1. Organizational & Household Decision Making Michael J. Kalsher MGMT 4460/6962 Summer 2014

2. Chapter Objectives When you finish this chapter, you should understand why: 1. Marketers often need to understand consumers’ behavior rather than an individual consumer’s behavior. 2. Companies as well as individuals make purchase decisions. 3. Our traditional notions about families are outdated. 4. Many important demographic dimensions of a population relate to family and household structure. 5. Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions. 6. Children learn over time what and how to consume.

3. Learning Objective 1  Marketers often need to understand consumers’ behavior (collective decision making) rather than a consumer’s behavior.

4. Roles In Collective Decision Making Initiator: Brings up idea or identifies a need Gatekeeper: Conducts information search and controls info flow Influencer: Attempts to sway the outcome of the decision Buyer: Purchaser User: Consumes the product or service

5. Learning Objective 2  Companies as well as individuals make purchase decisions.

6. 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) marketing is VERY big business ($trillions)

7. 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 (e.g., medical devices)

8. Hemodialysis Catheters http://www.youtube.com/watch?v=fXeuB1P8sDs

9. What Influences Organizational Buyers?  Internal stimuli  External stimuli (Nature of the industry & the organization)  Cultural factors  Type of purchase (Level of risk and complexity)  Buyclass theory of purchasing: organizational buying decisions can be divided into 3 types that vary in complexity.  Straight rebuy (Low risk; Habitual decision making e.g., approved vendors)  Modified rebuy (Moderate risk; Limited problem solving)  New task (High risk; Extensive problem solving)

10. Learning Objective 3  Our traditional notions about families are outdated.

11. Learning Objective 4  Many important demographic dimensions of a population relate to family and household structure.

12. The Modern Family  Changes in family structure (nuclear vs. extended)  Changes in concept of household (any occupied housing unit)

13. Family Size  Depends on educational level, availability of birth control, and religion  Many women want smaller families  The rate of voluntary childlessness is rising, making DINKs (dual incomes no kids) a valuable market segment

14. 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

15. Nonhuman Family Members  Pets are treated like family members  Pet-smart marketing strategies:  Name-brand pet products  Lavish kennel clubs  Pet accessories  http://www.youtube.com/watch?v=Pi60Aj2EkyE http://www.youtube.com/watch?v=Pi60Aj2EkyE

16. 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

17. Variables Affecting Family Life Cycle Age Marital Status Presence/Absence of Children Ages of Children, if present

18. Learning Objective 5  Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions.

19. Household Decisions Consensual Purchase Decisions: Agreement on purchase, but not necessarily on the details. Accommodative Purchase Decisions: Differing preferences/priorities prevent agreement and may lead to conflict

20. Resolving Decision Conflicts in Families: Contributing Factors  Interpersonal need  Product involvement and utility  Responsibility  Power

21. Who Makes Key Decisions in the Family?  Autonomic decisions: one family member chooses a product  Syncretic decisions: involve both partners  Used for cars, vacations, homes, appliances, furniture, home electronics, interior design, phone service  As education increases, so does syncretic decision making  Gender convergence  Sheconomy

22. In General, Four Factors Determine Decision-Making Patterns Among Couples Sex-role stereotypes Spousal Resources Experience Socioeconomic Status

23. Heuristics in Joint Decision Making  Synoptic ideal: calls for both members of the couple to take a common view and act as joint decision makers  Heuristics simplify decision making:  Find areas of agreement on salient, objective dimensions  Task specialization (reduces “turf wars”)  Concessions based on intensity of each spouse’s preferences (pick your battles wisely)

24. Learning Objective 6  Children learn over time what and how to consume.

25. Children as Decision Makers: They form three distinct markets  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)  Important to “lock-in” brand loyalty

26. 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 http://www.youtube.com/watch?v=4CA11vk_X- A&feature=related https://www.youtube.com/watch?v=DVvigQ_RFKc

27. Five Stages of Consumer Development

28. Parental Styles for Socializing Children Authoritarian Neglecting Indulgent

29. Cognitive Development : New view stresses differences in information-processing abilities  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

30. 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.