Understanding Buyer Behavior PDF

Topic 5: Understanding Buyer Behavior After reading this chapter, you should be able to : 5.1 Describe the consumer buying decision process. 1) Define the consumer market 5.2 Describe the factors affe...

Topic 5: Understanding Buyer Behavior After reading this chapter, you should be able to : 5.1 Describe the consumer buying decision process. 1) Define the consumer market 5.2 Describe the factors affecting consumer buying behavior. 2) Explain the stages in the buyer decision 5.3 Describe the business buying process. behaviour and the influencing factors. 3) List and define the major types of buying decision behavior  Introduction For marketer to find out how people make their buying decision. To identify the factor that influences these decisions. 2 types buyer behaviours : Consumer market All the individuals 1. Business buyer and households that buy or acquire goods 2. Consumer and services for Consumer personal consumption. Individuals who buy products services for themselves or behalf of households. Final user of the products. By understanding consumer behaviours, managers can reduce uncertainty when creating the marketing mix. Learning objective 1  Consumer Buying Behaviour The process of how consumer make purchase decisions and how they use the purchased products. Need to understand: 1)How decision-making process comes about? 2)Why consumers make the purchases that they make? 3)What factors influence consumer purchases? Consumer Buying Decision - Making Process Learning objective 2  1. Need Recognition Awareness of need. The buyer senses a difference between his/her actual state and desired state. 2 types of stimuli: Customer become aware of the need due to either physical or Internal psychological factors. stimuli Example : Hunger and thirst which can only be met by acquisition. External A need also can be triggered by advertisement on TV, colour stimuli of automobile, brand name mentioned by friend or perfume used by a friend.  1. Need Recognition Example:  In automobile industry, marketers can attempt to create consumer demand by developing new car seats with built-in speakers and more comfortable seat belts.  By gathering such information, marketers can identify these stimuli that most often stimulate interest in the product then develop marketing programs.  2. Information Search Customers search information about various Personal sources Public sources alternatives available to satisfy their wants. Commercial sources Information gained from any of several sources: Experiential sources 2. Information Search Sources From family member, friends, neighborhood. Personal Most effective in searching information. Tend to justify or evaluate product for the buyer. Advertising, salesperson, dealer and displays. Inform the buyer of what the product is. Commercial Provides product knowledge and attraction to buy the product. Mass media, customer-rating org. Public Provide information about products. Experiential From own or others experiences in handling, examining and using the products.  3. Evaluation of Alternatives Customer ready to make decision. Uses the information gained about the product, evaluates and compare the alternatives. Evaluating process depends on individual and specific buying position. Have several steps in evaluating. Evaluating steps: Benefits of Degree of Brand product importance beliefs Utility Level of Cost of functions satisfaction product  4. Purchase Decision Customer will decide to buy or not to buy the product. Also used 4W and 1H to purchase and tendency to act quickly high when the product on sale. Can forgo the purchase if not meet their need and wants. May postpone due to saving issues.  4. Purchase Decision Customer will decide to buy or not to buy the product. Also used 4W and 1H to purchase and tendency to act quickly high when the product on sale. Can forgo the purchase if not meet their needs and wants. May postpone due to saving issues. Sometimes at purchase location, customer may make changes to original choice decision if they affected by other influences. Example: –When buying a hand phone, a person may decide to buy another brand of hand phone at the kiosk when hearing other customer’s criticisms of selected brand.  5. Post Purchase Behaviour Consumer assesses the product and determines whether he/she is satisfied with it or not. Post Purchase Behaviour of Consumer  If perceived performance < Buyer expectation  Dissatisfied buyer  If perceived performance = Buyer expectation  Satisfied buyer  If perceived performance > Buyer expectation  Delighted buyer Factors Affecting Consumer Buying Behaviour  Cultural : Culture The set of values, ideas and attitudes that are accepted by homogeneous group of people and transmitted or passed down over time to the next generation. Basic course of a person’s wants and behaviours. Each countries have different culture. Determine what is acceptable with product advertising. Example: 1) In US, they are more about good health, education, individualism and freedom. 2) Common to find Malaysian eating in open air restaurants in the middle of night because it is a favored activity among Malaysian. Meanwhile, at Saudi Arabia, people tends to eat inside the restaurants because the temperature outside very cold during night.  Cultural : Subculture Including nationalities, religion, racial groups and geographic region. Example: – Common colour to depict Hari Raya for Malays will be green. Most of Hari Raya products like money pocket, hampers and decoration will be green colour. Meanwhile for Chinese New Year, the favoured colour is red and most of the products include the money packets or ‘ang pow’ must be in red.  Cultural : Social Class A group consisting of individuals with similar social and economic circumstances who are consider to have similar status in society. Measured and related to occupation, income, education and wealth. Share common values, interest and behaviours. Result --> Common buying preferences Example: US generally categorized into upper class, middle class, working class and lower class. Malaysian society is not clearly divided into different social class.  Social Factor : Reference Group The group in society with which a person interacts. To indicate that they are point of comparison or reference for consumers in making decisions. Important to marketer because consumer may used products to establish identity with a group or to gain membership into it. Have 3 types of references group: 1)Direct membership groups Face to face membership groups that touch people’s live directly. Have 2 elements in this group: a)Primary membership group. Which people interact regularly in an informal face to face manner. Like family, friends and co-workers. b) Secondary membership group. Which people associate less consistently and formally. Like clubs, professional group and religion groups.  Social Factor : Reference Group 2)Indirect membership group  The group of which one is not a member.  Have 2 elements in this group: a)Aspirational groups Group one would like to join. Must obey to the group norms. b)Non-aspirational groups Groups with which an individual doesn’t want to be associated or be identified. 3)Opinion leader  A person influence within a group or society due to his/her knowledge, skills, characteristics and other factors.  Example : David Beckham set the trend and have strong influence on the public, like follow unique hair style and used the products he endorses.  Social Factors : Family The most basic group a person belongs to and the most important social institution for many customer. The family unit have many family decisions. Purchase and information roles within family: –Instigator - Decision maker –Influencer - Purchaser - Consumer  Social Factor : Roles and Status An individual have different roles and status within the groups that they belong to. Role --> The activities people are expected to perform according to the person around them. Example : –Mr. Abu plays role of a father to his children and the role of marketing manager in his company Each role carries a status. Example : –The role Mr. Abu being the marketing manager in his company has a higher status in the society than the role of a father. Products like cars (PROTON) are seen as status symbol in Malaysia. Personal : Age and Life Cycle Stage People changes the product that they buy over their lifetimes. Demand and consume different products as their age increases. Example: – Baby need products like diapers and infant milk. – Child become teenager -> Demand for movies and tuition. – Becomes older -> Owning a house and car. Each stage creates different consumer demands.  Personal : Occupation Occupation of customer affect their buying behaviours. Example: – A shoes manufacturer will design different shoes for office workers and worker at the oil rig or at construction sites.  Personal : Economic Situation Economic situation affects his/her buying decision. Example: – Marketers of income-sensitive products like cars should trends in personal income, saving interest rate. –If recession -> marketers can redesigning or repricing their products.  Personal : Lifestyle Same subculture, social class and occupation but differ in lifestyles. Have 3 dimensions: (AIO) Dimensions Examples Activities Work, study, dining, sleeping Interests Travel, entertainment, food, community work Opportunity Others, social issues, marketers, products, politics  Personal : Personality A way of organizing and grouping the consistencies of an individual’s reactions to various situations. Example: – Nike has been linked to the personality ‘confidence’ while Harley Davidson is reflection of ‘manliness and cool’. –Digi mobile telecommunication user is ‘daring, different and dynamic.’  Personal : Self-concept Known as self-image. How consumers perceive themselves in terms of attitudes, perception, belief and self-evaluations. Provides consistent and coherent behaviours. Ideal self-concept  way individual would like to be. Example: –Nescafe Gold is for those ‘whose appreciate the finer things in life.’  Psychological : Motivation Only need not strong but if : NEED + MOTIVE = SUFFICIENT LEVEL OF INTENSITY Maslow’s Hierarchy of needs: i.Physiological needs ii.Safety needs iii.Social needs iv.Self – esteem v.Self - actualization  Psychological : Perception A process by which we select, organize and interpret information to form meaningful picture of the world. Must recognize the importance of cues in customers’ perception of products. 3 types of perceptual processes: Selective attention Selective distortion Selective retention  Psychological : Values, Beliefs and Attitude Values –Beliefs that specific mode of conduct is personally or specially preferable to another mode of conduct. Beliefs –Organized patterns of knowledge that an individual holds as true about something. Attitudes –A person’s like or dislike towards an object or ideas.  Types of Buying Behaviour 1. Complex Buying Behaviour 2. Dissonance-reducing Seek extensive decision Buying Behaviour because they are unfamiliar Highly involved in the of product or purchase the purchase but are not able product infrequently. to see key difference Expensive, have among brand choices. See little brand difference psychological or economic among products like risks. leather sofa and kitchen Spend time to look for cabinet. information. Difference them thru price Examples: range. –House, personal computer and cars. Learning objective 5  Types of Buying Behaviour 4. Variety-seeking Buying 3. Habitual Buying Behaviour Behaviour Who buy frequently Low consumer involvement purchased low cost items but see large differences require very little search among brands. and decision effort. Change their preferences for Examples: certain of body soap for –Soft drinks, snack foods, milk. variations although satisfied with the current brands.  Business Buying Behaviour Business-to-business buyers or industrial buyers All org. that buys goods and services for further production of other goods and services, reselling, renting or supplying to others. 4 main categories: i. Producers ii.Resellers iii.Government iv. Institutions Organizational Market and Consumer Market Characteristics Consumer Organizational Market Market Demand Organizational Individual Distribution Direct Indirect Nature of unit Professional Personal Types of Complex and Simpler and decision and formalized informal process Reciprocity Yes No Leasing Greater Lesser Business Buying Process 1. Problem Recognition Sees that specific products or services can solve a problem or fulfill the need in the org. Arise from internal or external stimuli. Example: – Internal stimuli : Org. may need to replace an old computer or expand the current factory capacity – External stimuli : Manager may see a new machine in a trade exhibition that will ease the production problem in factory. 2. General Need Description To describe the characteristics and quantity of the needed items. Buying center need to discuss with specific persons to define the types of product needed to complete the task. Defining the product requires ranking of attributes required according to importance. – Quality, reliability, price or durability. 3. Product Specification Purchasing org. needs to develop technical specifications for the product required. This task usually assisted by engineering team to decide on the best product characteristics and specifications 4. Supplier Search For qualified supplier, it will start with the available list of suppliers from company’s record or the potential supplier met in trade exhibition. 5. Proposal Solicitation The buying center will request for proposal or bids from potential suppliers. Some vendor will send catalogue or sales person. Complex and costly purchases, buyers will request details written proposals. 6. Supplier Selection Buying center analyse the choice of proposals and bids and select supplier. Supplier rating system is developed by considering: – Quality of products and services. – Ethical corp. behaviours. – Honest communication. - Geo. Location. – Competitive prices. - Reputation. – Customer service. - Performance history. 7. Order Placement Supplier selected. Purchasing agents places the order and determines the delivery instructions and financial terms. What must have in purchase order? i. Product identification code ii.Quantity and quality to be delivered iii.Methods and frequency of delivery iv.Price and payment terms When product received, its will be inspected Employees need to check the quantity and quality then correct any delivery shipment’s problems. 8. Performance Review Purchasers and users need to monitor the supplier’s performance. Evaluation will determine future purchase from supplier. Different org. have its own way of buying and each situation may be unique. Factor Affecting Business Buyer Behaviour 1.Environmental factors – Cultural – Technology – Resources 2.Organizational factors – If the firms aims to be a cost-leader in order to be a market leader in industry, materials are normally purchase at reasonable quality at lowest price possible. 54 Factor Affecting Business Buyer Behaviour 3. Interpersonal factors. –Many people involve and tend to influence each other because of their authority, status, power to control rewards and punishment, expertise, status and relationship. –Example: They willing to spend more money on the office furniture in order to impress others in or outside the org.  SUMMARY Define the consumer market and construct a simple model of Name the four major factors that influence consumer buyer consumer buyer behavior. behavior. The consumer market consists of all the individuals and Consumer buyer behavior is influenced by four key sets of buyer households that buy or acquire goods and services for personal characteristics: cultural, social, personal, and psychological. consumption. The simplest model of consumer buyer behavior is Although many of these factors cannot be influenced by the the stimulus response model. marketer, they can be useful in identifying interested buyers and According to this model, marketing stimuli (the four Ps) and shaping products and appeals to serve consumer needs better. other major forces (economic, technological, political, Culture is the most basic determinant of a person’s wants and cultural) enter the consumer’s “black box” and produce certain behavior. Subcultures are “cultures within cultures” that have responses. distinct values and lifestyles and can be based on anything from Once in the black box, these inputs produce observable age to ethnicity. Many companies focus their marketing buyer responses, such as brand choice, purchase location and programs on the special needs of certain cultural and subcultural timing, and brand engagement and relationship behavior. segments, such as Hispanic American, African American, and Asian American consumers. Social factors also influence a buyer’s behavior. A person’s reference groups—family, friends, social networks, professional associations—strongly affect product and brand choices. The buyer’s age, life-cycle stage, occupation, economic circumstances, personality, and other personal characteristics influence his or her buying decisions. Consumer lifestyles—the whole pattern of acting and interacting in the world—are also an important influence on purchase decisions. Finally, consumer buying behavior is influenced by four major psychological References factors: motivation, perception, learning, and beliefs and 1. Kotler, P., Armstrong, G. (2020). Principles of Marketing, Global attitudes. Each of these factors provides a different perspective Edition. United Kingdom: Pearson Education. for understanding the workings of the buyer’s black box. 2. Marc Oliver Opresnik and Svend Hollensen (2018) Marketing: Principles and Practice: A management-oriented approach.Independently published  KEY TERMS Consumer buyer behavior Need recognition Consumer market information search Subculture alternative evaluation Total market strategy purchase decision Social class post-purchase behavior Cognitive dissonance DISCUSSION QUESTIONS Question 1: Studying behaviours of segment market is a management theory component which analyzes the purchasing habits of individuals and/or groups. Primarily used for marketing purposes, the analysis includes an examination of perception, desire, decision-making and satisfaction. The four models that are often used include economic model, learning theory model, psychoanalytic model and information processing model. REQUIRED a) Explain the cultural factors that influence consumer behavior. (5 marks) b) Explain the concepts of word-of-mouth influence, and opinion leader. (5 marks) c) A consumer's behavior is influenced by social factors, such as the consumer's small groups, family, and social roles and status. Explain the differences among these social factors. (10 marks) (TOTAL 20 MARKS)  MODEL ANSWER FOR DISCUSSION QUESTIONS Answer Q1- Syllabus chapter 5: Understanding Buyer Answer Q1- Syllabus chapter 5: Understanding Buyer Behavior (CLO 1) Behavior (CLO 1) Model Answer to Question a) Model Answer to Question b) Culture is the most basic cause of a person's wants Word-of-mouth influence can have a powerful impact on and behavior. Each culture contains smaller consumer buying behavior. The personal words and subcultures, or groups of people with shared value recommendations of trusted friends, associates, and other systems based on common life experiences and consumers tend to be more credible than those coming situations. from commercial sources. Subcultures include nationalities, religions, racial Most word-of-mouth influence happens naturally: groups, and geographic regions. Many subcultures Consumers start chatting about a brand they use or feel make up important market segments. strongly about one way or the other. Social classes are society's relatively permanent and Often, however, rather than leaving it to chance, marketers ordered divisions whose members share similar can help to create positive conversations about their values, interests, and behaviors. brands. Unlike nationality or ethnic subculture, social class is Marketers of brands subjected to strong group influence determined by a combination of many variables, such must figure out how to reach opinion leaders–people within as occupation, income, education, and wealth. a reference group who, because of special skills, Social scientists have identified seven social classes knowledge, personality, or other characteristics, exert within the American culture, ranging from upper social influence on others. class to lower class. Marketers try to identify opinion leaders for their products and direct marketing efforts toward them. (Students must elaborate briefly each point, in order to get full marks) MODEL ANSWER FOR DISCUSSION QUESTIONS Answer Q1- Syllabus chapter 5: Understanding Buyer Behavior (CLO 1) Model Answer to Question c) Reference groups serve as direct or indirect points of comparison or reference in forming a person's attitudes or behaviors. An aspirational group is one to which the individual wishes to belong. Reference groups expose a person to new behaviors and lifestyles, influence a person's attitudes and self-concept, and create pressures to conform that may affect the person's product and brand choices. Opinion leaders are also included in reference groups. Family members can strongly influence buyer behavior and is the most important consumer buying organization in society. Marketers are interested in the changing roles and influence of each family member, particularly as male and female purchasing roles evolve and children wield more purchasing influence. Within groups, including families, the position of an individual is defined by role and status. A role consists of the activities people are expected to perform according to the persons around them, while status is the general esteem given to that role. People tend to choose products that fit their roles and status.