Basics of CB-STP-VALS

Unit – I
Content:
1. Meaning of CB
2. Nature of CB
3. Role of CB as an Interdisciplinary Approach
4. Recapitulate Basic Marketing Concepts
5. Model of CB or Consumer Decision Making
6. Factors Influencing CB
7. Scope of CB
8. Importance of CB
9. Applications of CB
10. Organizational or Industrial Buying Behavior
11. VALS Framework
9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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Meaning and Nature of CB:
Definition : CB is dealing to understand that behavior of the consumer which he displays in searching for,
purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.
Meaning: CB focuses on how individual consumers and families or households make decisions to spend their
available resources (time, money, effort) on consumption-related items. That includes what they buy, why they
buy it, when they buy it, where they buy it, how often they buy it, how often they use it , how they evaluate it
after the purchase, the impact of such evaluations on future purchases, and how they dispose of it. Especially,
in today’s dynamic and rapidly evolving marketplace, marketers need to know everything they can about
consumers – what they want, what they think, how they work, and how they spend their leisure time. They
need to understand the personal and group influences that affect consumer decisions and how these decisions
are made. And, in these days of ever-widening media choices, they need to not only identify their target
audiences, but they need to know where and how to reach them. In its broadest sense, the term consumer
behavior, describes two different kinds of consuming entities: - the personal consumer and the
organizational consumer. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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The Personal Consumer: buys goods and services for his or her own use, for the use of the household, or as a
gift for a friend. In each of these contexts, the products are bought for final use by individuals, who are
referred to as end users or ultimate consumers.
The Organizational Consumer: includes profit and not-for-profit businesses, government agencies (local, state,
and national), and institutions (e.g. schools, hospitals and prisons), all of which must buy products, equipment
and services in order to run their organization.
Example of some Innovative Consumer Products:
1)Samsung has introduced a new television called "The Wall", which has an incredible 146-inch
diagonal screen and 4K screen resolution. Its interest is that it is made by modular diode technology
(MicroLED) that emit light separately and do not require any backlighting or colour filters.
MicroLED technology offers a long display life, lower power consumption and high image quality.
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2) There are drones in the air, on the ground... and now drones in the water. New technology called "The
PowerDolphin" is capable of capturing 4K videos and photos underwater, and using sonar to
create topographical maps of he ocean floor.
3) The Samsung Flip is a smart “whiteboard” that’s really a digital display. You can draw on the Flip like a
regular whiteboard, but it is also capable of scree-sharing with other devices via near-field communication
and it features tons of cool touch controls.
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NATURE OF CONSUMER BEHAVIOUR:
Systematic process : Consumer behaviour is a systematic process relating to buying decisions of the
customers. The buying process consists of the following steps :
a) Need identification to buy the product
b) Information search relating to the product
c) Listing and evaluating the alternative
d) Purchase decision
e) Post purchase evaluation by the marketer
Influenced by various factors : Consumer behaviour is influenced by a number of factors the factors
that influence consumers include marketing, personal, psychological, situational, social and cultural
etc.
Different for different customers : All consumers do not behave in the same manner. Different
consumers behave differently. The different in consumer behaviour is due to individual factors such
as nature of the consumer's lifestyle, culture etc.
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Different for different products : Consumer behaviour is different for different products there are some
consumers who may buy more quantity of certain items and very low quantity of some other items.
Vary across regions : The consumer behaviour vary across States, regions and countries. For instance, the
behaviour of urban consumers is different from that of rural consumers. normally rural consumers are
conservative (traditional) in their buying behaviour.
Vital for marketers : Marketers need to have a good knowledge of consumer behaviour they need to study the
various factors that influence consumer behaviour of the target customers. The knowledge of consumer
behaviour enables marketers to take appropriate marketing decisions.
Reflect status : Consumer buying behaviour is not only influenced by status of a consumer coma but it also
reflect it. Those consumers who owned luxury cars, watches and other items are considered by others as
persons of higher status.
Result in spread effect : Consumer behaviour as a spread effect. The buying behaviour of one person
may influence the buying behaviour of another person. For instance, a customer may always prefer
to buy premium brands of clothing, watches and other items etc. This may influence some of his
friends, neighbours and colleagues. This is one of the reasons why marketers use celebrities like
Shahrukh Khan, sachin to endorse their brands.
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Undergoes a change : The consumer behaviour undergoes a change over a period of time depending
upon changes in age , education and income level etc, for example, kids may prefer colourful dresses
but as they grow up as teenagers and young adults, they may prefer trendy clothes.
Information search : Search for information is a common consumer behaviour. Consumers cannot
purchase goods and services if they are unaware that a good or service exists. When a consumer
decides to buy a certain item, his decision must be based on the information he has gethered about
what products our services are available to fulfill his needs. There might be a product available that
would be better suited to the consumers needs, but if he is an aware of product, he will not buy it.
Brand loyalty : Brand loyalty is another characteristic of consumer behaviour. Brand loyalty is the
tendency of a consumer to buy product products or services from a certain company that one likes
or equates with having high quality goods and services. For example, if Naina's first car was a Honda
as a teenager and the car lasted 200,000 miles, she might have a tendency to buy hondas again in
the future due to her previous positive experience. This brand loyalty may be so strong that she
forgoes the information search all together when considering for next vehicle.
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Role of CB: An Interdisciplinary Approach
CB as a separate field of study has only gained attention from the 1960s. In the absence of a history or a
separate research of its own then, this new discipline drew/or borrowed concepts from other scientific
disciplines such as:
1) Psychology (the study of individuals)
2) Sociology (the study of groups)
3) Socio-psychology (the study of how persons are influenced by groups)
4) Cultural anthropology (the influence of the culture and society on the individuals)
5) Economics (relationship between demand and supply in the flow of marketing activity)
The initial thrust of consumer research was from a managerial perspective; marketing managers wanted to
know the specific causes of consumer behavior. They also wanted to know how people receive, store, and use
consumption –related information, so that they could design marketing strategies to influence consumption
decisions. They regarded the consumer behavior discipline as an applied marketing science: if they could
predict consumer behavior (or actions), they could influence it. This approach has come to be known as
positivism and consumer researchers primarily concerned with predicting consumer behavior are known as
positivists. Other terms used to describe the positivist research paradigm include logical positivism, modern
empiricism, and objectivism. Positivism assumes that consumers engage themselves in mental activity of
information processing to weigh the alternatives and take a rational decision. Causes and effects of behavior
can be identified and isolated to be influenced.
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Given the interdisciplinary background in which the consumer behavior discipline is rooted, it is not
surprising that academicians from a variety of contributing disciplines, including marketing itself, have
become interested in the study of consumer behavior, not necessarily from a managerial or applied perspective,
but simply to understand the consumer better. The study of consumer behavior from the point of view of
understanding consumption behavior (or practices) and the meanings behind such behavior is called
interpretivism (sometimes referred to postmodernism). Other terms used to describe this approach to consumer
behavior include naturalism, humanism, and postpostivism. Interpretivists have expanded the boundaries of
study to include many subjective aspects of consumer behavior, such as the effects of moods and emotions and
types of situations on consumer behavior, the role of fantasy, of play, of rituals, even the sensory pleasures that
certain products and services provide. They view consumer behavior as a subset of human behavior. Many
interpretivists consider each purchase experience unique because of the diverse set of variables at play at that
one particular moment of time. Because of its focus on the consumption experience, the interpretive approach
is also known as experientialism. An interpretivist assumes that each consumption experience is unique and
that causes & effects cannot be isolated.
Marketers have discovered that these two research paradigms are really complementary in nature. The
prediction made possible by positivist research and the insightful understanding provided by interpretivist
research together produce a richer and more robust profile of consumer behavior, and enable the marketer to
design more effective marketing strategies.
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Recapitulate Basic Marketing Concepts:
1. Define MARKETING:
i) Marketing is the process of planning and executing the conception, pricing, promotion and distributing
of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. –
American Marketing Association (AMA)
ii) Marketing includes all activities involved in the creation of place, time and possession utilities. Place
utility is created when goods and services are available at the places they are needed; time utility, when they
are needed; and the possession utility, when they are transformed to those who need them. – Converse, Hugey
and Mitchell
2. Define MARKET:
The word ‘Market’ is derived from the Latin word ‘Marcatus’ meaning merchandise, wares, traffic, trade
or a place where business is conducted. Few definitions:
i) A market is a set of arrangements where economic agents (or buyers & sellers) can freely exchange their
endowments or products with each other – as defined in Economics.
ii) Market includes both place and region in which buyers and sellers are in free competition with one
another – Pyle
iii) The term market refers not to a place, but to a commodity or commodities and buyers and sellers who
are in direct competition with one another – Chapman
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3. Define PRODUCT:
Product is something which has some ‘utility’, manufactured after combining various factors of production. It is
anything which can be offered to a market for attention, acquisition or consumption including physical objects, services,
personalities, organizations and desires. Products can be classified as for consumer & industrial purposes.
4. Define NEED:
Need is an exigency – an intrinsic requirement. Need is something not available. Need is a must. Need needs to be
satisfied now. Need is felt when something is deprived of. Need is a state of deficiency and tension. Need is an immediate
craving. Needs are basic for survival & existence for any organism. We all have basic needs for Food, Shelter, Clothes,
Sanitation and Transportation.
5. Define WANT:
Want is not an immediate requirement till it is converted into a need with the passage of time. Want may
or may not be related to the passion or dream or ego of a person. Capability or capacity to fulfil want may be
present or not in a person. Want is selecting something from the available choices. It may or may not be
affordable or deserving at the time aroused but is determined to be fulfilled sometime in future. Individual or
group of individuals may make efforts to fulfil their wants. It can be a wish list. It may or may not be achieved
in one’s life. Wants are the various forms of needs shaped by an individual’s environment. Want is transformed
into a need, practically, when its intensity is 100%. Want always remains unfulfilled because one’s resources &
willingness do not perfectly match with the wanted product or service at the time it arouses. Want can be
fulfilled immediately if capacity to pay allows. Wants are endless.
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6. Define UTILITY:
Utility means a quality of being useful. Utility is an essential property or function of a product or service to
satisfy one’s needs and demands. Utility is a want-satisfying quality of a product and consumer pay for a
commodity which has utility. Utility of a product varies from person to person therefore it is subjective and not
objective. For example a pen has no utility for an illiterate person or an income deficient person has no utility
of a bank or cigarette has no utility for non-smokers.
7. Define DEMAND:
Demand is an economic principle referring to a consumer’s desire and willingness to pay a price for a
specific good or service. Holding all other factors constant, an increase in the price of a good or service will
decrease demand and vice versa. Demand refers to how many people want those goods with ability to pay a
price.
8. Who is a Customer?
Customer is a person who has paying capacity, with a will to buy an article. He may or may not consume
the article or service personally but is willing to purchase to be consumed by himself or on behalf of someone
else.
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9. MARKET SEGMENTATION:
Market Segmentation is the activity of dividing a broad consumer or business market, normally consisting of existing
and potential consumers, into sub-groups of consumers (known as segments) based on some type of characteristics. These
characteristics are common in nature such as common needs, common interests, similar lifestyle or even similar
demographics. Market segmentation assumes that different market segments require different marketing programs – that
is different prices, offers, promotion, distribution or some combination of marketing variables. Market segmentation is not
only designed to identify the most profitable segments, but also to develop profiles of key segments in order to better
understand their needs and purchase motivations. Broadly the four types of market segmentation are: geographic,
demographic, psychographic and behavioral. An example of demographic segment is white males between the age of 45
and 55 with gross annual incomes between $75000 and $125000.
10. TARGETING: A target market is the market a company wants to sell its products and services to , and it includes a
targeted set of customers for whom it directs its marketing efforts. It is selecting one or more consumer segments. For
example, small businesses often target customers by gender or age; for example a women’s clothing retailer directs its
promotional efforts at women.
11. POSITIONING: Product positioning is an important element of marketing plan. It is the process of marketers use to
determine how to best communicate their products’ attributes to their target customers based on customer needs,
competitive pressures, available communication channels and carefully crafted key messages. Positioning is creating a
unique space regarding the stated product or service, in the mind of the consumers. It is the process identifying an
appropriate market niche for a product or service or a brand, and getting it established in that area. It is done through
developing a marketing mix for each selected segments.
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12. CUSTOMER VALUE
Perceived value is the benefit that a customer believes he or she received from a products after it was purchased.
Perceived valuWoodruff defines customer value as: ‘a customer perceived preference for and evaluation of those product
attributes, attribute performances, and consequences arising from use that facilitate achieving the customer’s goals and
purposes in use situations.’ The definition suggests that there are two aspects of customer value: the desired value and the
perceived value. Desired value refers to what customers desire in a product or service. e is the perceived benefits divided by
cost. Customer Value is delivered by delivering he best cost, best service and best product.
13. CUSTOMER SATISFACTION: It is a measure of how products and services supplied by a company meet or surpass
customer expectation. Customer satisfaction is defined as ‘the number of customers, or percentage of total customers,
whose reported experience with a firm, its products, or its services ratings, exceed specified satisfaction goals.’ Customer
satisfaction provides a leading indicator of consumer purchase intentions and loyalty. Customer satisfaction is a
measurement used to quantify the degree to which customer is happy with a product, service or experience. Customer
satisfaction is an abstract concept and involves such factors as the quality of the product, the quality of service provided,
the atmosphere of the location where the product or service is purchased, and the price of the product or service. It is the
degree of satisfaction provided by the goods or series of a company as measured by the number of repeat customers.
14. CUSTOMER RETENTION:
Customer retention refers to the ability of a company or product to retain its customers over some specified period of
time without customer defection. It means that the customer tends to re-purchase the company’s products or services,
continue buying or in some other way not switch to another company’s product or brand. Successful customer retention
involves more than giving the customer what they expect. Customer retention has direct impact on firm’s profitability. The
goal of customer retention programs is to help companies retain as many customers as possible, often through customer
loyalty and brand loyalty initiatives. Retaining customers costs less than acquiring the new ones. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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Factors influencing CB:
1. Social:
Family: The family members play a crucial role in designing one’s preferences and behavior. It offers an
environment wherein the individual evolves, develop personality and acquire values. A child develops his
buying behavior and preferences by watching his parents and tend to buy the same products or services even
when he grows old. The family can influence the buying behavior of an individual in either of the two ways:
Influences the personality, attitude, beliefs, characteristics of the individual.
Influences the decision making of an individual with respect to the purchase of certain goods and services.It is believed
that an individual passes through two families: Family of Orientation and Family of Procreation. In the former type, it is the
family wherein an individual has taken the birth, and the parents have a strong influence on his behavior. While in the
family of procreation, it is the family created by an individual with his spouse and children and as such the preferences
tend to change with the influence of the spouse.
Reference Group: A reference group is a group with which an individual likes to get associated, i.e. want to be called as a
member of that group. It is observed, that all the members of the reference group share common buying behavior and have
a strong influence over each other.The marketers should try to identify the roles within the reference group that influences
the behavior of others. Such as Initiator (who initiates the buying decision), Influencer (whose opinion influences the
buying decision), Decision-Maker (who has the authority to take the purchase decision) and Buyer (who ultimately buys
the product).
Roles and Status: An individual’s position and role in the society also influences his buying behavior. Such as, a person
holding a supreme position in the organization is expected to purchase those items that advocate his status. The marketers
should try to understand the individual’s position and the role very much before the endorsement of the products. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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2. Cultural:
Culture: The culture refers to the beliefs, customs, rituals and practice that a particular group of people follows. As a child
grows, he inculcates the buying and decision-making patterns through his family and the key institutions. The culture
varies from region to region and even from country to country. Such as the sale of “sarees” and “Lungis” is more in South
than the North India. Therefore, the marketer should carefully study all the different cultures and frame the marketing
strategies accordingly.
Subculture: The culture can be further divided into subculture wherein the people are classified more specifically on the
basis of their shared customs and beliefs, including religions, geographic regions, nationalities, etc. The different sub-
cultures forms several market segments whose needs can be carefully studied by the marketer, and the strategic marketing
decisions can be taken accordingly. Such as the needs of the people living in metro cities and the ones living in B-grade
cities must be identified before the launch of the marketing campaign.
Social Class: The social class to which an individual belongs influences the buying decision. Generally, the people belonging
to the same class are said to be sharing the similar interest, value and the behavior. Our society is classified into three social
classes upper class, middle class, and the lower class. The consumers belonging to these classes possess different buying
behaviors. Such as an individual belonging to the upper class buy those products or services that advocate his status while
the lower class people buy those products which satisfy their basic needs.
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3. Demographic:
Age: Age is an important demographic factor that affects consumer behavior. As people grow, their needs change. Similar
changes come to their buying decision making patterns. With age, our health needs change and so do many other
needs. Age brings changes to people’s lifestyle and with it their needs and personal values are also affected. When people
are young, they spend more on their lifestyle needs from fun and movies to fashion. As they grow older, their expenses on
these things shrink. Elderly people mostly remain indoor, however, their health related expenses may rise. In this way, age
becomes one of the fundamental demographic factors affecting consumer behavior and buying decisions.
Gender: Between male and female gender, several things are different and these differences also affect their buying choices.
The two gender have different needs in terms of fashion and lifestyle. So, their consumer behavior in these two areas can be
vastly different. It is mainly the difference in needs that lead to differing choices. However, there are several areas where
consumption patterns can be similar too like in terms of food and fun. The same movies and same fast food brand may
appeal to both the gender. The same is true about technological gadgets too. However, there are still several products in the
market which are meant for either of the sexes not each.
Income: Income is a very important factor that affects the buying decisions and consumer behavior of people. Across
different income levels, the difference in product choices and buying patterns can easily be marked. A person in the
middle class makes his buying decisions based on utility. However, someone from the upper class would want style, design
and special features while making a purchase. The channels for the marketing of luxury items are different from those for
the ordinary ones. Luxury items are mostly marketed through luxury magazines. The level of income determines what kind
of products someone regularly purchases. A buyer with higher disposable income will spend more on luxury or lifestyle
items.
Education: Education affects how people view things around them. It affects the level of discretion they employ while
making purchases. In this era, education has also become the determinant of social class and the easiest method to climb
up in the society. The more educated a person is, the higher the level of discretion he will employ in making purchases. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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4. Psychological:
Perception: What an individual thinks about a particular product or service is his/her perception towards the
same. For someone a Dell Laptop might be the best laptop while for others it could be just one of the best
brands available. Individuals with the same needs might not purchase similar products due to difference in
perception.
Learning: Learning comes only through experience. An individual comes to know about a product and service
only after he/she uses the same. An individual who is satisfied with a particular product/service will show a strong
inclination towards buying the same product again.
Beliefs and Attitude
Beliefs and attitude play an essential role in influencing the buying decision of consumers. Individuals create a
certain image of every product or service available in the market. Every brand has an image attached to it, also
called its brand image. Consumers purchase products/services based on their opinions which they form
towards a particular product or service. A product might be really good but if the consumer feels it is useless,
he would never buy it.
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SCOPE OF CONSUMER BEHAVIOUR:
1) Consumer behaviour and marketing management : Effective business managers realise the
importance of marketing to the success of their firm. A sound understanding of consumer behaviour
is essential to the long run success of any marketing program. In fact, it is seen as a comerstone of
the Marketing concept, an important orientation of philosophy of many marketing managers. The
essence of the Marketing concept is captured in three interrelated orientations consumers needs and
wants, company integrated strategy.
2) Consumer behaviour and non profit and social marketing : In today's world even the non-profit
organisations like government agencies, religious sects, universities and charitable institutions have
to market their services for ideas to the "target group of consumers or institution." At other times
these groups are required to appeal to the general public for support of certain causes or ideas. Also
they make their contribution towards eradication of the problems of the society. Thus a clear
understanding of the consumer behaviour and decision making process will assist these efforts.
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3) Consumer behaviour and government decision making : In recent years the relevance of consumer
behaviour principles to government decision making. Two major areas of activities have been
affected:
i) Government services: It is increasingly and that government provision of public services can
benefit significantly from an understanding of the consumers, or users, of these services.
ii) consumer protection: Many Agencies at all levels of government are involved with regulating
business practices for the purpose of protecting consumers welfare.
4) Consumer behaviour and demarketing: It has become increasingly clear that consumers
are entering an era of scarcity in terms of some natural gas and water. These scarcities have
led to promotions stressing conservation rather than consumption. In other circumstances,
consumers have been encouraged to decrease or stop their use of particular goods believed
to have harmful effects. Programs designed to reduce drug abuse, gambling, and similar
types of conception examples. These actions have been undertaken by government agencies
non profit organisations, and other private groups. The term "demarketing" refers to all such
efforts to encourage consumers to reduce their consumption of a particular product or
services.
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5) Consumer behaviour and consumer education: Consumer also stands to benefit directly from orderly
investigations of their own behaviour. This can occur on an individual basis or as part of more formal
educational programs. For example, when consumers learn that a large proportion of the billions spend
annually on grocery products is used for impulse purchases and not spend according to pre planned shopping
list, consumers may be more willing to plan effort to save money. In general, as marketers that can influence
consumers' purchases, consumers have the opportunity to understand better how they affect their own
behaviour.
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IMPORTANCE OF CONSUMER BEHAVIOUR:
1) Production policies: The study of consumer behaviour effects production policies of enterprise. Consumer
behaviour discovers the habits, tastes and preferences of consumers and such discovery enables and enterprise
to plan and develop its products according to these specifications. It is necessary for an enterprise to be in
continuous touch with the changes in consumer behaviour so that necessary changes in products may be
made.
2) Price policies: The buyer behaviour is equally important in having price policies. The buyers of some
products purchase only because particular articles are cheaper than the competitive articles available in the
market.
3) Decision regarding channels of distribution: The goods, which are sold and solely on the basis of low price
mast and economical distribution channels. In case of those articles, which week T.V. sets, refrigerators etc.
Must have different channels of distribution. Thus, decisions regarding channels of distribution are taken on
the basis of consumer behaviour.
4) Decision regarding sales promotion: Study of consumer behaviour is also vital in making
decisions regarding sales promotion. It enables the producer to know what motive prompt
consumer to make purchase and the same are utilised in promotional campaigns to awaken
desire to purchase. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
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5) Exploiting marketing opportunities: Study of consumer behaviour helps the marketers
to understand the consumers needs, aspirations, expectations, problems etc. This knowledge will be
useful to the marketers in exploiting marketing opportunities and meeting the challenges of the
market.
6) Consumer do not always act or react predictably: The consumers of the past used to react to price
levels as if price and quality had positive relation. Today, week value for money, lesser price but with
superior features. The consumers response indicates that the shift had occurred.
7) Highly diversified consumer preferences: This shift has occurred due to availability of more choice
now. Thus study of consumer behaviour is important to understand the changes.
8) Rapid introduction of new products: Rapid introduction of new product with technological
advancement has made the job of studying consumer behaviour more imperative. For example, the
information Technologies are changing very fast in personal computer industry.
9) Implementing the "Marketing concept": This calls for studying the consumer behaviour, all
customers need have to be given priority. Thus identification of target market before production
becomes essential to deliver the desired customer satisfaction and delight.
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APPLICATIONS OF CONSUMER BEHAVIOUR:
1) Analysing market opportunity: Consumer behaviour study help in identifying the unfulfilled needs
and wants of consumers. This requires examining the friends and conditions operating in the
Marketplace, consumers lifestyle, income levels and energy influences. This may reveal unsatisfied
needs and wants. Mosquito repellents have been marketed in response to a genuine and unfulfilled
consumer need.
2) Selecting target market: Review of market opportunities often helps in identifying district
consumer segments with very distinct and unique wants and needs. Identifying these groups, behave
and how they make purchase decisions enable the marketer to design and market products or
services particularly suited to their wants and needs. For example, please sleep revealed that many
existing and potential shampoo users did not want to buy shampoo fax price at rate 60 for more and
would rather prefer a low price package containing enough quantity for one or two washers. This
finding LED companies to introduce the shampoos sachet, which become a good seller.
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3) Marketing-mix decisions: Once unsatisfied needs and wants are identified, the marketer has to
determine the right mix of product, price, distribution and promotion. Where too, consumer
behaviour study is very helpful in finding answers too many preplexing questions. The factors of
marketing mix decisions are:
i) product ii) price iii) promotion iv) distribution
4) Use in social and non profits marketing: Consumer behaviour studies are useful to design
marketing strategies by social, governmental and not for profit organisations to make their
programmes more effective such as family planning, awareness about AIDS.
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INDUSTRIAL BUYING BEHAVIOR
Organizational buyers are those who buy goods and services for the purpose of further production, resale and
redistribution. The industrial buyer buys goods and services for the purpose of increasing sales, cutting costs and
supplying their products to the customers at the lowest costs consistent with quality. Organizational consumers include
profit and non-profit businesses, government agencies and institutions (B2B, for e.g. retail institutions, FIs & Banks, non-
government institutions, educational institutions, business organizations etc.)
According to Webster and Wind, ‘Organizational buying is the decision-making process by which formal organizations
establish the need for purchased products and services and identify, evaluate and choose among alternative brands and
supplies.’ Compared to the consumer market, the industrial markets generally have fewer and larger buyers, a closer
customer-supplier relationship, and more geographically concentrated buyers. The demand in industrial market is derived
from the demand in consumer market and fluctuates cyclically according to business conditions.
In a way organizational buying can be said to be a derived demand, i.e. their demand for a product or service is in turn
based on the end customer’s demand.
For Example: Castrol has been a preferred partner of original equipment manufacturers over the years with Tata, Maruti-
Suzuki, Ford, BMW, Volvo, Volkswagen, M&M, John Deere and Hyundai.
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Buying Situations:
The industrial buyers makes decisions that vary with the buying situation. Mainly there are three types of
buying situations:
i) Straight Rebuy: The straight rebuy is a buying situation in which the purchasing department re-orders on a
routine basis (e.g. office supplies, bulk chemicals)
ii) Modified Rebuy: The modified rebuy is a situation in which the buyer wants to modify product
specifications, prices, delivery requirements, or other terms. The modified rebuy usually involves additional
decision participants on both the buyer and seller sides.
iii) New Task: The new task is a buying situation in which a purchaser buys a product or service for the first
time (e.g. office building, new security system). New-task buying passes through several stages: awareness,
interest, evaluation, trial and adoption.
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Buying Process:
To buy the needed goods, industrial buyers move through a buying process. The buying process consists of
eight stages called buying phases:
1) Problem Recognition: The problem can arise as a result of internal or external stimuli. Internal stimuli which
can trigger off a problem recognition situation are: i) The company decides to launch a new product and
requires new equipment and materials for manufacturing the new product; ii) The breakdown of a machine
which requires replacement or new parts immediately; iii) The material purchased from a vendor proves to
be unsatisfactory and the company urgently looking out for another vendor; iv) The purchase department head
notices an opportunity to obtain better prices or quality materials. The external stimuli are: illuminating ideas
while participating in an exhibition or trade shows or by seeing an advertisement in an industrial magazine.
2) General Need Description: An industrial buyer will be motivated by budgetary considerations, such as profit
margins, expense quotas and cost benefit analysis. He is conscious of justifying the purchase based on some
measurable parameter. Very often, hence, the buyer will select the vendor/supplier based on the
sellers/marketer’s quality, service and price generally in this order. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
29

Buying Process:
3) Product Specification: This involves the item’s technical specifications for which the buyer will do value
analysis to appraise a supplier’s effectiveness. Value analysis involves the review of product specifications in
relation to requirements, the identification of unnecessary cost elements and suggestions for their elimination.
This requires participation of several groups of functional area specialists such as engineering, manufacturing
and production and accounting. These groups will be required to look for optional product characteristics and
specify them accordingly.
4) Supplier Search: The buyer now tries to identify the most appropriate vendor. The buyer has to be certain
that their suppliers meet the standard of performance and quality for which they have worked out their
operational plans. They will find out ways to accurately assess vendor capabilities, mainly in the areas of
technology, production, financial strength and management. The buyer may make up a final list of approved
qualified suppliers accordingly.
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Buying Process:
5) Proposal Solicitation: The next stage requires qualified supplier to submit proposals. Generally, the
supplier will furnish information in the form of a catalogue or send their sales representative to the
buyer with the necessary information. In case of more complex or expensive item, the buyer will
prefer to have a detailed written proposal from the supplier. The proposals must include both the
technical as well as the marketing documents.
6) Supplier Selection: A few of the attributes looked out for in a prospective supplier are:
i) Technical support services; ii) Prompt delivery; iii) Quick response to customer needs; iv)
Product quality; v) Supplier reputation in the market; vi) Product price and vii) Extension of credit.
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Buying Process:
7) Order-routine Specifications: This requires the buyer to specify and write out the final order in terms of
technical specifications, quantity to be ordered, expected time of delivery, terms on goods returned, warranties
and so on. To avoid the problem of stocking extra materials or items, the buyer very often goes for ‘blanket
contract’ with the supplier. Under this contract, the supplier will agree to resupply the buyer as and when
required on certain price terms over a specified period of time.
8) Performance Reviews: are to add customer value. Today all industrial marketers suffer from the problem of
product parity. So they are trying to build relationship with the buyers by adding value to the transaction.
Suppliers are customizing by knowing not only their own customers but also their customer’s customer.
Example: Ingredients of Mayonnaise: Egg Yolks, Salt, Mustard Oil, Sugar, Pepper Powder, Salad Oil, Lemon
Juice or White Vinegar.
Example: Amul Cheese Sauce: Amul Butter, Flour, Milk, Salt, Pepper Powder, Mustard, Grated Cheese
32

The Major Influences on Industrial Buyers:
a) Environmental Factors: Industrial buyers are influenced by the current and expected environmental factors namely the
level of primary demand, the economic outlook and cost of money (money value). If there is increased economic
uncertainty, the industrial buyers would prefer to reduce their inventories and will not invest in new plants and
equipment. Another important environmental factor is the availability of key materials. Companies are willing to buy and
hold larger inventories of scarce materials rather than facing a situation of shortages in key material. Other environmental
factors affecting the industrial buying behavior are rate of technological changes taking place, political stability and
regulatory developments and competitive developments in the environment.
b) Organizational Factors: Each organization has specific objectives, policies, procedures, and organization structure.
Marketers should know how many people are involved in the buying decisions, what are the company policies and what
are the evaluation criteria. Specifically, the materials’ management department are responsible for managing the
company’s cost related to purchasing, inventory control and production schedule. The head office will identify the
materials required by the various divisions and then consider buying them centrally. Industrial marketers must have
sophisticated purchase executives as well as a meticulous sales force matching the caliber of industrial buyers.
33

The Major Influences on Industrial Buyers:
c) Interpersonal Factors: Marketers must know about the interest, autonomy etc. of the industrial buyers. This refers to
various participants involved in decision making process and their status and authority, and their empathy and
persuasiveness qualities. Though the industrial marketer is not likely to know the kind of group dynamics which will take
place during the buying process, whatever information they can uncover about the personalities and interpersonal factors
will help them to be prepared while interacting with the participants of the industrial buying process.
d) Individual Factors: Each participant in the buying-decision process has some personal motivation and perception about
performances. These are influenced by participant’s age, income, education, professional qualifications and achievements,
personality and attitudes. Each participant also exhibits a unique buying style very often influence by his lifecycle stage.
Another Example: Parts of a Bicylce, explained further.
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35

List of Industrial Buying Products/Supplies (http://www.industrybuying.com/office-supplies-3227/ ):
1. Office Supplies: office furniture, Ink Cartridge & Toner, Photocopier machine, Binding & Lamination, Desk Accessories,
Office Stationery, Paper & Paper Products, Files & Folders, Label Markers, Mailing Envelopes, Staplers & Punches, Stamp
Pads & Ink, Boards, Diaries & Calendars, business card holders, etc.
2. Automotive & Maintenance: Water Motor, Tubeless Tyres, Solar panels, High pressure washer, Lawn Movers, Drill
Machine, Adjustable Wrenches, Tool Boxes, Professional Socket Set, Mircrometer, Digital Calipers, Thermal Imaging
Camera, Infrared Thermometer, Demolition Hammers, Marble Cutters, Industrial Ladders, Pallet Trucks, Stackers, etc.
3. Material Handling & Packaging Equipments: Hoists & Trolleys, Chain Pulleys, Plastic Craters, Lifting Clamps, Magneti
Lifters & Pullers, Protective Packaging Products, Hydaulic Trolley Jacks, Scissor Lifting Table, Wheel Barrows, Wire Ropes,
Shopping Carts, Ratchet Cargo Lashing, Slings, Steel Rack, Lockers & File Cabinets, etc.
4. Medical Equipments: Diagnostic products, Respiratory Care, Mibility Aid, Support Braces & Splints, Medical
Consumables, Oxygen cylinder, Stethoscope, Surgical trays, Digital Thermometer, Weighing Scales, Vaporiser, Xray
equipments, Surgical Mask, Ophtamology, Bedside Lockers etc. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
36

37

38

VALS Framework Explained further:
Meaning of Lifestyle: Lifestyle variables can be described in terms of certain quantifiable psychographics variables defined
on the basis of how people spend their time (Activities), what they consider important in their environment (Interests) and
what they as well as the world around think of them (Opinions). Joseph Plummer has described certain variables which
define lifestyle, presented in the following table:
Understanding of ‘lifestyle variables’ will help marketers in two ways:
i) Broad lifestyle trends have altered their habits, tastes and purchasing behavior of Indian Consumers, ex: working couple
ii) A knowledge of lifestyle can be used on a product-specific basis by marketers. Say VLCC can work on developing an
inventory of activities, interests, and opinion specially designed for the health conscious consumer market. 9/22/2018By: Dr. Sandeep Solanki, Associate Professor, RNB Global University, Bikaner
39
ACTIVITIES INTERESTS OPINIONS
Work
Hobbies
Social Events
Vacation
Entertainment
Club Membership
Community
Shopping
Sports
Family
Home
Job
Community
Recreation
Fashion
Food
Media
Achievements
Personal Relations
Social Issues
Politics
Business
Economics
Education
Products
Future
Culture

The original VALS (Value and Lifestyle) framework was developed in the US by Arnold Mitchell of the Stanford Research
Institute. The current VALS framework classifies American population into eight distinct sub-groups (or segments) on the
basis of the consumer responses to 35 attitudinal and four demographic questions. As shown in the previous figure of
VALS, the various segments of consumers have been described as following:
A. Self-Orientation:
1. Principle Oriented:
a. Fulfilled or Thinkers; b. Believers
2. Status Oriented:
c. Achievers; d. Strivers
3. Action Oriented:
e. Experiencers; f. Makers
B. Resources:
4. Most Resources:
g. Actualizers h. Strugglers
40

A. Self-Orientation:
1. Principle Oriented: refers to consumers whose choices are motivated by their beliefs rather than by desires for
approval. Such consumers choices are based on abstract or idealized criteria rather than on emotions or desire for
approval from others.
a. Fulfilled or Thinkers: Link interest in image or prestige. Above-average consumers of products for home. Like
educational and public affairs programming. Read widely and often.
b. Believers: Buy American. Slow to change habits, look for bargains. Watch TV more than average. Read
retirement, home an garden and general interest magazines.
2. Status Oriented: refers to those consumers whose choices are guided by the actions, approval and opinions of other
people. They prefer products and services which will convey their success to others.
c. Achievers: Attracted to premium products. Prime target for variety of products. Average TV watchers, read
business news, and self-help publications.
d. Strivers: Image conscious, limited discretionary incomes, but carry credit balances. Spend on clothing and
personal-care products, prefer TV to reading.
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3. Action Oriented: are those consumers who are motivated by a desire for social or physical activity.
e. Experiencers: Follow fashion and fads. Spend much of disposable income on socializing. Buy on impulse. Attend to
advertising, listen to rock music.
f. Makers: Shop for comfort, durability, value. Unimpressed by luxuries. Buy the basics, listen to radio. Read auto, home
mechanics, fishing, outdoor magazines.
B. Resources:
4. Most Resources: Resources (from most to least) refers to a range of psychological, physical, demographic and
material means and capacities of the consumers which includes education, income, self-confidence, health, eagerness to
buy and energy level.
g. Actualizers: Enjoy ‘finer things’. Receptive to new products, technology & distribution. Skeptical of advertising.
Frequent readers of a wide variety of publications. Light TV watchers.
h. Strugglers: Brand loyal. Use coupons and watch for ‘sale’. Trust advertising, watch TV often, read tabloids, and
woman’s magazines.
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Basics of CB-STP-VALS

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