppliers make an effort to maintain product and service
quality and propose “automatic reordering systems”. The “out-suppliers” attempt to offer
something new or exploit dissatisfaction with existing supplier.
Modified rebuy- The buyer wants to modify product specifications, prices, delivery
requirements and other terms. This involves additional decision participants on both sides.
The “in-suppliers” become nervous and “out-suppliers” try to offer a better deal.
New task- The purchaser buys a product or service for the first time.

Stages in New task buying: Awareness, Interest, Evaluation, Trial and Adoption.
Mass media have the greatest effect at the awareness stage, sales-people at the interest stage
and technical sources at the evaluation stage.
The new task situation is said to be the marketer’s greatest opportunity and challenge. Some
companies use a Missionary sales force consisting of their best people for this.

The numbers of decisions for the business buyer are the fewest in the straight rebuy and the
maximum in the new task.

Participants in the business buying process

The Buying center is composed of all those individuals and groups who participate in the
decision making process, who share some common goals and risks arising from the decisions.
Initiators: Those who request that something be purchased.
Users: Those who will use the product or service.
Influencers: People who influence the buying decision. They help define specifications and
provide information about alternatives.
Deciders: People who decide on product requirements or on supplies.
Approvers: people who authorize the proposed actions of deciders and buyers.
Buyers: People who have formal authority to select the supplier and arrange the purchase
terms.
Gatekeepers: People who have the power to prevent sellers or information from reaching the
buying center.

When a buying center includes many participants the business marketer will not have the
time or resources to reach all of them. Small sellers concentrate on reaching the key buying
influencers whereas the large sellers go for multilevel in depth selling to reach as many
participants as possible.

Major Influences
The major influences on buying behavior are: Environmental, Organizational, Interpersonal
and individual.
Environmental
- Level of demand Organizational
- Objectives Interpersonal
- Economic outlook - Policies - Interest Individual
- Interest rate - Procedures - Authority - Age
- Rate of tech. Change - Organizational - Status - Income
- Political and regulatory - Empathy - Education
structures
- Job Position
Business
developments - Systems - Persuasiveness
- Competitive developments - Personality Buyer
- Social responsibility concerns - Risk
- Attitudes
- Culture
Environmental factors: Business marketers can do little to stimulate total demand in this
environment. They can only fight harder to maintain or gain market share.
Organizational factors: Every organization has specific purchasing objectives, policies,
procedures, organizational structures and systems.
Interpersonal factors: Buying centers have several participants with different interests,
authority, status, empathy and persuasiveness. Whatever information the marketer can
discover about personalities and inter personal factors will be useful.
Individual factors: Each buyer carries personal motivations, perceptions, preferences as
influenced by his age, income, education, job position, personality attitudes towards risk and
culture.

The Purchasing/Procurement Process:

Business buyers buy goods and services to make money or to reduce operating costs or to
satisfy a social or legal obligation. Business buyers try to obtain the highest benefit package
relation to a market offering’s costs.
There are three company-purchasing orientations:
Buying- discrete transactions, relations are arms-length and adversarial, buyer focus is short
term and tactical. Buyers assume that “value pie” is fixed, and they must bargain hard to
maximize benefits. Buyers use two tactics: commoditization and multi-sourcing.
Procurement- Buyers seek quality improvements and cost benefits. More collaborative with
smaller no of suppliers working in close cooperation with customers. The goal is to establish
win-win relationship.
Supply management- Purchasing is more of a strategic value adding operation. Focus is on
improving value chain from raw materials to end-users. Buyer behaves as a lean enterprise
operating under demand pull rather than supply push.

Stages in the process

Problem recognition:
Most common events leading to problem recognition: company decides to develop new
product, machine breaks down, and purchased material turns out to be defective, purchases
senses opportunity to obtain materials at cheaper price.

General need description:

Determination of needed item’s general description and characteristics (viz reliability,
durability, price) & quantity. Marketers may assist buyers in this stage.

Product specification:
Buying organization will develop technical specifications for the product and assign a
product value analysis (PVA) engineering team to the project.

PVA is an approach to cost reduction in which components are carefully studied to determine
if they can be redesigned or standardized or made by cheaper methods of production.

Supplier search:
Identify the most appropriate suppliers. Suppliers who lack the required production capacity
or suffer from a poor reputation get rejected. Those who qualify may be visited by the
buyer’s agents, who will inspect supplier’s manufacturing sites. After this stage, buyer will
end up with a short list of qualified suppliers.

Proposal solicitation:
Buyer invites proposals from suppliers. After evaluating proposals, buyer will invite a few
suppliers to make formal presentations.

Supplier Selection:
Buyer will first specify desired supplier attributes like price, reputation, reliability, flexibility
and assign weightages according importance. They will be rated then and the best will be
identified.
Another decision to make is how many suppliers to have

Order – Routine specification:

After selecting supplier, buyer lays the purchase conditions related to final order, tech specs,
delivery etc. a blanket contract is signed for supplier to keep ready stock with the buyer over
a specified period of time

Performance review:
Buyer periodically reviews its suppliers using any of 3 methods
Ask end users for feedback
Evaluation suing weighted score method
Find out cost of poor performance and adjust price accordingly

Institutional and Government Markets

Institutional markets consist of schools, hospitals, nursing homes, prisons and other
institutions that must provide goods n services to people in their care. These are characterized
by low budgets and captive clienteles. The focus here is on quality and cost minimization and
profit are not objectives.

Characteristics
Governments invite bids for contracts and award to lowest bidder.
Might make exceptions for superior quality or reputation
Favor domestic suppliers over foreign ones
Governments have a lot of red tape and bureaucracy who tends to put off most people from
doing business with them

Governments have traditionally never seen a whole package – but have always bargained on
price and used that as a decision factor. They are moving towards web based procurement
and more transparency in their dealings. Marketing people have realized that where product
features are advertised, differentiation doesn’t really help and similarly for price as well.