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Understanding Consumer Behavior & Organizational Behavior

Dr. D. D. Swain

WHY STUDY CONSUMER BEHAVIOR


Consumers make buying decisions all the time. The Marketing Task is to understand What do they buy Where do they buy When do they buy Why do they buy How do they buy How often do they buy Product & Services Channel decisions Timing of purchase Motivation to purchase Decision process Purchase cycle

CONSUMER BEHAVIOR
Consumer behavior can be defined as the behavior that consumers display in
searching for Purchasing Using Evaluating and Disposing off products and services that they expect will satisfy their needs and wants.

CONSUMER BEHAVIOR & MARKETING PLANNING


As marketers, it is important for us to recognize why and how individuals make their consumption decisions so that we can make better strategic decisions.

Marketing firms use their knowledge of consumer behavior to segment markets, to design marketing strategies and to measure marketing performance.

THE BUYER : an Enigma


The consumer buying decision remains an enigma for the marketer---sometimes responding the way the marketer wants/expects and on other occasions just refusing to buy the product from the same marketer. The marketer provides certain stimuli Product, Price, Place & Promotion, but is unsure whether the buyer will respond. The consumers mind is another Black Box

THE BLACK BOX

Marketing Stimuli Product Price Place Promotion Other Stimuli Economic Technological Political Cultural

Buy

Buyers Characteristics

Response

Decision on Product Choice Brand Dealer Timing Quantity

Buyers Decision Process

Not to Buy

Evaluate & take Corrective action

FACTORS INFLUENCING CONSUMER BEHAVIOR


Cultural Social
: Culture, Sub-culture, Social class : Reference groups, family, roles &

status Personal
: Age & life cycle, Occupation,

Lifestyle, Personality, Economic

Psychological

: Motivation, Perception, Learning,

Beliefs & attitudes

Social class & typical consumption behavior


Social class Upper-Upper Characteristics Social elite, inheritance Consumption behavior Consume high quality often become standards for others Conspicuous consumers of luxury products, innovators

Lower-Upper

High income professionals, social position earned Career oriented professionals, highly educated

Upper-Middle

Hi-quality products that reflect success & position, gracious life style, experimenters. Influenced by standards, careful shoppers, price sensitive, home conscious Impulsive, brand loyal, self perception Unskilled shopper, purchase on credit & pays more

Lower-Middle

Respectable, hard working, conscious re standards Blue collar, moderate education & skill Near poverty line

Upper-Lower

Lower-Lower

PSYCHOLOGICAL FACTORS
Consumer buying choices are influenced by major psychological factors---motivation, perception, beliefs & attitudes Motive---is a need that is sufficiently pressing to drive the person to act Needs could be
Biologicalarising from state of hunger,thirst or comfort Psychologicalarising from need recognition, esteem, belonging A need becomes a motive when it is aroused to a sufficient level of intensity.

Theories of Motivation
Sigmund Freud Theory of Motivation Maslows theory of Motivation
Freudsuggests that a person does not fully understand his or her motivation E.g A consumer wanting to buy a Camera
Initial motive ..as a hobby or a career Deeper level.to impress others with creative talents Still deeper level.to feel young & independent

Maslow believes that human needs are arranged in a hierarchy, from the most pressing to the least pressing.

MASLOWS HIERARCHY OF NEEDS

Self Actualization needs Esteem Needs Social needs Safety needs Physiological needs

Self development & realisation

Self esteem, recognition status sense of belonging love

security,protection

hunger, thirst

Adapted from Principles of Marketing: Kotler & Armstrong. PHI, 9th edition

THE BUYING DECISION PROCESS


Buying roles -- who makes the buying decision
Initiator, Influencer, Decider, Buyer, User

Buying Decision behavior buying decision varies with type of product


Complex Buying behavior

Buying Process

-- how the decision is made

Need recognition

Search for information

Evaluation of alternatives

Purchase decision

Post purchase behavior

Decision Making Sets


Total Set

Awareness Set

Consideration Set

Choice Set

Decision

BUYING DECISION BEHAVIOR

High involvement

Low involvement

Significant Difference Between brands

Complex Buying behavior

Variety seeking Buying behavior

Few differences Between brands

Dissonance Reducing Buying behavior

Habitual Buying behavior

Complex buying behavior

Organizational Buying Behavior

Organizational Buying Behavior


Business Markets. all organizations that buy goods & services
for use in the production of other products & services that are sold, rented or supplied to others.

Business buying process.the decision making process by


which business buyers establish the need for purchased products & services and identify, evaluate and choose among alternative brands & suppliers

Characteristics of Business Markets


Demand Characteristics - derived demand - relatively inelastic - erratic demand Market demographics - fewer but larger buyers - geographically concentrated

Buyer-Seller relationship - closer relationship - multiple buying influences - professional buyers buy - follow prescribed specifications/procedures

Industrial Marketing vs Consumer goods Marketing


Industrial marketing Cons goods Marketing
Standard form; service important but less.

Product

More tech in nature; accompanying services important; form may vary. Competitive bidding for specific items; list prices for standard items

Price Promotion Distribution Customer relationships Decision making process

List prices

Personal selling
Shorter channels; more direct selling

Advertising Long chain of intermediaries

Frequent & more enduring but complex


Involves diverse group of organizational members

Less frequent & shorter duration Individual or household decides

Characteristics of Organizational Buying Process


Multiple buying influence Technical complexities Time lags Rational & Emotional Buying motives Objectives & Distinctive character of organization

Organizational Buying Process

Business Buyer Behavior


What buying decisions do business buyers make ? Who participates in the buying process ?

What are the major influences on buyers ?


How do business buyers make their buying decisions ?

What buying decisions : Implications of Buying situations


Buying situation IN Supplier
Maintain quality; be alert to changing customer needs;initiate auto ordering; reinforce relationships.

OUT Supplier
Offer something new/diff;exploit dissatisfaction;get foot in the door;ask to split order
Opportunity to get in;offer alternatives; offer value addition;minimize risk of shifting

Straight re-buy
(no change in specs)

Modified re-buy

Respond quickly; reinforce (changes in specs/terms) relationships;preempt changes using CI

New Task
(first time purchase)

Equal opportunity for both; info need is high;seller can influence specs

Buying motivations of Business buyers


Rational & emotional factors influence decisions
Rational factors - Pricebase price & price stability
- Quality..reliability,consistency, quality-price relationship - Servicewhere intangibility high, scope for differentiation - Deliveries..continuity/reliability, may not have exclusive suppliers - Reciprocityyou buy from me, I buy from you

Emotional factors

- Status & rewardmotives of individual - Perceived riskfear of wrong decision displeasing boss or losing reward - Friendship/relationshiphelp a known supplier by providing information

Forces influencing Organizational buying behavior


Environmental forces
- economic, political,& legal, cultural, physical & technological - uncertainty makes decision making complex - Organizational climate & rules - avoid uncertainty, role of purchasecentralized/decentralized, ripe for personal selling

Organizational forces

Group forces Individual forces

- group buying behavior-affected by influences of others, - goal conflict amongst members - Individuals not entities make buying decisions. - personal biases affect decision making, - background of individuals affects evaluation

Implications for Marketing Strategy planning


Environmental - how will the environment impact purchase
plans of the industry/organization

Organizational
Product specific

- What unique company attributes (size, structure) influence buyer behavior

- how far has the firm progressed in the


buying process

- what is the likely buying situation


- what is the extent of perceived risk

Group

- Group or individual decision, if group who


are the members

- what is the relative influence of each

Individual

- what criteria are important to each member


in evaluating suppliers - how do buyers rate suppliers