Chapter 5 Consumer & Business Buyer Behavior Professor Marshall Queens College

Consumer Buying Behavior

Refers to the buying behavior of people who buy goods and services for personal use.

These people make up the

consumer market

.

– The central question for marketers is: “How do consumers respond to various marketing efforts the company might use?”

Consider

People who buy Harley Davidson motorcycles People who buy Mercedes What is the buying behavior of these two types of people? Would the same marketing strategy work for both groups?

Culture

Culture is the Most Basic Cause of a Person's Wants and Behavior.

Culture is learned from family, church, school, peers, colleagues.

Culture includes basic values, perceptions, wants, and behaviors.

Culture

Subculture

– Groups of people with shared value systems based on common life experiences.

Major Groups

– Hispanic Consumers – African-American Consumers – Asian-American Consumers – Generational: ex Mature Consumers – Gay/Lesbian Consumers

Social Class

Society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors.

Measured by a combination of: occupation, income, education, wealth, and other variables.

Social Class

Upper Class Upper Upper: Social elite who live on inherited wealth Lower Upper: Earned high income or wealth through exceptional ability Middle Class Upper Middle: professionals, independent business people, & corporate managers - believe in education Middle: Average pay white & blue collar who live on the ‘better side of town’ Working Class Lead a ‘working class lifestyle’ irrespective of income, education, or job. Depend on relatives for economic and emotional support Lower Class Upper Lower: The working poor. They lack education and are poorly paid for unskilled work. They strive toward a higher class.

Lower Lower: Visibly poor. Often out of work and some depend on public assistance. Live day-to-day.

U.S. Population by Class

Lower Lower 7% Upper Lower 9% Lower Upper 2% Upper Middle 12% Middle 32% Working Class 38%

Social Class affects Purchasing Decisions

Class attitudes are reflected in what we buy Cars, magazines, and even types of bread are consumed based on social lines.

For a game designed to test your social class awareness: http://www.pbs.org/peoplelikeus/games/index.html

Social Factors

Groups: – Membership (direct membership, ex AARP) – Reference (indirect points of comparison, ex sports team) Opinion Leaders – people with special skill, knowledge or personality, who exert influence on others Aspirational – a group which someday one hopes to belong Family: – Most important consumer buying organization Roles & Status: – Role = Expected activities – Status = Esteem given to role by society

Personal Factors

Age and Life-Cycle Stage Occupation Economic Situation These personal characteristics also affect buyers’ decisions.

Personal Factors

Lifestyle: – Pattern of living as expressed in psychographics Activities Interests Opinions

SRI Consulting’s Values & Lifestyles (VALS)

Need-Driven

– Survivor lifestyle – most disadvantaged – Sustainer lifestyle – still disadvantaged

Outer-Directed

– Belonger lifestyle – comfortable middle class – Emulator lifestyle – strive to be achievers – Achiever lifestyle – leaders of business & government

Inner-Directed

– I-Am-Me lifestyle – egocentric, young and individualistic – Experiential lifestyle – want experience and involvement – Societally Conscious lifestyle – sense of social responsibility

Combined Outer- and Inner-Directed

– Integrated lifestyle – they have put it all together Source: http://www.context.org/ICLIB/IC03/SRIVALS.htm

Personality & Self-Concept

Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment.

Generally defined in terms of traits.

Self-concept (or self-image) suggests that people’s possessions contribute to and reflect their identities.

Maslow’s Hierarchy of Needs

Self actualization needs (self development & realization) Esteem needs (self esteem, recognition, status) Social needs (love, sense of belonging) Safety needs (security, protection) Physiological needs (hunger, thirst)

Hearing Smell Taste Sight Touch

Perception

The process by which people select, organize, and interpret information.

Information Inputs Interpretation Selective Exposure Selective Distortion Selective Retention

Learning

A relatively permanent change in behavior due to experience.

Interplay of drives, stimuli, cues, responses, and reinforcement.

Strongly influenced by the consequences of an individual’s behavior – Behaviors with satisfying results tend to be repeated.

– Behaviors with unsatisfying results tend

not

repeated.

to be

Beliefs & Attitudes

A

belief

is a descriptive thought that a person holds about something.

An

attitude

is a person’s consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea.

Buying Decision Process

The buying process starts long before purchase and lasts long after.

Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior Triggered by internal or external stimuli Personal sources, commercial sources, public sources (consumer rating sources), experiential sources (testing it out) Depends on the individual & the specific buying situation Two factors can come between the purchase intention & the purchase decision: attitudes of others & unexpected situational factors Satisfied or dissatisfied with the purchase?

A routine purchase (ex milk, or toothpaste) might skip from need recognition to purchase decision.

Buying Decision Process

• Consumer satisfaction is a function of consumer expectations and perceived product performance.

• Performance < Expectations ----- Disappointment • Performance = Expectations ----- Satisfaction • Performance > Expectations ----- Delight

Buying Decision Process

Cognitive dissonance:

a buyer’s doubts shortly after a purchase about whether it was the right decision.

Stages in the Adoption Process

2.5% Innovators 13.5% Early Adopters 34% Early Majority 34% Late Majority 16% Laggards X - 2 σ X σ X X + σ

Time of adoption of innovations

Try new ideas at some risk.

Before the average person Opinion Leaders – adopt new ideas early but carefully Suspicious of change Only after majority has tried it

Influence of Product Characteristics on Rate of Adoption

Relative Advantage

innovation superior to existing products?

: Is the

Compatibility

market?

: Does the innovation fit the values and experience of the target

Complexity

: Is the innovation difficult to understand or use?

Divisibility

: Can the innovation be used on a limited basis?

Communicability

be easily observed or described to others?

: Can results Picture quality & ease of viewing Programming & broadcasting systems are not very compatible HDTV is not complex HDTVs are expensive, but leasing extends the adoption Lends itself to demonstration

Business Markets & Business Buyer Behavior

Most large companies sell to other companies (B2B). Examples: Boeing, Cisco Systems, even things like milk and bread have to be sold to retailers.

The dollars and items than do consumer markets.

–

business market

is vast and involves far more

Many sets of business purchases are often necessary just to prepare for one customer purchase Business buyer behavior

refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.

Business Markets

Market Structure and Demand: – Contains far fewer but larger buyers.

– Customers are more geographically concentrated (CA, NY, OH, IL, MI, TX, PA, NJ).

– Business demand is derived from consumer demand (

derived demand

).

Nature of the Buying Unit: – Business purchases involve more decision participants.

– Business buying involves a more professional purchasing effort (purchasing agents or buying committees are usually in charge of business purchases – the field is known as supply management or procurement).

Think back to Intel. They increased demand for Intel chips inside PCs. They promoted their product directly to consumers even though the result was an increase in business demand because Dell and other PC manufacturers had to buy more Intel chips.

Types of Decisions and the Decision Process

Business buyers usually face more complex buying decisions.

Business buying process tends to be more formalized.

Buyers and sellers are much more dependent on each other.

Participants in the Business Buying Process

Decision-making unit of a buying organization is called its buying center.

Not a fixed and formally identified unit.

Membership will vary for different products and buying situations.

Buying Center Members: – Users – Deciders – Influencers – Buyers – Gatekeepers The buying center is made up of all of the people involved in the buying decision (users, purchasers, people who influence the decision, even legal or accounting personnel depending on purchase).

Model of Business Buyer Behavior

The environment Marketing Stimuli Other Stimuli

Product Price Place Promotion Economic Technological Political Cultural Competitive

The buying Organization

The buying center Buying Decision Process (interpersonal & individual preferences) (Organizational influences) 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?

Buyer Responses

Product of service choice Supplier choice Order Quantities Delivery Terms & times Service Terms Payment

Types of Buying Situations

Straight rebuy – reorders something with no modifications (fewest decisions) Modified rebuy – modifies price, terms, or suppliers (more decisions making than a straight rebuy) New Task – buying a product or service for the first time (greatest cost/risk, large number of decision participants, large amount of information must be collected).

Influences on Business Buyer Behavior

Environmental – economic developments, supply conditions, technological change, regulatory environments Organizational, objectives, policies, procedures, organizational structure Interpersonal – authority, status, persuasiveness Individual – age, income, job position, personality & risk attitudes

The Business Buying Process

Problem recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order-routine Specification Performance Review

e-Procurement

Advantages for buyers: – Access to new suppliers – Lowers purchasing costs – Hastens order processing and delivery Advantages for vendors: – Share information with customers – Sell products and services – Provide customer support services – Maintain ongoing customer relationships GE set up Global eXchange Services Network for all GE business units to make purchases online. It is now open to other companies: http://www.gxs.com/ see Services, Trading Grid to

Video Case

Sony Metreon

(8 minutes)

Thoughts

Do you think that a kid playing at Metreon’s Playstation bar will eventually buy the game he liked or is he just taking advantage of Sony’s hospitality?

To what type of people do these stores appeal?

What is the relationship between a store like Sony Metreon and the types of people discussed in the model of “adoption of innovations”?