Marketing Principles Session 5

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Marketing PrinciplesSession 5

• Consumer and Business Buyer Behavior

Jeffrey E. Newcomb Red Widget Strategies for
Hosei University
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Looking Forward Where are we going?
Session 5, Consumer and Business Buyer Behavior,
will help you to

• Understand the essential features of consumer
  marketing -- and key factors influencing
  consumer buyer behavior.
• Identify and discuss the stages in the buyer
  decision process.
• Describe the adoption and diffusion process for
  product and service innovations.
• Define the essential features of business
  marketing -- and identify the major factors that
  influence business buyer behavior.
• Define the steps in the business buying decision
  process.

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Shopping!
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Lets define. Consumer Buying Behavior

• Consumer buyer behavior refers to the thoughts,
  decisions and actions of final consumers
  individuals and households who buy goods and
  services for personal use or consumption
• Final consumers combine to make up the consumer
  market
• The central question for marketers is
• How do final consumers respond to various
  marketing efforts a marketer might use?

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Stimulus-Response Model of Consumer Behavior

• Buyer Response
• Product choice
• Brand choice
• Dealer choice
• Purchase timing
• Purchase amount

• Buyers Black Box
• Buyer characteristics
• Buyer decision process

• Stimuli
• 4Ps
• Other factors
• -economic
• -technological
• -political
• -cultural

Whats in the Black Box?
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Harley Davidson(Case Story)

• Building Success
• Understanding the customers emotions
• and motivation
• Determining the factors of loyalty
• Translating this information to effective
  advertising

• Measuring Success
• Currently 22 of all U.S. bike sales
• Demand above supply
• Sales doubled in the past 5 years earnings
  tripled

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Characteristics Affecting Consumer Behavior

• Culture forms a persons wants and behaviors
• Marketers look for changes in cultural patterns
• Groups with shared value systems, based on common
  cultural experiences
• Societys divisions who share values, interests
  and behaviors. Class is measured by combination
  of income, occupation, education and other
  variables

Key Factor Cultural
Subculture
Class
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• How would you describe your cultural background?

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Characteristics Affecting Consumer Behavior
Key Factor Social

• Membership
• Reference
• Aspirations
• Opinion leaders
• Buzz marketing
• Family
• Family Most important consumer
• buying organization in society
• Roles and Status
• Role Expected activities in life
• Status Esteem given to lifes role by society

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• How would you describe your
• social background?

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Characteristics Affecting Consumer Behavior
Key Factor Personal

• Age and life cycle
• Occupation
• Economic situation
• Lifestyle
• -Activities, interests and opinions
• -Psychographic segmentation
• Personality
• the unique psychological characteristics that
  lead to consistent, lasting responses to ones
  environment
• Self-concept
• how we see ourselves. A persons possessions
  may contribute to and reflect his or her identity

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Values and Lifestyles (VALS) Research from SRI
Consulting
Consumer Market Psychographic Research One
Method for Classifying Consumer Lifestyles

• US VALS
• Based upon Consumer
• Motivation Resources
• Innovators
• Thinkers
• Achievers
• Experiencers
• Believers
• Strivers
• Makers
• Survivors

• Japan VALS
• Based upon Consumer
• Life Orientation Attitudes
• to Social Change
• Integrators
• Innovators
• Adaptors
• High Pragmatics
• Low Pragmatics
• Sustainers

Source SRI Business Intelligence, www.sric-bi.com
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Characteristics Affecting Consumer Behavior
Brand Personality Dimensions Examples.

• Sincerity Campbell Soup
• Ruggedness Levis Jeans
• Excitement Harley Davidson
• Competence CNN
• Sophistication 5-Star Hotel

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Characteristics Affecting Consumer Behavior
Key Factors Psychological

• Motivation
• the drive of an individual to seek satisfaction
• Perception
• the process by which people select, organize, and
  interpret information
• Learning
• describes changes in an individuals behavior
  arising from experience helps with change
• Beliefs
• thought about a brand or service
• Beliefs are based on real knowledge, opinion or
  faith
• Attitude
• a individuals evaluations, feelings and
  tendencies toward an object or idea
• attitudes are difficult to change

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Maslows Hierarchy of Needs
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Modifying Maslows Hierarchy of Needs

• Physiological needs of human beings as described
  by Maslow are universal, for both Asians and
  Westerners
• But.
• for self-actualization, the Asian context may
  differ from Maslows Western view
• socially-directed needs may be the top tier,
  the most important of needs for Asians -- not
  self-actualization
• Esteem and regard from society at large are key
  socially-directed needs

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Types of Buying Decision Behavior

• Complex
• Highly involved, significant brand differences
• Example automobiles
• Dissonance-reducing
• Highly involved, little brand differences
• Example computers
• Habitual
• Low involvement, little brand differences
• Example soya
• Variety-seeking
• Low involvement, significant perceived brand
  differences
• Example cookies!

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Buying Decision Process
Need recognition
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The Buying Decision Process

• Need recognition

I need a camera!

• Needs can be triggered by
• Internal stimuli
• -Normal needs become strong enough to drive
  behavior
• External stimuli
• -Advertisements
• -Friends of friends

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The Buying Decision Process

• Information search

• Consumers exhibit heightened attention or
  actively search for information
• Sources of information
• -Personal
• -Commercial
• -Public
• -Experiential
• -Word-of-mouth

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The Buying Decision Process

• Evaluation of alternatives

• Evaluation procedure depends on the consumer and
  the buying situation.
• Most buyers evaluate multiple attributes, each of
  which is weighted differently.
• At the end of the evaluation stage, purchase
  intentions are formed.

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Buying A Digital Camera

• Total Set
• Awareness Set
• Consideration Set
• Choice Set
• Decision

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The Buying Decision Process

• Purchase decision

• Two factors can come between purchase intentions
  and the actual purchase decision
• -Attitudes of others
• Hey, Jeff, that camera you want is last years
  technology!
• -Unexpected situations
• A family medical emergency

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The Buying Decision Process

• Post-purchase behavior

• Customer satisfaction is a function of customer
  expectations and perceived performance,
• And customer satisfaction is critical for
  sustainable competitive advantage
• -Delighted customers engage in positive
  word-of-mouth
• -Unhappy customers tell on average 11 other
  people about their bad experiences
• -It costs more to attract a new customer than
  it does to retain an existing customer

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Buying Decision Process

• Cognitive dissonance
• a buyers doubts shortly after a purchase about
• whether the purchase was the right decision
• Cognitive dissonance is common
• -Example a digital camera decision.
• Performance lt Expectations ----- Disappointment
• Performance Expectations ----- Satisfaction
• Performance gt Expectations ----- Delight

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In managing consumers post-purchase behavior, we
want to reduce cognitive dissonance. Imagine
yourself the product manager of consumer digital
imaging at Canon. Think about your customers.
What do you want to do? Why? How?
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Buying Decision Process

• Why we want to reduce cognitive dissonance
• -Satisfied customers are golden!
• -It costs more to find new customers
• than it does to keep current customers
• -Negative word-of-mouth about an organizations
  product or service travels faster and wider than
  
• positive word-of-mouth
• -Negative word-of-mouth among customers can be
• difficult to reverse
• How we can reduce cognitive dissonance
• -Stay in touch with customers after purchase
• -Encourage customers post-purchase to
  communicate toll-free hotlines, easy-to-use
  websites, user groups

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Adoption and Diffusion of Innovations
Market Growth
A Western View
13 1/2 Early adopters
34 Early majority
2 1/2 Innovators
Time of adoption of innovations
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Influences on the Adoption of Innovations

• Relative Advantage Is the innovation superior to
  existing products?
• Compatibility Does the innovation fit the values
  and experience of the target market?
• Complexity Is the innovation difficult to
  understand or use?
• Divisibility Can the innovation be used on a
  limited basis?
• Communicability Can results be easily observed
  or described to others?

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International Consumer Behavior
Values, attitudes and behaviors differ
greatly in other countries

• Physical differences exist which require changes
  in the marketing mix
• Customs vary from country to country
• Marketers must decide the degree to which they
  will adapt their marketing efforts
• Examples eBays entry into China Kikkomans
  entry into US

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Business Markets Business Buyer Behavior
Business buyer behavior

• the buying behavior of organizations that
  purchase goods and services -- for use in making
  products and services of greater value to market
• Sales in business markets far exceed sales in
  consumer markets
• Business markets differ from consumer markets
  in several ways.
• Marketing structure and demand
• Nature of the buying unit
• Types of decisions and the decision process

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UPS United Parcel ServiceCase Story

• B2B (Business-to-Business) Customer Needs
• Consumers need fast, friendly, low-cost package
  delivery
• Business needs are more complex
• - the logistics of shipping is a process which
  includes purchasing, inventory, order status,
  invoices, payments, returns

• B2B Services
• What Can Brown Do For You? The message is for
  B2B
• UPSs 360,000 people and 88,000 vehicles offer
  ground, air, and freight services worldwide
• Helps customer with international shipping
• Offers a wide range of financial services
• Provides consulting services to improve logistics
  operations

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Business Markets

• Market Structure and Demand

• Compared to consumer markets
• Business markets
• -have a common language
• -have fewer but larger customers
• Business customers
• -are more geographically concentrated
• for example, business clusters
• -demand is derived tied to consumer demand
• -demand is price inelastic
• -demand fluctuates according to the ups and downs
  
• of competition and business cycles

• Demand is different

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Business Markets

• Nature of the Buying Unit

• Compared to consumer purchases
• business markets involve more buyers in the
  decision process
• require a professional effort toward purchasing
• typically include use of a buying center

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Business Markets

• Decision Types and
• the Decision Process

• Compared to consumer purchases
• business markets require more complex buying
  decisions
• the buying process is more formalized
• buyers and sellers work more closely together
  and build long-term relationships

Consider these differences Why do start-ups and
entrepreneurs prefer B2B vs. B2C
(Business-to-Consumer) markets?
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Business Buying Behavior

• Major Types of Buying Situations
• Example Starbucks Coffee and its suppliers
• Straight rebuy
• -Reordering without modification
• Modified rebuy
• -Requires modification to prior purchase
• New task
• -First-time purchase
• Buying a packaged solution from a single seller
• Often a key marketing strategy for businesses
  seeking to win and hold accounts

Systems Selling Example ChemStation cleaning
chemicals
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Participants in the Business Buying Process

• Buying Center
• Decision-making unit of a buying organization
• members vary for different products and buying
  situations
• Buying Center Members
• Example Starbucks Coffee
• Users frontline clerks, marketing and sales
• Deciders regional, divisional, corporate
  managers
• Influencers finance, operations
• Buyers purchasing
• Gatekeepers sales contacts, processing clerks,
• budget managers, etc

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Stages in the Business Buying Process

• Stage 1 Problem Recognition
• Stage 2 General Need Description
• Stage 3 Product Specification (Value Analysis)
• Stage 4 Supplier Search (Supply Chains)
• Stage 5 Request for Proposals (RFPs)
• Stage 6 Supplier Selection
• Stage 7 Order-Routine Specification
• Stage 8 Performance Review

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Business Buying on the Internet

• E-procurement
• online auctions and trading exchanges account for
  rapidly increasing online purchasing by
  businesses
• -Examples Hospital supplies Microsoft Cisco
  Systems
• E-procurement benefits
• Access to new suppliers
• Lower purchasing costs
• Quicker order processing and delivery
• Advantages for vendors
• -Share information with customers
• -Sell products and services
• -Provide customer support services
• -Maintain ongoing customer relationships

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• Adoption of innovations
• Attitude, belief
• Business buyer behavior
• Buying center
• Cognitive dissonance
• Consumer buyer behavior
• Culture
• Derived demand
• Learning
• Value analysis

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Looking Back Where have we been?

• Understand the essential features of
• consumer marketing -- and key factors
  influencing consumer buyer behavior.
• Identify and discuss the stages in the buyer
  decision process.
• Describe the adoption and diffusion process for
  product and service innovations.
• Define the essential features of business
  marketing -- and identify the major factors that
  influence business buyer behavior.
• Define the steps in the business buying decision
  process.
• And good luck with your next buying decision!