Chapter 5 Consumer Business Buyer Behavior Professor

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

U. S. Population by Class

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/IC 03/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 Selfactualization needs (self development & realization) Esteem needs (self esteem, recognition, status) Social needs (love, sense of belonging) Safety needs (security, protection) Physiological needs (hunger, thirst)

Perception Smell Hearing Sight Taste The process by which people select, organize, and interpret information. Touch 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 to be repeated.

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 Triggered by internal or external stimuli Information Search Personal sources, commercial sources, public sources (consumer rating sources), experiential sources (testing it out) Evaluation of Alternatives Purchase Decision Postpurchase Behavior 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 34% Early Majority 13. 5% Early Adopters X - 2σ 34% Late Majority 16% Laggards 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: Is the Advantage innovation superior to existing products? Compatibility: Does the Compatibility innovation fit the values and experience of the target market? Complexity: Is the innovation Complexity difficult to understand or use? Divisibility: Can the innovation Divisibility be used on a limited basis? Communicability: Can results Communicability be easily observed or described to others? 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 (B 2 B). Examples: Boeing, Cisco Systems, even things like milk and bread have to be sold to retailers. The business market is vast and involves far more dollars and items than do consumer markets. – 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 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 The buying Organization Buyer Responses Other Stimuli The buying center Product of service choice Economic Buying Decision Process Order Quantities Product Technological Price Political Place Cultural Promotion Competitive (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? Supplier choice 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 Proposal Solicitation Product Specification Supplier Selection Order-routine Specification Supplier Search 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 e. Xchange 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”?