Understanding Local Buyers Chapter 7 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Outline Local Buyer Behavior Basics The Consumer Decision Process Local Market Research The B2B Industrial Buyer Three Market Environments Takeaways.

Culture and Buyer Behavior Marketing and Materialism Marketing actions are basically undertaken in the belief that more and better goods will bring an increase in consumers’ standard of living, an increase in their satisfaction, and perhaps even more happiness However, when anticipating customers’ reactions to new products and increased product choices, it is important to note the limits on the relationship between material affluence and personal happiness “Money can’t buy you love.”

External Influences Culture Economics Technology Politics Buyer characteristics “Models of Man” Product choice Brand choice Store choice Supplier choice Buyer Choices Buyer decision process Local Marketing Effort Local Buyer Behavior

James Duesenberry - Relative Income hypothesis – consumer’s well-being is a function of how much income they have relative to their peer groups, not the actual income Milton Friedman – Permanent income, defined as the regularly expected income, is what determines an individual’s consumption Thorstein Veblen – Conspicuous consumption – the notion that people make purchases of expensive brands & products in order to display their ability to afford them Local Buyer Behavior

What does the product/service do for the buyer? How does it fit into the consumption and use pattern of the buyer? What are the core benefits? What is the perceived risk and how high is it? The CORE BENEFIT often differs between local markets. The generic function of a product depends more on the local environment than on innate individual preferences. Remember: Buyers are GOAL-ORIENTED – they buy for a reason. Point is to understand what that reason is. Local Buyer Behavior

Problem recognition Search Evaluation of alternatives ChoiceOutcomes The Buyer Decision Process

Problem Recognition A problem is when an individual perceives a difference between an ideal and an actual state of affairs New products often lead to tension and a recognized “problem” For the local marketer it is important to recognize that education about the core benefits might be necessary in order to create a demand for the product

The Buyer Decision Process Search A consumer’s search for alternative ways to solve the problem is closely related to his or her level of involvement with the product category For product with which involvement is high, search tends to be more comprehensive and time consuming For convenience and habit purchases, the decision process is shorter, with little need for extensive searches or alternative evaluations Search intensity is dependent on the perceived availability of the alternative One advantage for product with high global brand awareness is that initial distrust is easier to overcome

The Buyer Decision Process Evaluation of Alternatives When a new product or service is in the “consideration set” A highly involved individual will process the available information matching the pros and cons of the alternatives against preferences Consumers can deal with multi-attribute evaluations in several ways: They can use gradually less-important features to successively screen out alternatives A “hierarchical” decision rule They can consider all features simultaneously: A “compensatory” rule – hard to do.

Multi-attribute evaluation (ΣBI) Preference Behavioral intent Choice Social norms Social forces Motivation to comply Situational factors (P-O-P) B = beliefs about product attributes; I = importance of the beliefs; P-O-P = point of purchase Fishbein’s Multi-attribute Model

The Buyer Decision Process Choice The final choice of which alternative to select or try is typically influenced by social norms and by situational factors Social Norms Where group pressures to comply are strong social norms influence is expected to override multiattributed evaluation The social norms can be usefully analyzed by the extended Fishbein model The social norms involve two aspects Social forces Motivation to comply

The Buyer Decision Process Outcomes The main question about the outcomes revolves around the degree of customer satisfaction. Customer satisfaction is particularly important in mature markets where choices are many and the needs are already well met. Satisfaction engenders loyalty to the brand and to the company. Because buying is typically a risky choice between different brands, the marketer has to make sure that the customer does not encounter cognitive dissonance, a sense of possibly making the wrong choice. One approach is to get satisfied customers to endorse the product, a common strategy in advertising.

A Strong Brand Simplifies the Decision Process -- REDUCES INFORMATION SEARCH -- REDUCES PERCEIVED RISK -- PLACES A BRAND IN THE EVOKED CONSIDERATION SET MORE EASILY -- BRAND LOYALTY MEANS DECISIONS GO FAST. A GLOBAL BRAND CAN FOCUS ON: -- ATTITUDES -- NORMS -- P-O-P (Point-of-Purchase Promotions)

Problem definition Sampling Research design Measurement/ scaling Exploratory Descriptive Causal Trade surveys Observation Experiments Causal Models Secondary data Qualitative research Consumer surveys Questionnaire construction Fieldwork Data analysis The Local Market Research Process

FOCUS GROUPS Focus groups have become standard for initial exploratory research In foreign markets, focus groups have the advantage of being relatively inexpensive, can be completed quickly, and can reach local pockets of the market Unfortunately, they can also constitute an unrepresentative sample because typical screening criteria are incorrect in the new environment or are not implemented correctly Local Market Research

SURVEY RESEARCH Consumer Surveys Surveys of large (n = 500 and above) random samples drawn from a sampling frame of representative product users are of central importance in marketing research Cultural problems involved in the typical consumer survey: In high context cultures especially, one cannot fully understand consumers from their responses to standard survey questions. At the same time, informal face-to-face interviews are prone to bias because of demand characteristics However, even if surveys are afflicted by a number of problems in many foreign markets, they can still be useful if care is taken. Local Market Research

TRADE SURVEYS Trade surveys of distribution channels and trade associations can provide a good starting point for further data gathering and analysis In the U.S., the use of middlemen for information about consumers is usually limited to the sales and scanner records of retailers and wholesalers In countries with less social mobility and less diversity than the U.S., key informants in the trade are good sources of information about buyers. Local Market Research

MEASUREMENT & SCALING In attitude scaling, very basic factors can create difficulties The cognitive and emotional concepts measured might not be equivalent across cultures. This means measurement equivalence is questionable. Local Market Research

The questionnaire employed in the typical consumer survey needs to be carefully pre-tested & translated into the foreign language. It should then be back-translated for verification and adjustment. In high context cultures the questionnaires are typically much longer because of the need to establish the proper context for the questions. Local Market Research QUESTIONNAIRE CONSTRUCTION

SAMPLING Lack of comprehensive and reliable sampling frames has long been a problem for marketing researchers in many countries. Emergence of firms that specialize in developing lists for direct marketing and survey research is gradually resolving this problem. Still sampling equivalence can be questionable because the appropriate profiles differ (e.g. “high” income in one country might not be“high” in another). Local Market Research

Typically handled by a subcontracting marketing research firm, sometimes a full-service advertising agency As economic growth occurs, mature markets with differentiated demand requiring formal and scientific market research applications will emerge in many countries. FIELDWORK Local Market Research

Understanding Industrial Buyers The Business-to-Business (B2B) Marketing Task: The marketer should help the buying organization succeed. Industrial Buyers are influenced by the same forces as individual consumers, but also conditioned by the organizational culture in which they operate. The organizational culture reflects company policies and ways of making decisions. The industrial buying process involves several stages from problem recognition to performance review.

Performance review Order specification Supplier selection Proposal solicitation Search for suppliers Product specification Problem recognition Industrial Buying Process

Industrial Buyers: Building Relationship “Relationship Marketing” is important in B2B. The term is applied to a marketing effort involving Various personalized services Creation of new and additional services Customizing a company’s offering to the needs of a special buyer Takes a long-term view Since without it, the effort required to build a relationship is not worth it.

ADOPT THE BUYER’S VIEWPOINT. GROW WITH THE RELATIONSHIP. ACCEPT AND DEMAND TRANSPARENCY. BE PROACTIVE. THINGS A MARKETER CAN DO TO CREATE A WORKABLE RELATIONSHIP: Always consider how the culture of the nation and the culture of the organization affect relationship marketing. Relationship Marketing

EMERGINGNEW GROWTHMATURE Three Market Environments

Dominant Market Features

Dominant Marketing Tasks

Understanding local markets involves conceptual skills & imaginative rethinking more than new analytical marketing skills. Takeaway The core benefit of a product or service can vary considerably across countries because of differing environmental conditions surrounding product usage.

Consumer behavior concepts and models are useful tools when examining buyers in foreign markets, but underlying cultural assumptions have to be reconsidered. Takeaway

Local market research is difficult because of lack of data, language problems, & cultural differences in how people respond to surveys, but can be done with proper adaptation. Takeaway

In B2B the local marketer should help the buying organization succeed, and make the buyer look good Firms must take into account the culture of the purchasing agent and the culture of the organization Takeaway

It is useful to distinguish between three market environments: 1.The MATURE market, where share and customer satisfaction define the strategies 2.The NEW GROWTH market, where the global marketer needs to participate & “all boats rise with the tide”. 3.The EMERGING market, where the aim is market development with a long time horizon. Takeaway