Chapter 5: Consumer & Business Buyer Behavior

CHAPTER 5: CONSUMER & BUSINESS BUYER BEHAVIOR

MAIN POINTS TO BE DISCUSSED:-

1. Understand the consumer market and the major factors that influence consumer buyer behavior. 2. Identify and discuss the stages in the buyer decision process. 3. Describe the adoption and diffusion process for new products. 4. Define the business market and identify the major factors that influence business buyer behavior. 5. List and define the steps in the business buying decision process

Case study: Harley Davidson Motor Cycles.

Harley’s “HOGS” capture 23% of all US bike sales and 50% of the heavy weight motorcycle market segment. For several years running, sales have outstripped supply with customer waiting lists of up to two years for popular models. During just the past 6 years, Harley sales have more than doubled, and more and earnings have tripled.

How is this happening for Harley Davidson? Harley – Davidson’s marketers spend a great deal time of time thinking about customers and their buying behavior. They want to know who their customers are. What they think and how they feel? They also want to know what is that makes Harley buyers so loyal? Harley management put top priority on understanding customers and what makes them tick?

Who rides Harley? The average Harley customer is a 46 year old husband with a median household income of $78,000. More than 10 % of Harley purchases are made by woman. To gain a better understanding of customer’s deeper motivations, Harley Davidson conducted Focus groups in which they analyzed their customer’s opinion. It then mailed out 160,000 surveys. The research revealed seven core customer types. They are 1. adventure loving traditionalists 2. sensitive pragmatists 3. stylish status seekers 4. laid back campers 5. classy capitalists 6. cool headed loners 7. Cocky misfits. “It’s much more than a machine” says the analyst. “Its part of their own self expression and lifestyle”. Such strong emotions and motivations are captured in a classy Harley Davidson advertisement.

CONSUMER BUYING BEHAVIOR

Consumer Buying Behavior refers to the buying behavior of people who buy goods and services for personal use. Consumer market consists of all the people (Individuals and households) who buy or acquire goods and services for personal consumption. The world consumer market consists of more than 6.6 billion people.

Model of Consumer Behavior

Consumers make many buying decisions every day. Most large companies research consumers buying decisions in great detail to answer questions about what consumers buy, where they buy, how and how much they buy, when they buy, why they buy. But learning about whys of customers are not so easy. The answers are often locked deep in the consumer’s mind. The central question for marketers is : How do consumers respond to various marketing efforts the company might use? The starting point is the stimulus-response model of buyer behavior shown below.

The figure shows that marketing and other stimuli enter consumer’s BLACK BOX and produce certain responses. Marketers must figure out what is in the buyer’s black box.

Marketing stimuli consists of four Ps. Product, Price, Place, and Promotion. Other stimuli include major forces and events in the buyer’s environment such as Economic, Technological, Political and Cultural. All these inputs enter the buyer’s black box where they are turned into a set of observable buyer responses such as Product choice, Brand choice, Dealer choice, Purchase timing and Purchase amount.

The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black box which has two parts. First, the Buyers characteristics influence how he or she perceives and reacts to stimuli. Second, the buyer’s decision process itself affects the buyer’s behavior.

CHARACTERISTICS AFFECTING THE CONSUMER BEHAVIOR

Consumer purchases are influenced strongly by cultural, social, personal, and psychological characteristics as shown in the figure below. Factors Influencing Consumer Behavior

Figure 5.2

Marketing : An Introduction © Armstrong, Kotler & da Silva An Asian Perspective 5-7 Culture: Culture is the most basic cause of a person's wants and behavior. – Culture is learned from family, church, school, peers, and colleagues. – Culture reflects basic values, perceptions, wants, and behaviors. – Cultural shifts create opportunities for new products or may otherwise influence consumer behavior.

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

Social Class Almost every society has some form of social structure. Social classes are Society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Social class is not determined by a single factor, such as income, but is measured as a combination of occupation, income, education, wealth and other variables. Social classes show distinct product and brand preferences in areas such as Clothing, home furnishing, leisure activities and automobiles. Social Factors: A consumer’s behavior also influenced by social factors such as the consumer’s small groups, family and social roles and status. . Groups: A person’s behavior is influenced by many small groups. Manufacturers of products and brands subjected to strong group influence must figure out how to reach opinion leaders. An opinion leader is a person within a reference group who because of special skills, knowledge, personality, or other characteristics exerts on others. An aspirational group is one to which an individual wishes to belong. . Family: – Most important consumer buying organization in the society. – Family members can strongly influence buyer behavior. – Marketers are interested in the roles and influence of the husband, wife and children on the purchase of different products and services.

. Roles and Status: A person belongs to many groups such as family, clubs, organizations etc. The person’s position in each group can be defined in terms of both role and status. A role consists of the activities people are expected to perform according to the persons around them. Each role carries a status reflecting the general esteem given it to by the society. People usually choose products appropriate to their roles and status. Eg. As a brand manager, she will buy the kind of clothing that reflects her role and status in her company. . Role = Expected activities . Status = Esteem given to role by society Personal Factors A buyer’s decisions are also influenced by personal characteristics such as the buyer’s age, life cycle stages , occupation, economic situation , lifestyle, personality and self concept. . Age and Life-Cycle Stage – People change the goods they buy over their lifetimes. – Traditional family life-cycle stages include young singles and married couples with children. . Occupation – Occupation influences the purchase of clothing and other goods. . Economic Situation – Some goods and services are especially income-sensitive. . Lifestyle: – People coming from the same subculture, social class and occupation may have different lifestyles. Lifestyle is a person’s Pattern of living as expressed in his or her psychographics. It involves measuring consumer’s major AIO dimensions. They are . Activities ( work, hobbies, shopping, sports, social events) . Interests ( food, fashion, family, recreation) . Opinions ( about themselves, social issues, business, products) . Personality & Self-Concept Each person’s distinct personality influences his or her buying behavior. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Personality is usually described in terms of traits such as self confidence, dominance, sociability etc. Personality can be useful in identifying consumer behavior for certain products or brand choices. For example, Coffee marketers have discovered that heavy coffee drinkers tend to be high on sociability. Thus to attract customers, Starbucks and other coffee houses create environments in which people can relax and socialize over a cup of steaming coffee.

Many marketers use a concept related to personality- A person’s self concept (Also called self image). Self-concept (self image) suggests that people’s possessions contribute to and reflect their identities. That is “We are what we have”. Thus in order to understand consumer behavior, the marketer must first understand the relationship between consumer self concept and possessions.

Psychological factors A person’s buying choices are further influenced by four major psychological factors. They are motivation, perception, learning, beliefs and attitudes. Motives and Needs A person has many needs at any given time. Some are biological arising from states of tension such as hunger, thirst or discomfort. Others are psychological arising from the need for recognition, esteem or belonging. . A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. . Maslow’s hierarchy of needs explains why people are driven by needs at particular times . Maslow’s hierarchy of needs implies that lower level needs must be satisfied prior to higher level needs. . Physiological needs . Safety needs . Social needs . Esteem needs . Self-Actualization Application of Maslow’s Hierarchy of Needs to the Marketing of Cars THE BUYER DECISION PROCESS

So far we have looked at the influences that affect buyers. Now we will study at how consumers make buying decisions. Clearly the buying process starts long before the actual process and continues long after. Marketers need to focus on the entire buying process rather on just the purchase decision. Marketers need to understand the various influences and decision stages that customer move through when making a purchase decision. By conducting consumer research based on these individual stages, the marketer can develop suitable marketing actions to influence each of the stages leading to the purchase decision

Buyer decision process

The figure suggests that consumer pass through all the five stages with every purchase. But in more routine purchases, consumers often skip or reverse some of the stages.

Step #1 = Need Recognition The buying process starts with need recognition- The buyer recognizes a problem or need. The need can be triggered by internal stimuli when one of the person’s normal needs such as hunger, thirst, sex etc.

• 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. Step #2 = Information Search An interested consumer may or may not search for more information. If the consumer’s drive is strong and a satisfying product is near at hand, the consumer is likely to buy it then. If not the consumer may store the need in memory or undertake an information search related to the need. As more information is obtained, the consumer awareness and knowledge of the available brands and features increases. • 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

- Most effective source Personal - Family, friends, neighbors

Commercial - Advertising, salespeople - Receives the most information from these sources

- Mass Media Public - Consumer-rating groups

Experiential - Handling the product - Examining the product - Using the product Step #3= Alternative Evaluation • Consumer is now confronted with a number of options • Choice involves element of risk • Consumer will evaluate product options based on different “evaluative criteria” or attributes • Consumer will apply different decision rules depending on complexity of the decision Step #4= Purchase Decision In the evaluation stage, the customer ranks brands and forms purchase intentions. Generally, the consumers purchase decisions will be to buy the most preferred brand. But two factors can come between the purchase intention and purchase decision.

The first factor is the attitude of the others. If someone important to you thinks that you should buy the lowest priced car, then the chances of your buying a more expensive car are reduced. The second factor is unexpected situational factors. The consumer may form a purchase intention based on factors such as expected income, expected price, and expected product benefits. However, unexpected events may change the purchase intention. For example, the economy might turn very bad, a close competitor might drop its price , or a friend might report being disappointed in your preferred car. Thus preferences and even purchase intentions do not always result in actual purchase choice.

Step #5= Post Purchase • Consumer could experience satisfaction, dissatisfaction or dissonance Marketers job is to reduce customers fear of negative outcomes and provide post purchase (after sales) services Cognitive dissonance: A buyer’s doubts shortly after a purchase about whether it was the right decision. Consumer satisfaction is a function of consumer expectations and perceived product performance. . Performance < Expectations Disappointment . Performance = Expectations Satisfaction . Performance > Expectations Delight Linking the Buying Decision Process and Psychological Influences Linking the Buying Decision Process to Marketing Strategies