Consumer Behavior&

Business Buying Behavior

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Objectives of this module:

What are the underlying psychological processes in making a purchase?

How do consumers make purchasing decisions?

Basically: Why consumers behave the way they behave?

What Influences Consumer Behavior?

Cultural FactorsCultural Factors

Social FactorsSocial Factors

Personal FactorsPersonal Factors

What is Culture?

Culture is the fundamental determinant of a person’s wants and behaviors acquired

through socialization processes with family and other key institutions.

Subcultures

Nationalities Nationalities

ReligionsReligions

Racial groupsRacial groups

Geographic regionsGeographic regions

Social Classes

Upper uppersLower uppersUpper middlesMiddle class

Working classUpper lowersLower lowers

Characteristics of Social Classes

Within a class, people tend to behave alikeSocial class conveys perceptions of

inferior or superior positionClass may be indicated by a cluster of

variables (occupation, income, wealth)Class designation is mobile over time

Social Factors

Referencegroups

Social roles

Statuses

Family

Reference Groups

Membership groupsMembership groups

Primary groupsPrimary groups

Secondary groupsSecondary groups

Aspirational groupsAspirational groups

Dissociative groupsDissociative groups

Roles and Status

What degree of status is associated with various occupational roles?

Personal Factors

Age

Values

Life cyclestage

Occupation

Personality

Self-concept

Wealth

Lifestyle

The Family Life Cycle

Brand Personality

SinceritySincerity

ExcitementExcitement

CompetenceCompetence

SophisticationSophistication

RuggednessRuggedness

Lifestyle Influences

Multi-tasking

Time-starved

Money-constrained

Faysal Bank of Pakistan has extended banking hours for time-pressed executives.

VERY IMPORTANT: Model of Consumer Behavior

Key Psychological Processes

Motivation

MemoryLearning

Perception

Motivation

Freud’sTheory

Behavioris guided by subconsciousmotivations

Maslow’sHierarchyof Needs

Behavioris driven by the lowest, unmet need

Herzberg’sTwo-Factor

Theory

Behavior isguided by motivating

and hygienefactors

Maslow’s Hierarchy of Needs

Herzberg’s Two-Factor Theory

Perception

Selective Attention

Subliminal Perception

Selective Retention

Selective Distortion

VERY IMPORTANT Consumer Buying Process

Problem Recognition

Information Search

Evaluation

Purchase Decision

PostpurchaseBehavior

Sources of Information

Personal

ExperientialPublic

Commercial

Successive Sets Involved in Consumer Decision Making

Stages between Evaluation of Alternatives and Purchase

Perceived Risk

FunctionalFunctional

PhysicalPhysical

FinancialFinancial

SocialSocial

PsychologicalPsychological

TimeTime

How Customers Use and Dispose of Products

Mental Accounting

Consumers tend to…Segregate gainsIntegrate lossesIntegrate smaller losses with larger gainsSegregate small gains from large losses

Just as consumers undergo several processes in purchase decisions, so do businesses..

Hence we also have to study the B2B i.e. Business Buying Behavior…

30

Business Markets and Business Markets and Business Buyer BehaviorBusiness Buyer Behavior

Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying decision process

4. Compare the institutional and government markets and explain how they make their buying decisions

UPS – A typical seller of business solutions

Customer Needs

Consumers need fast, friendly, low-cost package delivery

Business needs are more complex Shipping part of complex

logistics process including purchasing, inventory, order status, invoices, payments, returns

Services

Its 360,000 people and 88,000 vehicles offer ground, air, freight worldwide

Helps customer navigate the complexities of international shipping

Offers a wide range of financial services

Provides consulting services to improve logistics operations

DefinitionBusiness Buyer Behavior:

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

Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.

Goal 1: Define the business market

Sales in the business market far exceed sales in consumer markets.

Business markets differ from consumer markets in many ways.

Marketing structure and demand Nature of the buying unit Types of decisions and the decision process

Characteristics of Business Markets

Goal 1: Define the business market

Business Markets

Compared to consumer markets: Business markets

have fewer but larger customers

Business customers are more

geographically concentrated

Demand is different Demand is derived Demand is price

inelastic Demand fluctuates more

CharacteristicsCharacteristics

Goal 1: Define the business market

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Compared to consumer purchases: Involve more buyers in

the decision process More professional

purchasing effort

CharacteristicsCharacteristics

Goal 1: Define the business market

Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Compared to consumer purchases

More complex buying decisions

The buying process is more formalized

Buyers and sellers work more closely together and build long-term relationships

Goal 1: Define the business market

CharacteristicsCharacteristics

Major Types of Buying Situations Straight rebuy

Reordering without modification Modified rebuy

Requires modification to prior purchase New task

First-time purchase

Business Buyer Behavior

Goal 1: Define the business market

Business Buyer Behavior

Systems Selling Buying a packaged solution to a problem from a

single seller. Often a key marketing strategy for businesses

seeking to win and hold accounts.

Goal 1: Define the business market

Business Buyer Behavior

Buying Center The decision-making unit of a buying

organization Includes all individuals and units that participate

in the decision making

Goal 1: Define the business market

Members of the Buying Center

Business Buyer Behavior

UsersBuyers

InfluencersDeciders

Gatekeepers

Goal 1: Define the business market

Major Influences on Business Buyers

Environmental Organizational Interpersonal Individual

Economic trends Supply conditions Technological, political

and competitive changes Culture and customs

Key Factors Key Factors

Goal 2: Identify the major factors that influence business buyer behavior

Major Influences on Business Buyers

Environmental Organizational Interpersonal Individual

Objectives Policies Procedures Organizational

structure Systems

Key Factors Key Factors

Goal 2: Identify the major factors that influence business buyer behavior

Major Influences on Business Buyers

Influence of members in the buying center Authority Status Empathy Persuasiveness

Key Factors Key Factors

Goal 2: Identify the major factors that influence business buyer behavior

Environmental Organizational Interpersonal Individual

Major Influences on Business Buyers

Personal characteristics of members in the buying center Age and income Education Job position Personality Risk attitudes Buying styles

Key Factors Key Factors

Goal 2: Identify the major factors that influence business buyer behavior

Environmental Organizational Interpersonal Individual

Stages in the Business Buying ProcessStage 1: Problem RecognitionStage 2: General Need DescriptionStage 3: Product Specification

Value analysis helps to reduce costs

Stage 4: Supplier Search Supplier development

Goal 3: List and define the steps in the business buying decision process

Stage 5: Proposal SolicitationStage 6: Supplier SelectionStage 7: Order-Routine Specification

Blanket contracts are often used for maintenance, repair and operating items.

Stage 8: Performance Review

Stages in the Business Buying Process

Goal 3: List and define the steps in the business buying decision process

E-procurement is growing rapidly Online auctions and online trading exchanges (e-

marketplaces) account for much of the online purchasing activity

E-procurement offers many benefits: Access to new suppliers Lower purchasing costs Quicker order processing and delivery

Business Buying on the Internet - good book: “The world is flat” – Thomas Friedman

Goal 3: List and define the steps in the business buying decision process

Further reading recommended:

Philip KotlerLeon Schiffman

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