Consumer Behavior Consumer behavior refers to the buying behavior of final consumers -- individuals and households who buy goods and services for personal consumption. Model of Consumer Behavior Marketers control the stimuli or inputs consisting of the four Ps: Product, Place, Price, and Promotion. Environmental and situational influences, though perhaps beyond the control of the marketer, also influence many consumer choices. But what happens between the marketing stimuli input and the buyer’s response or output? That “black box” processing is the central question for marketers. Teaching Tip: You may wish to discuss the “buyer’s black box” in more detail at this stage. Students sometimes become involved in the controversy regarding the presence or absence of consciousness in consumers. Consider using a two-side in-class discussion: Side A: Experimental psychologists argue that what we call consciousness is merely a set of complex learned responses -- an ordinary physiological function. Side B: Sociologists and social psychologists argue that consciousness is greater than the sum of its physiological parts. For marketers, the issue is sometimes linked to free will: Do marketers create needs by conditioning consumers? Do marketers offer need-fulfillers to needs consumer’s create in their “black box?” Model of Consumer Behavior This CTR corresponds to Figure 5-1 on p. 135 and to the material on pp. 134-135.
Characteristics Affecting Consumer Behavior This CTR relates to Figure 5-2 on p.135 and previews the material on pp. 135-150. Influences on Consumers Cultural . Culture is the most basic influence on a person's values, priorities, and beliefs. Cultural shifts make marketing opportunities although most such changes are in secondary rather than core cultural values. Subcultures are important markets as these groups are often significantly different in their needs to warrant different marketing approaches. Social. Social class is determined by a combination of income, occupation, education, wealth and other variables. Social factors within one's class that affect consumer behavior include reference groups & aspirational groups. Families also exert strong social influences. Finally, each relationship a person has with his or her group carries with it certain roles and status that may carry consumptive responsibilities. Personal . Major personal factors are age and life cycle stage, occupation, economic situation, life style and personality/self-concept. Texts vary in their treatment of the PLC stages but it is clear that singles buy different products than do young marrieds with small children. Occupations differ in time constraints and social pressures to conform that affect consumption decisions. Lifestyles measured by AIO or VALS typologies can reveal different consumption patterns across otherwise dissimilar groups. The unique characteristics of each person that make up their personality also affect behavior. Psychological . Maslow's hierarchy reminds marketers that need states vary in their intensity or motivation. Perception is the process of organizing stimuli and is influenced by selective exposure, distortion, & retention. Learning occurs in response to the presentation of information linked to relevant drives, cues, responses, and reinforcement only some of which is under the control of the marketer. Beliefs and attitudes, though shaped by cultural and social forces, may vary considerably on the individual level.
Social Factors This CTR relates to the material on pp. 140-142. Group Influence on Brand Choice Groups vary in their influence on product and brand purchases as illustrated on the CTR. Consumers belong to several different membership groups. Primary Groups. Primary groups are those with which we have regular but informal interaction. These include family, friends, neighbors, and co-workers. Secondary Groups. Secondary groups are those with which we have more formal and less regular interaction such as religious groups, professional associations, and trade unions. Reference Groups. These groups serve as direct (face-to-face) or indirect points of comparison and evaluation in a person’s formation of attitudes or behavior. Aspirational Groups. This type of group is one to which the individual wishes to belong and emulates in adopting behaviors appropriate to that group. Opinion Leaders. These are people within a reference group who exert influence over others due to special knowledge, skill, personality, or other characteristic.
Factors Affecting Consumer Behavior: Personal This CTR corresponds to Table 5-2 on p. 142 and the material on pp. 142-146. Personal Factors Age and Family Life-Cycle Stage. Buyers’ choices are affected by changes in their age and family structure over time. Young singles have different tastes in clothes, furniture, food, and recreation than do middle aged persons with their own children. Older consumers continue to change in their preferences and additionally acquire new buyer needs such as increased health care needs. Occupation. A person’s occupation carries with it distinct consumptive needs. White collar workers need different clothes than blue collar workers. Also, occupations usually carry their own subcultural norms and values that influence buyer behavior. Economic Situation. Means constrain buyer behavior for almost everyone except for the most wealthy. Personality and Self-Concept. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting response to one’s own environment. Self-concept is the basic perception that people have about who they are. Lifestyle Lifestyle is a person’s pattern of living as expressed in her or his activities, interests, and opinions. Determining lifestyle involves measuring AIO dimensions -- the Activities , Interests , and Opinions of consumers. Psychographics. Lifestyle measures combined with demographic information can identify distinct market segments for consumer products and services. The best known of these methods, VALS 2, is addressed on the following CTR.
Maslow’s Hierarchy of Needs Maslow suggests that lower level needs must be satisfied before individuals become motivated to satisfy higher level needs. Thus consumers will respond to lower level products and promotions until those needs are met. Only then can other marketing offers be of interest. Needs include: Physiological. Physical needs such as hunger, thirst, and bodily functions are the lowest level need and require satisfaction before other needs become important to the individual. Sometimes this helps students understand the difference between needs and wants. A thirsty person may still want an expensive car but if thirsty enough will take a drink of water. Safety. Safety needs for security and protection are the next level needs in the hierarchy. So long as physiological needs are met, safety needs will take precedence over other needs. Fear appeals for consumer products are often linked to safety needs. Social. Human beings are social, gregarious animals. We group together in part to fulfill physiological and safety needs but also because we enjoy and need the company of others. Going to malls to &quot;hang out&quot; fulfills social needs. Esteem. To be recognized as an individual fulfills esteem needs. Self-esteem is the value a person places on himself or herself. As lower level needs become more stable, esteem needs become more important to the individual. Self-actualization. Beyond esteem needs very successful people may still be driven to improve themselves and &quot;accomplish something.&quot; These people are driven to self-actualize their potential. Maslow’s Hierarchy of Needs This CTR relates to the material on p. 146-147 and corresponds to Figure 5-4.
The Buyer Decision Making Process This CTR corresponds to Figure 5-6 on p. 153 and relates to the material on pp. 152-156. Teaching Tip: Consider asking students to describe some of their purchases decisions made at the beginning of the term and link them to steps in the process. Stages in the Buyer Decision Process Need Recognition. Problems are recognized when people sense a difference between an actual state and some desired state. Problem recognition can be triggered by either internal or external stimuli. Information Search. Consumers vary in the amount of information search they conduct. Information search may be a survey of information stored in memory or may be based upon information available externally. Search effort varies from heightened awareness corresponding to increased receptivity for relevant information to active information search modes where the person expends some energy to obtain information that is desired. External information vary in their informational and legitimizing characteristics. Riskier decisions usually elicit more search behavior than non-risky decisions. Evaluation of Alternatives. Following information search, the person compares decisional alternatives available. Criterion for evaluation compares product attributes of the alternatives against degrees of importance each attribute has in meeting needs, beliefs about the product or brand's ability and utility, and an evaluation procedure that ranks the alternatives by preference that forms an intention to buy. Purchase Decision. - The individual buys a product. Purchasing other than the intended product may be due to attitudes of others exerted after the evaluation of alternatives is completed or unexpected situational factors such as point of purchases promotions that affect the alternatives' ranking. Post-purchase Behavior. This involves comparing the expected performance of the product against the perceived performance received. Cognitive dissonance describes the tendency to accentuate benefits and downplay shortcomings.
Stages in the Adoption Process The new product adoption process parallels the buyer decision process but focuses more on the interaction of consumer needs with product adoption. The new product adoption process may work best to explain how regularly used products requiring re-purchase are considered for inclusion in the consumer's consumptive behavior patterns but may also apply to some durables as well. Awareness. In this stage the consumer is aware of the new product but lacks further information about it. Interest. The consumer is motivated to seek information about the new product. Evaluation. The consumer determines whether or not to try the new product. Trial. The consumer tries the new product on a small scale to test its efficacy in meeting his or her needs. Trial can be imagined use of the product in some cases. Adoption. The consumer decides to make use of the product on a regular basis. Stages in the Adoption Process This CTR relates to the material on p. 157.
Adoption of Innovations This CTR corresponds to Figure 5-7 on p. 157 and relates to the material on pp. 157-158. Individual Differences in Innovativeness Innovators. Innovators include the first 2.5% of buyers who adopt a new product idea. Innovators help get the product exposure but are not often perceived by the majority of potential buyers as typical consumers. Innovators like risk taking and enjoy buying new products. Innovators may purchase at skimming prices. Discussion Note: You might discuss the ethical implications of skimming. Is it fair? Also, are there cost considerations associated with new product development that make skimming to recover high start up costs more ethical than it may seem? Early Adopters. Early Adopters comprise about 13.5% of the buyers who adopt new products. This group serves as opinion leaders to the rest of the market and their product usage outcomes serve as motivation to later buyers to get the product. Early Majority. Early Majority are some 34% of buyers adopting the product. They are deliberate consumers who adopt new ideas before the average person but seldom lead the market. Late Majority. Late Majority comprise another 34% of buyers adopting the product. This group is skeptical of new products and only buys after the majority of the market has tried it. Laggards. Laggards are the final 16% of adopters and are tradition-bound. They are suspicious of change and only adopt innovation that have already become something of a tradition.
Influences on the Rate of Adoption of New Products This CTR relates to the material on pp. 158-159. Teaching Tip: The adoption of innovations may be initially confusing to students but they will usually become involved in discussion when new products of importance to them are used as examples. Product Characteristics Influences Relative Advantage. This refers to the degree to which the innovation appears superior to existing products. The greater the perceived relative advantage, the sooner the innovation will be adopted. Compatibility . This refers to the degree to which the innovation fits the values and experiences of the potential consumers. Increased compatibility will accelerate adoption of the innovation. Complexity . This refers to the degree to which the innovation is difficult to understand or use. Greater complexity will slow the rate of adoption of the innovation. Divisibility . This refers to the degree to which the innovation can be tried on a limited basis. Greater divisibility will help increase the rate of adoption of the innovation. Communicability . This refers to the degree to which the results of using the innovation can be observed or described to others. Greater communicability will increase the rate of adoption of innovation.
Characteristics of Organizational Markets Market Structure and Demand. Business markets have far fewer buyers than consumer markets. Business markets are much more geographically concentrated. Business demand is derived demand coming from the demand for the consumer goods the organization produces. Demand is more inelastic and more fluctuating. Nature of the Buying Unit. Business markets have more buyers and more professional purchasing procedures. Purchasing agents may be career professionals highly trained in how to buy better. As purchases become more complex, more people are likely to become involved in the purchase decision. Types of Decisions. Business buying decisions may be more complex due to the large amounts of money involved, technical specification considerations, and the interaction and coordination of more people in the buying process. Decision Process. Beyond the complexity of the decision business buying is more formalized, often with written procedures. Also, business buying decisions feature buyer-seller relationships that are more dependent upon each other than consumer buying situations. Both buyer and seller have fewer options to do business elsewhere than do consumer buyer and sellers. Other Characteristics Direct Purchasing. Business buyers usually buy direct from producers. Reciprocity . Business buyers often practice reciprocity, selecting suppliers who also buy from them. Leasing . Many businesses lease rather than buy equipment. Leasing gains a number of advantages over buying such as having more capital, having newer products, and tax incentives. Characteristics of Business Markets This CTR corresponds to Table 6-1 on p. 171 and relates to the material on pp. 170-172.
Buying Centers This CTR relates to the material on pp. 175-177. Participants in Business Buying Centers Users . These are members of the organization who will use the product or service. Users often initiate the buying proposal and help define product specifications. Influencers . These are people who affect the buying decision. They often help define specifications and provide information for evaluating alternatives. Technical personnel are particularly important influencers. Buyers . These are the people with the formal authority to select the supplier and arrange terms of purchase. Buyers may influence product specifications, but their major role is in selecting vendors and negotiating. Deciders . These are the people who have the formal or informal power to select or approve the final suppliers. Gatekeepers . Gatekeepers are those people who control the flow of information to others. Gatekeepers are extremely important to anyone trying to gain the cooperation of buying center members, especially in widely-dispersed organizations.
A Model of Business Buyer Behavior This CTR corresponds to Figure 6-1 on p. 173 and the material on pp. 172-173. A Model of Business Buyer Behavior The Environment. The business buyer operates in a competitive environment consisting of two categories: Marketing Stimuli. Marketer controlled stimuli consist of the product, place, price, and promotion. Other Stimuli . As with consumer markets, other stimuli consist of the forces in the economic, technological, political, cultural, and competitive environments. However, group membership in the business organization and participation in the business buying process affects how these environmental forces influence decision making. The Buying Organization. The buying organization is influenced by the overall organization -- its corporate culture and values, traditions, and procedures and regulations. The buying center and the business buying decision process also differs from consumer buying influences and is discussed on a following CTR. Buyer Responses. Buyer responses in business buying situations often consist of more alternatives than those available to consumers. Supplier choice, order quantities, delivery terms, service options, and payment terms are often more negotiable than they are to the consumer.
Major Influences on Business Buying This CTR corresponds to Figure 6-2 on p. 178 and the material on pp. 177-179. Major Influences on Business Buying Environmental Factors. Industrial Buyers are heavily influenced by the economic environment especially the level of primary demand, economic outlook, and the cost of money. Materials shortages are also increasing in importance. Organizational Factors . These factors stem from each organization's objectives, policies, procedures, and ways of doing business. Marketers must identify how each of these elements are manifest in a particular company. Interpersonal Factors . Interpersonal influences center on group dynamics and the interplay of personalities and organizational roles. Buyer roles within the buying unit may differ not only from organizational factors but from the interpersonal interaction of the individuals involved as well. Individual Factors. A person's age, status, education, professional specialty, and overall personality and attitudes affect how they participate in organizational buying decisions. It may be difficult for the marketer to identify individual factors directly.
Major Types of Buying Situations Straight Rebuy. This is an industrial buying situation in which the buyer routinely reorders something without any modifications in the order. Marketers of industrial supplies seek to establish this type of relationship with the customer. When buyers place straight rebuys, competitors have little or no chance of making a sale. Modified Rebuy. This is an industrial buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. This increases the number of participants in the buying decisions thus increasing the combination of influences on the decision. &quot;In&quot; suppliers worry that competitors will gain some business. &quot;Out&quot; suppliers recognize the situation as an opportunity. New Task Buying. This is an industrial buying situation in which the buyer purchases a product or service for the first time. New task buying is the most complex of buying decision processes made by a company. It is also both the greatest opportunity and challenge to the marketer. Marketers must consider that new task buying situations often arise in response to still-emerging problems seeking solutions. Business Buying Situations This CTR relates to the material on pp. 173-175.
3. Consumer And Business Buyer Behavior1
Nathan George Consumer and Business Buyer Behavior
Consumer Buying Behavior <ul><li>Consumer Buying Behavior refers to the buying behavior of final consumers -individuals & households who buy goods and services for personal consumption. </li></ul><ul><li>The central question for marketers is: </li></ul><ul><li>“ How do consumers respond to various marketing efforts the company might use?” </li></ul>
Model of Buyer Behavior Marketing and Other Stimuli Buyer’s Black Box Buyer’s Response Product Price Place Promotion Economic Technological Political Cultural Buyer Characteristics Buying Decision Process Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount
Factors Influencing Consumer Behavior Culture Sub- culture Social class Social Reference groups Family Roles and status Personal Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Psycho- logical Motivation Perception Learning Beliefs and attitudes Buyer Cultural
Factors Affecting Consumer Behavior: Culture <ul><li>Culture </li></ul><ul><li>Most basic cause of a person's wants and behavior. </li></ul><ul><li>Values, Perceptions, Wants & Behavior </li></ul><ul><li>Social Class </li></ul><ul><li>Society’s relatively permanent & ordered divisions whose members share similar values, interests, and behaviors. </li></ul><ul><li>Measured by: Occupation, Income, Education, Wealth and Other Variables. </li></ul><ul><li>Subculture </li></ul><ul><li>Groups of people with shared value systems based on common life experiences. </li></ul><ul><li>Hispanic Consumers </li></ul><ul><li>African American Consumers </li></ul><ul><li>Asian American Consumers </li></ul><ul><li>Mature Consumers </li></ul>
Factors Affecting Consumer Behavior: Social <ul><li>Groups </li></ul><ul><li>Membership </li></ul><ul><li>Reference </li></ul><ul><li>Family </li></ul><ul><li>Husband, wife, kids </li></ul><ul><li>Influencer, buyer, user </li></ul>Roles and Status Social Factors
Factors Affecting Consumer Behavior: Personal Personal Influences Age and Life Cycle Stage Occupation Economic Situation Lifestyle Identification Activities Opinions Interests Personality & Self-Concept
Maslow’s Hierarchy of Needs Esteem Needs ( self-esteem, status) Social Needs (sense of belonging, love) Safety Needs (security, protection) Physiological Needs (hunger, thirst) Self Actualization (Self-development )
The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post-purchase Behavior
The Buyer Decision Process Step 1. Need Recognition <ul><li>External Stimuli </li></ul><ul><li>TV advertising </li></ul><ul><li>Magazine ad </li></ul><ul><li>Radio slogan </li></ul><ul><li>Stimuli in the environment </li></ul><ul><li>Internal Stimuli </li></ul><ul><li>Hunger </li></ul><ul><li>Thirst </li></ul><ul><li>A person’s normal needs </li></ul>Need Recognition Buyer Recognizes a Problem or Need
The Buyer Decision Process Step 2. Information Search <ul><li>Family, friends, neighbors </li></ul><ul><li>Most effective source of </li></ul><ul><li>information </li></ul><ul><li>Advertising, salespeople </li></ul><ul><li>Receives most information from </li></ul><ul><li>these sources </li></ul><ul><li>Mass Media </li></ul><ul><li>Consumer-rating groups </li></ul><ul><li>Handling the product </li></ul><ul><li>Examining the product </li></ul><ul><li>Using the product </li></ul>Personal Sources Commercial Sources Public Sources Experiential Sources
Marketers Must Study Buyers to Find Out How They Evaluate Brand Alternatives The Buyer Decision Process Step 3. Evaluation of Alternatives Consumer May Use Careful Calculations & Logical Thinking Consumers May Buy on Impulse and Rely on Intuition Consumers May Make Buying Decisions on Their Own. Consumers May Make Buying Decisions Only After Consulting Others .
The Buyer Decision Process Step 4. Purchase Decision Purchase Intention Desire to buy the most preferred brand Purchase Decision Attitudes of Others Unexpected Situational Factors
The Buyer Decision Process Step 5. Post-purchase Behavior <ul><li>Consumer’s Expectations of </li></ul><ul><li>Product’s Performance </li></ul>Dissatisfied Customer Satisfied Customer! <ul><li>Product’s Perceived Performance </li></ul>Cognitive Dissonance
Buying Decision Process Consumer satisfaction is a function of consumer expectations and perceived product performance. Performance < Expectations Disappointment Performance = Expectations Satisfaction Performance > Expectations Delight
<ul><li>Cognitive dissonance: a buyer’s doubts shortly after a purchase about whether it was the right decision. </li></ul>Buying Decision Process
Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption
Stages in the Adoption Process <ul><li>Awareness : Consumer becomes aware of the new product, but lacks information about it. </li></ul><ul><li>Interest : Consumer seeks information about new product. </li></ul><ul><li>Evaluation : Consumer considers whether trying the new product makes sense. </li></ul><ul><li>Trial : Consumer tries new product on a small scale to improve his or her estimate of its value. </li></ul><ul><li>Adoption : Consumer decides to make full and regular use of the new product. </li></ul>
Adopter Categories Percentage of Adopters Time of Adoption Early Late Innovators Early Adopters Early Majority 2.5% 13.5% 34% 34% 16% Laggards Late Majority
Influence of Product Characteristics on Rate of Adoption Divisibility Can the innovation be used on a trial basis? Compatibility Does the innovation fit the values and experience of the target market? Complexity Is the innovation difficult to understand or use? Relative Advantage Is the innovation superior to existing products? Communicability Can results be easily observed or described to others? Product Characteristics
What is a Business Market? <ul><li>Business Buyer Behavior refers to the buying behavior of all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. </li></ul><ul><li>The business market is huge and involves many more dollars and items than do consumer markets. </li></ul>
Types of Decisions & the Decision Process Market Structure and Demand <ul><li>Fewer, larger buyers </li></ul><ul><li>Geographically concentrated </li></ul><ul><li>Demand derived from consumers </li></ul><ul><li>Fluctuating demand </li></ul>Nature of the Buying Unit <ul><li>More members </li></ul><ul><li>More professional purchasing </li></ul><ul><li>effort </li></ul><ul><li>More complex decisions </li></ul><ul><li>Process is more formalized </li></ul><ul><li>Buyer and seller are more </li></ul><ul><li>dependent on each other </li></ul><ul><li>Build close long-term relationships </li></ul><ul><li>with customers </li></ul>Characteristics of Business Markets
Participants in the Business Buying Process <ul><li>Decision-making unit of a buying organization is called its buying center . </li></ul><ul><li>Not a fixed and formally identified unit. </li></ul><ul><li>Membership will vary for different products and buying situations. </li></ul><ul><li>Buying Center Members: </li></ul><ul><ul><li>Users </li></ul></ul><ul><ul><li>Deciders </li></ul></ul><ul><ul><li>Influencers </li></ul></ul><ul><ul><li>Buyers </li></ul></ul><ul><ul><li>Gatekeepers </li></ul></ul>
Participants in the Business Buying Process: The Buying Center Buying Center Users Gatekeepers Buyers Deciders Influencers
The Buying Organization Model of Business Buyer Behavior Marketing and Other Stimuli Buyer’s Response Product Price Place Promotion Economic Technological Political Cultural Interpersonal and Individual Influences Organizational Influences Product or Service Choice Supplier Choice Order Quantities Delivery Terms and Times Service Terms Payment The Buying Center Buying Decision Process
Major Influences on Business Buyer Behavior Environmental Economic, Technological, Political, Competitive Organizational Objectives, Policies, Procedures, Structure, & Systems Interpersonal Authority, Status, Empathy & Persuasiveness Individual Age, Education, Job Position, Personality & Risk Attitudes Buyers
Major Types of Buying Situations <ul><li>The buyer routinely reorders </li></ul><ul><li>something without any </li></ul><ul><li>modifications. </li></ul><ul><li>Straight Re-buy </li></ul><ul><li>Modified Re-buy </li></ul><ul><li>New Task </li></ul><ul><li>The buyer wants to modify </li></ul><ul><li>product specifications, </li></ul><ul><li>prices, terms, or suppliers. </li></ul><ul><li>The buyer purchases a </li></ul><ul><li>product or service for the </li></ul><ul><li>first time. </li></ul>
Business Buying Situations Straight Re-buy New Task Buying Modified Re-buy Involved Decision Making
Rest Stop: Reviewing the Concepts <ul><li>Understand the consumer market and the major factors that influence consumer buyer behavior. </li></ul><ul><li>Identify and discuss the stages in the buyer decision process. </li></ul><ul><li>Describe the adoption and diffusion process for new products. </li></ul><ul><li>Define the business market and identify the major factors that influence business buyer behavior. </li></ul><ul><li>List and define the steps in the business buying decision process. </li></ul>