1. Chapter 10 Organizational and Household Decision Making
CONSUMER BEHAVIOR, 10e Michael R. Solomon
Chapter 10 addresses how organizations and households make decisions. When a group of people makes decisions, the process and outcome can be quite different from what would occur otherwise.
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2. When you finish this chapter, you should understand why:
Chapter Objectives
When you finish this chapter, you should understand why:
Marketers often need to understand consumers’ behavior rather than a consumer’s behavior.
Companies as well as individuals make purchase decisions.
Our traditional notions about families are outdated.
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3. Chapter Objectives (continued)
Many important demographic dimensions of a population relate to family and household structure.
Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions.
Children learn over time what and how to consume.
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4. Learning Objective 1
Marketers often need to understand consumers’ behavior rather than a consumer’s behavior.
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5. Roles In Collective Decision Making
Initiator
Gatekeeper
Influencer
Depending on the decision in question, the choice may include some or all group members and different group members may play different roles. The initiator role is played by the person who brings up the idea or identifies the need. The person who conducts the information search and controls the flow of information available to the group is the gatekeeper. The person who tries to sway the outcome of the decision is the influencer. The person who actually makes the purchase is the buyer. Those who will actually use the product are the users.
Buyer
User
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6. List all the people that may be involved in the decision making.
For Reflection
Assume that you are a sales representative for a large company that markets laptop computers.
List all the people that may be involved in the decision making.
Try to match all the people to their possible decision roles as outlined on the previous slide.
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7. Companies as well as individuals make purchase decisions.
Learning Objective 2
Companies as well as individuals make purchase decisions.
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8. Organizational Decision Making
Organizational buyers: purchase goods and services on behalf of companies for use in the process of manufacturing, distribution, or resale.
Business-to-business (B2B) marketers: specialize in meeting needs of organizations such as corporations, government agencies, hospitals, and retailers.
Collective decision making occurs when more than one person chooses the products or services that multiple consumers use. It may occur in organizations and for business-to-business situations, as well as in households.
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9. Compared to Consumer Decision Making, Organizational Decision Making…
Involves many people
Requires precise, technical specifications
Is based on past experience and careful weighing of alternatives
May require risky decisions
Involves substantial dollar volume
Places more emphasis on personal selling
Although there are similarities between consumer and organizational buying, there are some key differences. These are listed on the slide.
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10. What Influences Organizational Buyers?
Internal stimuli
External stimuli
Cultural factors
Type of purchase
Organizational buyers are influenced by several factors including the psychological characteristics of those involved in the buying decision, external stimuli such as the nature of the industry and the organization, cultural factors, and the level of risk and complexity involved in the decision.
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11. Table 10.1 Types of Organizational Buying Decisions
Buyclass theory: organizational buying decisions divided into three types, ranging from most to least complex:
Buying Situation
Extent of Effort
Risk
Buyers Involved
Straight rebuy
Habitual decision making
Low
Automatic reorder
Modified rebuy
Limited problem solving
Low to moderate
One or a few
New task
Extensive problem solving
High
Many
When we apply the buyclass theory of purchasing, we divide organizational buying decisions into three types ranging from least to most complex. How much cognitive effort goes into making a decision affects what type of decision the buyer is making. The three basic types of decisions are straight rebuy, modified rebuy, and new task. The straight rebuy is a habitual decision. A modified rebuy involves limited decision making. A new task involves extensive problem solving because the company has not made a similar decision already.
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12. For Reflection
Summarize the buyclass model of purchasing. How do decisions differ within each class?
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13. Our traditional notions about families are outdated.
Learning Objective 3
Our traditional notions about families are outdated.
In 2010, our culture marked a milestone: Married couples represented
just 48 percent of American households. In contrast, back in 1950, 78 percent of households were occupied by married couples. New Census data also revealed that just one-fifth of households were composed of traditional families—married couples with children—compared to 43 percent in 1950.
Does this mean that families are obsolete?
The reality is that many other types of families continue to grow rapidly.
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14. For Reflection
How does the changing nature of the family affect marketing mix decisions marketers make to target families and family members?
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15. Learning Objective 4
Many important demographic dimensions of a population relate to family and household structure.
American Girl produces historical-period characters complete with books, dolls, and accessories, as well as modern-period dolls. Consumer researchers who studied the American Girl phenomenon concluded that part of the brand’s huge popularity is due to its multigenerational appeal. After they interviewed numerous girls, mothers, and grandmothers, they found that consumers of all ages valued the opportunities for family connection.
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16. Changes in family structure
The Modern Family
Changes in family structure
Changes in concept of household (any occupied housing unit)
The extended family was once the most common family unit. It consisted of three generations living together and including grandparents, aunts, uncles, and cousins. Then the nuclear family became more common. Now there have been many changes in the American family structure such that the family unit could contain a number of variations on membership and size. Further, the U.S. Census Bureau now defines a household, not by the relationships of the people who live there, but simply as any occupied housing unit.
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17. Women want smaller families
Family Size
Depends on educational level, availability of birth control, and religion
Women want smaller families
The rate of voluntary childlessness is rising, making DINKs a valuable market segment
There are many factors which affect the size of a family. The higher the education of the parents, the fewer children typically. Religious beliefs and the availability of birth control also affect family size. Worldwide, women tend to want smaller families than in past years. There is a growing trend toward voluntary childlessness. DINKs are dual-income, no kids couples. They make a valuable market segment because they have a higher level of discretionary income than couples with kids.
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18. Sandwich Generation
Sandwich generation: adults who care for their parents as well as their own children
Boomerang kids: adult children who return to live with their parents
Spend less on household items and more on entertainment
Some families are extended again and include three generations. The Sandwich Generation refers to those who are in the position of caring for both children and parents. This tends to occur when adult children return to the nest. These kids are known as boomerang kids.
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19. Nonhuman Family Members
Pets are treated like family members
Pet-smart marketing strategies:
Name-brand pet products
Lavish kennel clubs
Pet accessories
Ninety-two percent of pet owners consider their pets to be family members. Eighty-three percent call themselves Mommy or Daddy when talking to their pets.
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20. Factors that determine how couples spend money:
Family Life Cycle
Factors that determine how couples spend money:
Whether they have children
Whether both spouses work
Family life cycle (FLC) concept combines trends in income and family composition with change in demands placed on income
Many factors affect what a family spends, including the number of people in the family, their ages, and whether one, two, or more adults work outside the home. Two especially important factors that determine how a couple spends time and money are whether they have children and whether the woman works. The family life cycle concept enables marketers to segment households.
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21. Variables Affecting FLC
Age
Marital Status
Children in the Home
Researchers over the years have proposed several models to describe family life cycle stages, but with limited effect because most failed to take into account trends like the changing role of women, childless and delayed-child marriages, alternative family styles, and single-parent households. Four variables are used to describe the changes a family undergoes: age, marital status, whether children are in the home, and the ages of children in the home. We also have to consider any couple as a household whether or not they are a traditional husband and wife.
Ages of Children in the Home
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22. For Reflection
For the following products, discuss how having children or not might affect the choices a couple makes. What do such variations mean for marketers?
Groceries
Cars
Vacations
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23. Learning Objective 5
Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions.
The decision process within a household unit resembles a business conference. Certain matters go on the table for discussion and different members advocate for different decisions.
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24. Household Decisions Consensual Purchase Decisions Accommodative
Families make two types of decisions: 1) consensual and 2) accommodative.
Consensual purchase decisions are those for which members agree on the desired purchase, differing only in terms of how it will be achieved.
Accommodative purchase decisions are those for which members have different preferences or priorities and they cannot agree on a purchase to satisfy the minimum expectations of all involved .
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25. Resolving Decision Conflicts in Families
Interpersonal need
Product involvement and utility
Responsibility
Power
Decisions involve conflict among family members to the extent that the issue is important or unusual or if individuals have strong opinions about alternatives. The degree to which these factors generate conflict determines the type of decision the family will make, whether that be a consensual agreement or an accommodative agreement. The factors that determine how much conflict there will be include interpersonal need, product involvement and utility, responsibility, and power.
Interpersonal need refers to the level of involvement of a person in the group. Product involvement and utility refers to the degree to which a person will use the product to satisfy a need. Responsibility refers to the person who has responsibility for procurement, maintenance, payment, and so on. Power refers to the degree to which one family member exerts influence over the others.
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26. Who Makes Key Decisions in the Family?
Autonomic decision: one family member chooses a product
Syncretic decision: involve both partners
Used for cars, vacations, homes, appliances, furniture, home electronics, interior design, phone service
As education increases, so does syncretic decision making
When couples first marry, they tend to make more joint decisions but over time, they begin to specialize in decisions. Wives still have the most say on grocery purchases, clothes, furniture, home electronics, and things for children. In traditional views of family, men made the money and women spent it. Today, it is primarily the woman who manages the role of family financial officer, whether or not she is a primary breadwinner. Marketers are also aware of the tendency for working mothers to struggle with a “juggling lifestyle.”
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27. Factors Affecting Decision-Making Patterns Among Couples
Sex-role stereotypes
Spousal Resources
Experience
In general, four factors appear to determine the degree to which one or the other spouse or both jointly decide what to buy. Couples who believe in traditional sex-role stereotypes tend to make individual decisions for sex-typed products (those that are considered feminine or masculine). The spouse who contributes more resources to the family has the greater influence. Couples who have gained experience as a decision-making unit make individual decisions more frequently. Middle-class families make more joint decisions than do either higher- or lower-class families.
Socioeconomic Status
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28. Heuristics in Joint Decision Making
Synoptic ideal: the couple takes a common view and act as joint decision makers
Heuristics simplify decision making:
Salient, objective dimensions
Task specialization
Concessions based on intensity of each spouse’s preferences
The ideal view of joint decision making is that both the husband and wife participate equally. According to this view, both would act rationally and weigh alternatives. In reality, spousal decision making is more about reaching decisions than making decisions. One common technique for simplifying decisions is to use heuristics. Couples can define their areas of common preference on specific dimensions. They can assign certain duties or decision components to the person who is best at that task. Lastly they can make concessions to each other based on the wishes and concerns of one another.
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29. For Reflection
What exposure have you had to family decisions made in your own family? Can you see the patterns discussed in the chapter in those decisions? Give an example.
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30. Children learn over time what and how to consume.
Learning Objective 6
Children learn over time what and how to consume.
The last objective in this chapter focuses on the role children play in family decision-making. Such influence explains why many marketers promote products directly to young people.
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31. Children as Decision Makers
Primary market: kids spend their own money
Influence market: parents buy what their kids tell them to buy (parental yielding)
Future market: kids “grow up” quickly and purchase items that normally adults purchase (e.g., photographic equipment, cell phones)
Children are a part of three distinct consumer markets. First, they have their own money and buy things that are targeted to them. Second, children influence their parents’ spending. Parents give in to influence from kids on many choices. This is known as parental yielding. Lastly, kids grow up and become adults, but they may stay loyal to the brands they loved when they were young.
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32. Consumer Socialization
Consumer socialization is the process by which young people acquire skills, knowledge, and attitudes relevant to their functioning in the marketplace
Children’s purchasing behavior is influenced by
Parents, family, and teachers
Television and toys
Culture
Kids learn how to consume through the socialization process. They learn how to act as consumers from the environment around them. Parents are a big influence as are teachers. Kids learn a great deal from television, which for many is akin to an electronic babysitter. Toys help to teach kids how to behave. Finally, the culture all around us influences are beliefs and patterns.
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33. Figure 10.2 Five Stages of Consumer Development
This figure reveals the five stages of development for children as they become consumers.
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34. Parental Styles for Socializing Children
Authoritarian
Neglecting
Parents exhibit different styles when they socialize their children. Authoritarian parents are hostile, restrictive, and emotionally uninvolved. They do not have warm relationships with their children. They censor the types of media their children see, and tend to have negative views of advertising. Neglecting parents are detached from their children and the parents don’t exercise much control over the children. Indulgent parents communicate more with their children about consumption-related matters and are less restrictive. They believe children should be allowed to learn about the marketplace without much interference.
Indulgent
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35. Cognitive Development
Limited: Below age 6, children do not use storage and retrieval strategies
Cued: Between ages 6 and 10, children use these strategies, but only when prompted
Strategic: Children ages 10 and older spontaneously employ storage and retrieval strategies
Marketers segment kids in terms of their stage of cognitive development or their ability to comprehend concepts of increasing complexity. Jean Piaget, a Swiss psychologist, was influential in establishing that children pass through distinct stages of cognitive development. Many developmental specialists no longer believe that children pass through these fixed stages at the same time. An alternative view proposes that they differ in information-processing capability. Researchers have instead identified three developmental stages: 1) limited, 2) cued, and 3) strategic.
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36. For Reflection
How do the stages of cognitive development relate to a child’s ability to comprehend marketing messages?
How can marketing messages be adapted to meet the appropriate stage of cognitive development?
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37. Buying for one’s self is different than buying for one’s company.
Chapter Summary
The purchase decisions made by many may differ from those made by individuals.
Buying for one’s self is different than buying for one’s company.
Our traditional notions of family are outdated.
Family members play different roles and varying levels of influence.
Children learn over time how to consume.
We’ve reviewed many concepts in this chapter. The key points are noted on the slide.
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