Consumer&business buying behavior

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For PGDM students of BK School of business management Nov 2011
www.profmanishparihar.blogspot.com

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Consumer&business buying behavior

  1. 1. Consumer Behavior & Business Buying Behavior www.profmanishparihar.blogspot.com
  2. 2. Objectives of this module: <ul><li>What are the underlying psychological processes in making a purchase? </li></ul><ul><li>How do consumers make purchasing decisions? </li></ul><ul><li>Basically: </li></ul><ul><ul><li>Why consumers behave the way they behave? </li></ul></ul>
  3. 3. What Influences Consumer Behavior? Cultural Factors Social Factors Personal Factors
  4. 4. What is Culture? <ul><li>Culture is the fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family and other key institutions. </li></ul>
  5. 5. Subcultures Nationalities Religions Racial groups Geographic regions
  6. 6. Social Classes Upper uppers Lower uppers Upper middles Middle class Working class Upper lowers Lower lowers
  7. 7. Characteristics of Social Classes <ul><li>Within a class, people tend to behave alike </li></ul><ul><li>Social class conveys perceptions of inferior or superior position </li></ul><ul><li>Class may be indicated by a cluster of variables (occupation, income, wealth) </li></ul><ul><li>Class designation is mobile over time </li></ul>
  8. 8. Social Factors Reference groups Social roles Statuses Family
  9. 9. Reference Groups Membership groups Primary groups Secondary groups Aspirational groups Dissociative groups
  10. 10. Roles and Status What degree of status is associated with various occupational roles?
  11. 11. Personal Factors Age Values Life cycle stage Occupation Personality Self- concept Wealth Lifestyle
  12. 12. The Family Life Cycle
  13. 13. Brand Personality Sincerity Excitement Competence Sophistication Ruggedness
  14. 14. Lifestyle Influences Multi-tasking Time-starved Money-constrained
  15. 15. Faysal Bank of Pakistan has extended banking hours for time-pressed executives.
  16. 16. VERY IMPORTANT: Model of Consumer Behavior
  17. 17. Key Psychological Processes Motivation Memory Learning Perception
  18. 18. Motivation Freud’s Theory Behavior is guided by subconscious motivations Maslow’s Hierarchy of Needs Behavior is driven by the lowest, unmet need Herzberg’s Two-Factor Theory Behavior is guided by motivating and hygiene factors
  19. 19. Maslow’s Hierarchy of Needs
  20. 20. Herzberg’s Two-Factor Theory
  21. 21. Perception Selective Attention Subliminal Perception Selective Retention Selective Distortion
  22. 22. VERY IMPORTANT Consumer Buying Process Problem Recognition Information Search Evaluation Purchase Decision Postpurchase Behavior
  23. 23. Sources of Information Personal Experiential Public Commercial
  24. 24. Successive Sets Involved in Consumer Decision Making
  25. 25. Stages between Evaluation of Alternatives and Purchase
  26. 26. Perceived Risk Functional Physical Financial Social Psychological Time
  27. 27. How Customers Use and Dispose of Products
  28. 28. Mental Accounting <ul><li>Consumers tend to… </li></ul><ul><ul><li>Segregate gains </li></ul></ul><ul><ul><li>Integrate losses </li></ul></ul><ul><ul><li>Integrate smaller losses with larger gains </li></ul></ul><ul><ul><li>Segregate small gains from large losses </li></ul></ul>
  29. 29. Just as consumers undergo several processes in purchase decisions, so do businesses.. Hence we also have to study the B2B i.e. Business Buying Behavior…
  30. 30. Business Markets and Business Buyer Behavior
  31. 31. Learning Goals <ul><li>Define the business market and how it differs from consumer markets </li></ul><ul><li>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><ul><li>Compare the institutional and government markets and explain how they make their buying decisions </li></ul>
  32. 32. UPS – A typical seller of business solutions <ul><li>Customer Needs </li></ul><ul><li>Consumers need fast, friendly, low-cost package delivery </li></ul><ul><li>Business needs are more complex </li></ul><ul><ul><li>Shipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns </li></ul></ul><ul><li>Services </li></ul><ul><li>Its 360,000 people and 88,000 vehicles offer ground, air, freight worldwide </li></ul><ul><li>Helps customer navigate the complexities of international shipping </li></ul><ul><li>Offers a wide range of financial services </li></ul><ul><li>Provides consulting services to improve logistics operations </li></ul>
  33. 33. Definition <ul><li>Business Buyer Behavior: </li></ul><ul><ul><li>The buying behavior of 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><ul><ul><li>Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit. </li></ul></ul>Goal 1: Define the business market
  34. 34. <ul><ul><li>Sales in the business market far exceed sales in consumer markets. </li></ul></ul><ul><ul><li>Business markets differ from consumer markets in many ways. </li></ul></ul><ul><ul><ul><li>Marketing structure and demand </li></ul></ul></ul><ul><ul><ul><li>Nature of the buying unit </li></ul></ul></ul><ul><ul><ul><li>Types of decisions and the decision process </li></ul></ul></ul>Characteristics of Business Markets Goal 1: Define the business market
  35. 35. Business Markets <ul><li>Compared to consumer markets: </li></ul><ul><ul><li>Business markets </li></ul></ul><ul><ul><ul><li>have fewer but larger customers </li></ul></ul></ul><ul><ul><li>Business customers </li></ul></ul><ul><ul><ul><li>are more geographically concentrated </li></ul></ul></ul><ul><ul><li>Demand is different </li></ul></ul><ul><ul><ul><li>Demand is derived </li></ul></ul></ul><ul><ul><ul><li>Demand is price inelastic </li></ul></ul></ul><ul><ul><ul><li>Demand fluctuates more </li></ul></ul></ul><ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul>Characteristics Goal 1: Define the business market
  36. 36. Business Markets <ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul><ul><li>Compared to consumer purchases: </li></ul><ul><ul><li>Involve more buyers in the decision process </li></ul></ul><ul><ul><li>More professional purchasing effort </li></ul></ul>Characteristics Goal 1: Define the business market
  37. 37. Business Markets <ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul><ul><li>Compared to consumer purchases </li></ul><ul><ul><li>More complex buying decisions </li></ul></ul><ul><ul><li>The buying process is more formalized </li></ul></ul><ul><ul><li>Buyers and sellers work more closely together and build long-term relationships </li></ul></ul>Goal 1: Define the business market Characteristics
  38. 38. <ul><li>Major Types of Buying Situations </li></ul><ul><ul><li>Straight rebuy </li></ul></ul><ul><ul><ul><li>Reordering without modification </li></ul></ul></ul><ul><ul><li>Modified rebuy </li></ul></ul><ul><ul><ul><li>Requires modification to prior purchase </li></ul></ul></ul><ul><ul><li>New task </li></ul></ul><ul><ul><ul><li>First-time purchase </li></ul></ul></ul>Business Buyer Behavior Goal 1: Define the business market
  39. 39. Business Buyer Behavior <ul><li>Systems Selling </li></ul><ul><ul><li>Buying a packaged solution to a problem from a single seller. </li></ul></ul><ul><ul><li>Often a key marketing strategy for businesses seeking to win and hold accounts. </li></ul></ul>Goal 1: Define the business market
  40. 40. Business Buyer Behavior <ul><li>Buying Center </li></ul><ul><ul><li>The decision-making unit of a buying organization </li></ul></ul><ul><ul><li>Includes all individuals and units that participate in the decision making </li></ul></ul>Goal 1: Define the business market
  41. 41. Business Buyer Behavior <ul><li>Users </li></ul><ul><li>Buyers </li></ul><ul><li>Influencers </li></ul><ul><li>Deciders </li></ul>Members of the Buying Center <ul><li>Gatekeepers </li></ul>Goal 1: Define the business market
  42. 42. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Economic trends </li></ul><ul><li>Supply conditions </li></ul><ul><li>Technological, political and competitive changes </li></ul><ul><li>Culture and customs </li></ul>Key Factors Goal 2: Identify the major factors that influence business buyer behavior
  43. 43. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Objectives </li></ul><ul><li>Policies </li></ul><ul><li>Procedures </li></ul><ul><li>Organizational structure </li></ul><ul><li>Systems </li></ul>Key Factors Goal 2: Identify the major factors that influence business buyer behavior
  44. 44. Major Influences on Business Buyers <ul><li>Influence of members in the buying center </li></ul><ul><ul><li>Authority </li></ul></ul><ul><ul><li>Status </li></ul></ul><ul><ul><li>Empathy </li></ul></ul><ul><ul><li>Persuasiveness </li></ul></ul><ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul>Key Factors Goal 2: Identify the major factors that influence business buyer behavior
  45. 45. Major Influences on Business Buyers <ul><li>Personal characteristics of members in the buying center </li></ul><ul><ul><li>Age and income </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Job position </li></ul></ul><ul><ul><li>Personality </li></ul></ul><ul><ul><li>Risk attitudes </li></ul></ul><ul><ul><li>Buying styles </li></ul></ul><ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul>Key Factors Goal 2: Identify the major factors that influence business buyer behavior
  46. 46. Stages in the Business Buying Process <ul><li>Stage 1: Problem Recognition </li></ul><ul><li>Stage 2: General Need Description </li></ul><ul><li>Stage 3: Product Specification </li></ul><ul><ul><li>Value analysis helps to reduce costs </li></ul></ul><ul><li>Stage 4: Supplier Search </li></ul><ul><ul><li>Supplier development </li></ul></ul>Goal 3: List and define the steps in the business buying decision process
  47. 47. <ul><li>Stage 5: Proposal Solicitation </li></ul><ul><li>Stage 6: Supplier Selection </li></ul><ul><li>Stage 7: Order-Routine Specification </li></ul><ul><ul><li>Blanket contracts are often used for maintenance, repair and operating items. </li></ul></ul><ul><li>Stage 8: Performance Review </li></ul>Stages in the Business Buying Process Goal 3: List and define the steps in the business buying decision process
  48. 48. <ul><ul><li>E-procurement is growing rapidly </li></ul></ul><ul><ul><li>Online auctions and online trading exchanges (e-marketplaces) account for much of the online purchasing activity </li></ul></ul><ul><ul><li>E-procurement offers many benefits: </li></ul></ul><ul><ul><ul><li>Access to new suppliers </li></ul></ul></ul><ul><ul><ul><li>Lower purchasing costs </li></ul></ul></ul><ul><ul><ul><li>Quicker order processing and delivery </li></ul></ul></ul>Business Buying on the Internet - good book: “The world is flat” – Thomas Friedman Goal 3: List and define the steps in the business buying decision process
  49. 49. <ul><li>Further reading recommended: </li></ul><ul><li>Philip Kotler </li></ul><ul><li>Leon Schiffman </li></ul><ul><ul><li>www.profmanishparihar.blogspot.com </li></ul></ul>

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