Consumer and Business Buyer Behavior 5 Consumer and Business Buyer Behavior

ROAD MAP: Previewing the Concepts Understand the consumer market and the major factors that influence consumer buyer behavior. Identify and discuss the stages in the buyer decision process. Describe the adoption and diffusion process for new products. Define the business market and identify the major factors that influence business buyer behavior. List and define the steps in the business buying decision process.

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?”

Model of Buyer Behavior

Factors Influencing Consumer Behavior Cultural Culture Subculture Social Class Social Reference Groups Family Roles & Status Personal Age & Life-Cycle Stage Occupation Economic Situation Lifestyle Personality & Self-Concept Psychological Motivation Perception Learning Beliefs & Attitudes

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 Major Groups Groups of people with shared value systems based on common life experiences. Major Groups Hispanic Consumers African-American Consumers Asian-American Consumers Mature Consumers

Marketing to a Subculture Sears is widely considered one of the most successful marketers to the U.S. Hispanic population. Its Spanish-language Web site features content and events carefully tailored to Hispanic consumers.

Culture 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.

Major American Social Classes

Social Factors Groups Family Roles & Status Membership Reference (opinion leaders) Aspirational Most important consumer buying organization Family Role =Expected activities Status = Esteem given to role by society Roles & Status

Opinion Leaders Marketers use buzz marketing by enlisting or even creating opinion leaders to spread the word about their brands.

Age and Life-Cycle Stage Personal Factors Age and Life-Cycle Stage Occupation Economic Situation

Pattern of Living as Expressed Personal Factors Lifestyle Pattern of Living as Expressed in Psychographics Activities Interests Opinions

Jeep Shows how a person’s lifestyle can help marketers understand consumer values and their impact on buying behavior. Ad targets people who want to “leave the civilized world behind.” Click Here to Visit Jeep's Website

Personality & Self-Concept

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 suggests that people’s possessions contribute to and reflect their identities.

Maslow’s Hierarchy of Needs

Perception Perception Information Inputs Interpretation Selective Exposure Selective Distortion Selective Retention

Perception Information inputs are the sensations received through the sense organs. Perception is the process of selecting, organizing, and interpreting information inputs to produce meaning.

Perception Selective Attention: the process of selecting some inputs to attend to while ignoring others. An input is more likely to reach a person’s awareness if it relates to an anticipated event.

Perception Selective distortion is an individual’s changing or twisting of information when it is inconsistent with personal feelings or beliefs. Selective retention is remembering information that supports personal feelings and beliefs and forgetting inputs that do not.

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

Interactive Student Assignment Choose a partner and talk about some product for which each of you has strong attitudes. These attitudes can be either positive or negative. What led you to have these attitudes toward these products?

Buying Decision Process

Buying Decision Process Step #1 = Need Recognition Buyer becomes aware of a difference between a desired state and an actual condition. Individual may be unaware of the problem or need. Marketers may use sales personnel, advertising, and packaging to trigger recognition of needs or problems. Recognition speed can be slow or fast.

Need Recognition Need recognition can be triggered by advertising. This ad from America’s Dairy Farmers alerts consumers of their need for more dairy products to build strong bones.

Buying Decision Process Step #2 = Information Search This stage begins after the consumer becomes aware of the problem or need. The search for information about products will help resolve the problem or satisfy the need. There are various sources of information.

Sources of Information Personal - Most effective source - Family, friends, neighbors - Advertising, salespeople - Receives the most information from these sources Commercial - Mass Media - Consumer-rating groups Public - Handling the product - Examining the product - Using the product Experiential

Buying Decision Process Consumers May Use Careful Calculations & Logical Thinking Consumers May Buy on Impulse and Rely on Intuition Consumers May Make Buying Decisions on Their Own Consumer May Make Decisions After Talking With Others Marketers Must Study Buyers to Find Out How They Evaluate Brand Alternatives

Buying Decision Process Factors That Influence Purchase Decision Unexpected Situational Factors Attitudes Of Others

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 Awareness: Consumer becomes aware of the new product, but lacks information about it. Interest: Consumer seeks information about new product. Evaluation: Consumer considers whether trying the new product makes sense. Trial: Consumer tries new product on a small scale to improve his or her estimate of its value. Adoption: Consumer decides to make full and regular use of the new product.

The Adoption Process This ad encourages trial by offering a coupon.

Product Adopter Categories When an organization introduces a new product, people do not begin the adoption process at the same time, nor do they move through it at the same speed. Adopters are divided into five categories.

Product Adopter Categories 2.5% Innovators 16% Laggards 13.5% Early Adopters 34% Late Majority 34% Early Majority

Product Adopter Categories Group #1 - Innovators Innovators are the first adopters of new products. They are venturesome – they try new ideas at some risk.

Product Adopter Categories Group #2 – Early Adopters Early adopters are guided by respect. They are opinion leaders in their communities and adopt new ideas early but carefully.

Product Adopter Categories Group #3 – Early Majority Early majority are deliberate. Although they rarely are leaders, they adopt new ideas before the average person.

Product Adopter Categories Group #4 – Late Majority Late majority are skeptical. They adopt an innovation only after a majority of people have tried it.

Product Adopter Categories Group #5 - Laggards Laggards are tradition bound. They are suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Interactive Student Assignment Choose a partner and come up with a list of items for which you fit into each of the product adopter categories. What is it about you that puts you into a different category for each of those products?

Influence of Product Characteristics on Rate of Adoption 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?

New Product Adoption Rate Some products catch on almost overnight. Others, such as HDTV, take a long time to gain acceptance.

Business Markets & Business Buyer Behavior The business market is vast and involves far more dollars and items than do consumer markets. 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. Business demand is derived from consumer demand. Nature of the Buying Unit: Business purchases involve more decision participants. Business buying involves a more professional purchasing effort.

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.

Business Markets B2B marketers often roll up their sleeves and partner with customers to jointly create solutions. Here, Fujitsu promises, “Our technology will keep you moving upward, and our people won’t let you down.”

Model of Business Buyer Behavior

Major Types of Buying Situations Straight Rebuy The buyer routinely reorders something without any modifications. The buyer wants to modify product specifications, prices, terms, or suppliers. Modified Rebuy The buyer purchases a product or service for the first time. New Task

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

Buying Center Allegiance Healthcare Corporation deals with a wide range of buying influences, from purchasing executives and hospital administrators to the surgeons who actually use its products.

Major Influences on Business Buyer Behavior

The Business Buying Process

e-Procurement Advantages for buyers: Advantages for vendors: 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

Click Here to Visit Covisint's Website e-Procurement Public trading exchanges like the auto industry’s Covisint exchange offer a “faster, more efficient way to communicate, collaborate, buy, sell, trade, and exchange information—business to business.” The exchange handled more than $50 billion in auto-parts orders last year. Click Here to Visit Covisint's Website

Rest Stop: Reviewing the Concepts Describe the consumer market and the major factors that influence consumer buyer behavior. Identify and discuss the stages in the buyer decision process. Describe the adoption and diffusion process for new products. Define the business market and identify the major factors that influence business buyer behavior. List and define the steps in the business buying decision process.