Consumer and Business Buyer Behavior

1. Consumer and Business Buyer Behavior Muhammad Imran Wazir

2. Model of Consumer Behavior Marketing and other stimuli Buyer’s black box Buyer’s responses Product Economic Product choice Price Technological Brand choice Place Political Dealer choice Promotion Cultural Buying Purchase timing Buyer decision Purchase amount Characteristics process $

3. Factors Influencing Consumer Behavior Cultural Culture Subculture Social class Social Reference groups Family Roles and Status Personal Age & lifecycle stage Occupation Economic situation Lifestyle Personality and self-concept Psychological Motivation Perception Learning Beliefs & attitudes Buyer

4. Cultural Factors • It exert a broad and deep influence on consumer behavior. • Culture – the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. • Marketers are always trying to spot cultural shifts in order to discover new products that might be wanted. • Each culture contains smaller subcultures, or groups of people with shared value systems based on common life experiences and situations. • Subcultures includes nationalities, religions, racial groups, and geographic regions.

5. Social classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behavior. • 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. • In some social systems, member of different classes are reared for certain roles and cannot change their social positions. • Marketers are interested in social class because people within a given social class tend to exhibit similar buying behavior. • Seven major American social classes: Upper uppers, Lower uppers, Upper middles, Middle class, Working class, Upper lowers, Lower lowers.

6. Social Factors • Group – two or more people who interact to accomplish individual or mutual goals. • Membership groups – groups that have a direct influence and to which a person belongs. • Reference groups – serve as direct (face-to-face) or indirect points of comparison or reference in forming a person’s attitudes or behavior. • People often are influenced by reference groups to which they do not belong. For example, an aspirational group is one to which the individual wishes to belong. • Opinion leaders – people within a reference group, who, because of special skills, knowledge, personality, or other characteristics, exert influence on others.

7. Family members can strongly influence buyer behavior. • Marketers are interested in the roles and influences of the husband, wife, and children on the purchase of different products and services. • Husband–wife involvement varies widely by product categories and by stage in the buying process. • A person belongs to many groups–family, clubs, organizations. 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 to it by society.

8. Personal Factors • Tastes in food, clothes, furniture, and recreation are often age related. • Buying is also shaped by the stage of the family life cycle – the stages through which families might pass as they mature over time. • Traditional family life-cycle stages include young singles and married couples with children. • Marketers try to identify the occupational groups that have an above-average interest in their products and services. • Computer software companies will design different products for brand managers, accountants, engineers, lawyers and doc.

9. A person’s economic situation will effect product choice. • Marketers of income-sensitive goods watch trends in personal income, savings, and interest rates. • People coming from the same subculture, social class, and occupation may have quite different lifestyles. • Lifestyle is a person’s pattern of living as expressed in his or her psychographics. • It involves measuring consumers’ major AIO dimensions – activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products).

10. Several research firms have developed lifestyle classifications. The most widely used is SRI Consulting’s Values and Lifestyles (VALS) typology. • VALS classifies people according to how they spend their time and money. It divides consumers into eight groups based on two major dimensions: self-orientation and resources. • 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, autonomy, defensiveness, adaptability, and aggressiveness. e.g. coffee & sociability. • The basic self-concept premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.”

11. Psychological Factors • A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. • Sigmund Freud assumed that people are largely unconscious about the real psychological forces shaping their behavior. • He saw the person as growing up and repressing many urges. These urges are never eliminated or under perfect control, they emerge inn dreams, in slips of the tongue, in neurotic and obsessive behavior, or ultimately in psychoses. • Thus, Freud suggested that a person does not fully understand his or her motivation.

12. Self- actualization needs Self development and realization Esteem needs Self-esteem, recognition, status Social needs Sense of belonging, love Safety needs Security, protection Physiological needs Hunger, thirst Maslow’s hierarchy of needs

13. A motivated person is ready to act. How the person acts is influenced by his or her own perception of the situation. • All of us learn by the flow of information through our five senses: sight, hearing, smell, touch, and taste. • Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. • People can form different perceptions of the same stimulus because of three perceptual processes: selective attention, selective distortion, and selective retention. • Selective attention – the tendency for people to screen out most of the information to which they are exposed – means that marketers have to work especially hard to attract the consumer's attention. • Selective distortion – the tendency of people to interpret information in a way that will support what they already believe. • Selective retention – people tend to retain information that supports their attitudes and beliefs.

14. Learning describes changes in an individual’s behavior arising from experience. • Learning occurs through the interplay of drives, stimuli, cue, responses, and reinforcement. • A drive is strong internal stimulus that calls for action. Drive becomes a motive when it is directed toward a particular stimulus object. • Cues are minor stimuli that determine when, where, and how the person responds. • After buying if the experience is rewarding than consumer response to the selected good will be reinforced.

15. Through doing and learning, people acquire beliefs and attitudes. • A belief is a descriptive thought that a person has about something. • Beliefs may be based on real knowledge, opinion, or faith, and may or may not carry an emotional charge. • Marketers are interested in the beliefs that people formulate about specific products and services, because these beliefs make up product and brand images that affect buying behavior. • Attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. • Attitude are difficult to change. A person’s attitudes fit into a pattern, and to change one attitude may require difficult adjustments in many others.

16. Buyer Decision Process Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior

17. Need Recognition & Information Search • The need can be triggered by internal stimuli when one of the person’s normal needs – hunger, thirst, sex – rises to a level high enough to become a drive. • A need can also be triggered by external stimuli. e.g. word-of-mouth, advertisements. • The consumer can obtain information from any of several sources. These include personal sources, commercial sources, public sources and experiential sources. • Commercial sources normally inform the buyer, but personal sources legitimize or evaluate products for the buyer.

18. Evaluation of Alternatives & Purchase Decision • The consumer arrives at attitudes toward different brands through some evaluation procedure. • How consumer go about evaluating purchase alternatives depends on the individual consumer and the specific buying situation. • In some cases, consumers use careful calculations and logical thinking. • At other times, the same consumers do little or no evaluating; instead they buy on impulse and rely on intuition. • Two factors that affects the consumer’s purchase decision. • Attitudes of others. • Unexpected situational factors.

19. Postpurchase Behavior • The answer to whether the buyer is satisfied or dissatisfied with a purchase lies in the relationship between the consumer’s expectations and the product’s perceived performance. • Almost all major purchases result in cognitive dissonance, or discomfort caused by postpurchase conflict. • Company’s sales come from two basic groups – new customers and retained customers. • A satisfied customer tell 3 people about a good product experience, a dissatisfied customer gripes to 11 people. • Some 96 percent of unhappy customers never tell the company about their problem.

20. The Buyer Decision Process For New Products • A good, service or idea that is perceived by some potential customers as new. • Adoption process – the mental process through which an individual passes from first hearing about an innovation to final adoption. • Consumers go through five stages in the process of adopting a new product: • Awareness • Interest • Evaluation • Trial • Adoption

21. Individual Differences in Innovativeness 34% Late majority 34% Early majority 2.5% Innovators 13.5% Early adopters 16% Laggards X – 2a X – a X X + 2a Time of adoption of innovation

22. Influence of Product Characteristics on Rate of Adoption • Five characteristics are especially important in influencing an innovation’s rate of adoption. • For example, consider the characteristics of HDTV (High-definition television) in relation to the rate of adoption. • Relative advantage (superior to existing products) • Compatibility (fits the values and experiences of potential customers) • Complexity (difficult to understand or use) • Divisibility (tried on a limited basis but still very expensive) • Communicability (results of using can be observed or described to others)

23. Business Markets • The business market is huge. • Many sets of business purchases were made for only one set of consumer purchases. • The main differences between business markets and consumer markets are following. • Market structure and demand (derived demand) Far fewer but far larger buyers; more geographically concentrated • Nature of the buying unit More decision participants; more professional purchasing effort • Types of decisions and the decision process More complex; more formalized; more dependent.

24. Business Buyer Behavior

25. Major Types of Buying Situation • Straight rebuy – a business buying situation in which the buyer routinely reorders something without any modifications. • Modified rebuy – a business buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. • New task – a business buying situation in which the buyer purchases a product or service for the first time.

26. Stages of the Business Buying Process Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order-routine specification Performance review