Organizational & Household Decision Making

1. Organizational & Household Decision Making Michael J. Kalsher MGMT 4460/6962 Summer 2014

2. Chapter Objectives When you finish this chapter, you should understand why: • Marketers often need to understand consumers’ behavior rather than an individual consumer’s behavior. • Companies as well as individuals make purchase decisions. • Our traditional notions about families are outdated. • Many important demographic dimensions of a population relate to family and household structure. • Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions. • Children learn over time what and how to consume.

3. Learning Objective 1 • Marketers often need to understand consumers’ behavior (collective decision making) rather than a consumer’s behavior.

4. Roles In Collective Decision Making Initiator: Brings up idea or identifies a need Gatekeeper: Conducts information search and controls info flow Influencer: Attempts to sway the outcome of the decision Buyer: Purchaser User: Consumes the product or service

5. Learning Objective 2 • Companies as well as individuals make purchase decisions.

6. Organizational Decision Making • Organizational buyers: • purchase goods and services on behalf of companies for use in the process of manufacturing, distribution, or resale. • Business-to-business (B2B) marketing is VERY big business ($trillions)

7. Compared to Consumer Decision Making, Organizational Decision Making… • Involves many people • Requires precise, technical specifications • Is based on past experience and careful weighing of alternatives • May require risky decisions • Involves substantial dollar volume • Places more emphasis on personal selling (e.g., medical devices)

8. Hemodialysis Catheters http://www.youtube.com/watch?v=fXeuB1P8sDs

9. What Influences Organizational Buyers? • Internal stimuli • External stimuli (Nature of the industry & the organization) • Cultural factors • Type of purchase (Level of risk and complexity) • Buyclass theory of purchasing: organizational buying decisions can be divided into 3 types that vary in complexity. • Straight rebuy (Low risk; Habitual decision making e.g., approved vendors) • Modified rebuy (Moderate risk; Limited problem solving) • New task (High risk; Extensive problem solving)

10. Learning Objective 3 • Our traditional notions about families are outdated.

11. Learning Objective 4 • Many important demographic dimensions of a population relate to family and household structure.

12. The Modern Family • Changes in family structure (nuclear vs. extended) • Changes in concept of household (any occupied housing unit)

13. Family Size • Depends on educational level, availability of birth control, and religion • Many women want smaller families • The rate of voluntary childlessness is rising, making DINKs (dual incomes no kids) a valuable market segment

14. Sandwich Generation • Sandwich generation: adults who care for their parents as well as their own children • Boomerang kids: adult children who return to live with their parents • Spend less on household items and more on entertainment

15. Nonhuman Family Members • Pets are treated like family members • Pet-smart marketing strategies: • Name-brand pet products • Lavish kennel clubs • Pet accessories • http://www.youtube.com/watch?v=Pi60Aj2EkyE

16. Family Life Cycle • Factors that determine how couples spend money: • Whether they have children • Whether both spouses work • Family life cycle (FLC) concept combines trends in income and family composition with change in demands placed on income

17. Variables Affecting Family Life Cycle Age Marital Status Presence/Absence of Children Ages of Children, if present

18. Learning Objective 5 • Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions.

19. Household Decisions Consensual Purchase Decisions: Agreement on purchase, but not necessarily on the details. Accommodative Purchase Decisions: Differing preferences/priorities prevent agreement and may lead to conflict

20. Resolving Decision Conflicts in Families: Contributing Factors • Interpersonal need • Product involvement and utility • Responsibility • Power

21. Who Makes Key Decisions in the Family? • Autonomic decisions: one family member chooses a product • Syncretic decisions: involve both partners • Used for cars, vacations, homes, appliances, furniture, home electronics, interior design, phone service • As education increases, so does syncretic decision making • Gender convergence • Sheconomy

22. In General, Four Factors Determine Decision-Making Patterns Among Couples Sex-role stereotypes Spousal Resources Experience Socioeconomic Status

23. Heuristics in Joint Decision Making • Synoptic ideal: calls for both members of the couple to take a common view and act as joint decision makers • Heuristics simplify decision making: • Find areas of agreement on salient, objective dimensions • Task specialization (reduces “turf wars”) • Concessions based on intensity of each spouse’s preferences (pick your battles wisely)

24. Learning Objective 6 • Children learn over time what and how to consume.

25. Children as Decision Makers: They form three distinct markets • Primary market: • kids spend their own money • Influence market: • parents buy what their kids tell them to buy (parental yielding) • Future market: • kids “grow up” quickly and purchase items that normally adults purchase (e.g., photographic equipment, cell phones) • Important to “lock-in”brand loyalty

26. Consumer Socialization • Consumer socialization is the process by which young people acquire skills, knowledge, and attitudes relevant to their functioning in the marketplace • Children’s purchasing behavior is influenced by • Parents, family, and teachers • Television and toys • Culture http://www.youtube.com/watch?v=4CA11vk_X-A&feature=related https://www.youtube.com/watch?v=DVvigQ_RFKc

27. Five Stages of Consumer Development

28. Parental Styles for Socializing Children Authoritarian Neglecting Indulgent

29. Cognitive Development: New view stresses differences in information-processing abilities • Limited: • Below age 6, children do not use storage and retrieval strategies • Cued: • Between ages 6 and 10, children use these strategies, but only when prompted • Strategic: • Children ages 10 and older spontaneously employ storage and retrieval strategies

30. Chapter Summary • The purchase decisions made by many may differ from those made by individuals. • Buying for one’s self is different than buying for one’s company. • Our traditional notions of family are outdated. • Family members play different roles and varying levels of influence. • Children learn over time how to consume.