OLC EUROPE

PRINCIPLES OF MARKETING

Consumer Behaviour

Eric Agyemang BSc., MA, PGCE, A1, V1

CONSUMER BUYING BEHAVIOUR

Definitions

As a customer, we would engage in a purchase transaction with a supplier of goods for our own or our family's consumption.

As a client we would be availing `ourselves of a range of professional services such as accountants, solicitors etc.As a professional, we would be exercising special skills in purchasing, often in large quantities and/or expending millions of pounds, as a part of our job on behalf of an organisation.

As a consumer, we are the end user of the product.

When we are part of a group combining our influences we are known as a Decision Making Unit. (DMU),

DEFINITION CONSUMER BUYING BEHAVIOUR

Consumer buying `behaviour can be defined as, 'the decision processes and acts of individuals involved in buying and using products or services.'(Dibb: Marketing Concepts and Strategies, 2001).

Consumer buying behaviour is important to the marketing manager for a at least three reasons.1. The buyer's reaction to the organization's marketing strategy has a

major impact on the success of the organisation.

2. It allows the organisation to examine the main influences on what, where, when and how customers buy. Only in this way will they be able to devise a marketing mix that satisfies the needs of the customers.

3. By gaining a better understanding of the factors influencing their customers and how their customers will respond, organisations will be better able to predict the effectiveness of their marketing activities.

A FRAMEWORK FOR CONSUMER ANALYSIS

Many theories, models, and concepts have been borrowed from other fields as well as developed by marketing researchers in attempts to understand consumer behaviour

In many cases, these ideas overlap and even compete with each other as useful descriptions of consumers.

To date, no one approach is fully accepted; nor is it likely that a single, grand theory of consumer behaviour can be devised that all researchers would agree on

This lesson provides a framework for studying, analyzing, and understanding consumers to help develop successful marketing strategies.

In addition, we discuss several levels of consumer analysis.

THE WHEEL OF CONSUMER ANALYSIS

CONSUMER AFFECT AND COGNITION

Consumer affect and cognition refer to two types of mental responses consumers exhibit toward stimuli and events in their environment.

Affect refers to their feelings about stimuli and events, such as whether they like or dislike a product.

Cognition refers to their thinking, such as their beliefs about a particular product.

AFFECTIVE RESPONSES

Affective responses can be favourable or unfavourable and vary in intensity.

For instance, affect includes relatively intense emotions such as love or anger, less strong feeling states such as satisfaction or frustration, moods such as boredom or relaxation, and milder overall attitudes such as liking McDonald’s french fries or disliking Bic pens.

Marketers typically develop strategies to create positive affect for their products and brands to increase the chances that consumers will buy them.

COGNITIONCognition refers to the mental structures and processes involved in thinking, understanding, and interpreting stimuli and events.

It includes the knowledge, meanings, and beliefs that consumers have developed from their experiences and stored in their memories.

It also includes the processes associated with paying attention to and understanding stimuli and events, remembering past events, forming evaluations, and making purchasing decisions and choices.

Although many aspects of cognition are conscious thinking processes, others are essentially automatic.

Marketers often try to increase consumers’ attention to products and their knowledge about them.

TECHNOLOGY THAT SEES CLEARLY WHEN YOU CAN'T

City Safety- At 31 mpg or less, City Safety detects a stopped or slower moving car in front of you, and applies the brakes.  Which is why the Volvo XC60 is known as "The Car That Stops Itself".

Volvo ads often feature detailed information about the safety features of the cars to increase consumers’ knowledge and the chances that they will buy Volvos.

CONSUMER BEHAVIOUR

Behaviour refers to the physical actions of consumers that can be directly observed and measured by others.

It is also called overt behaviour to distinguish it from mental activities, such as thinking, that cannot be observed directly.

Thus, a trip to The Gap at the mall involves behaviour; deciding whether to go there is not an overt behaviour because it cannot be observed by others.

Examples of behaviours include shopping at stores or on the Internet, buying products, and using credit cards.

CRITICAL NATURE OF BEHAVIOURBehaviour is critical for marketing strategy because only through behaviour can sales be made and profits earned.

Although many marketing strategies are designed to influence consumers’ affect and cognition, these strategies must ultimately result in Overt Consumer behaviour to have value for the company.

Thus, it is critical for marketers to analyze, understand, and influence overt behaviour.

This can be done in many ways, including offering superior quality (Toyota), lower prices (Circuit City), greater convenience (Tesco online groceries), and easier availability (Coke is sold in millions of stores and vending machines),

Marketers can also influence overt behaviour by offering products, stores, and brands that are trendier (The Gap), sexier (Calvin Klein jeans), and more popular (Nike).

CONSUMER ENVIRONMENTThe consumer environment refers to everything external to consumers that influences what they think, feel, and do.

It includes social stimuli, such as the actions of others in cultures, subcultures, social classes, reference groups, and families, that influence consumers.

It also includes other physical stimuli, such as stores, products, advertisements, and signs, that can change consumers’ thoughts, feelings, and actions.

 The consumer environment is important to marketing because it is the medium in which stimuli are placed to influence consumers. For example, marketers run commercials during TV shows that their target markets watch to inform, persuade, and remind them to buy certain products and brands.

RELATIONSHIPS AMONG AFFECT AND COGNITION, BEHAVIOR, AND THE ENVIRONMENT

In the wheel of consumer analysis model, each of the three elements is connected by a two-headed arrow signifying that any of them can be either a cause or an effect of a change in one or more of the other elements.

For example, a consumer sees an ad for a new laundry detergent that promises to clean clothes better than Ariel. This ad changes what the consumer thinks about the new brand and leads to a purchase of it.

In this case, a change in the consumer’s environment (the ad for the new detergent) led to a change in cognition (the consumer believed the new detergent was better), which led to a change in behaviour (the consumer bought the new brand).

A change in laundry detergent purchase and use could come about in other ways. For example, a consumer receives a free sample of a new liquid detergent in the mail, tries it out, likes it, and then purchases it.

In this case, a change in the consumer’s environment (the free sample) led to a change in behaviour (use and purchase), which led to a change in the consumer’s affect and cognition (liking the new brand).

RECIPROCAL SYSTEM

Consumer processes not only involve a dynamic and interactive system but also represent a reciprocal system .  

In a reciprocal system , any of the elements can be either a cause or an effect of a change at any particular time (reciprocal determinism).

Affect and cognition can change consumer behaviour and environments.

Behaviour can change consumers’ affect, cognition, and environments.

Environments can change consumers’ affect, cognition, and behaviour.

EFFECTS OF THE RECIPROCAL SYSTEMViewing consumer processes as a reciprocal system involving affect and cognition, behaviour, and the environment has five implications.

First, any comprehensive analysis of consumers must consider all three elements and the relationships among them.

 Second, any of the three elements may be the starting point for consumer analysis.

 Third, because this view is dynamic, it recognizes that consumers can continuously change.

 Fourth, although our example focused on a single consumer, consumer analysis can be applied at several levels.

 Finally, this framework for analyzing consumers highlights the importance of consumer research and analysis in developing marketing strategies.

MARKETING STRATEGYFrom a consumer analysis point of view, a marketing strategy is a set of stimuli placed in consumers’ environments designed to influence their affect, cognition, and behaviour.

These stimuli include such things as products, brands, packaging advertisements, coupons, stores, credit cards, price tags, salespeople’s communications, and, in some cases, sounds (music), smells (perfume), and other sensory cues.

In our model of the Wheel of Consumer Analysis, Marketing strategy is treated as the hub of the wheel because it is a central marketing activity and is designed by marketing organizations to influence consumers.

Clearly, marketing strategies should be designed not only to influence consumers but also to be influenced by them.

THE ROLE OF CONSUMER RESEARCH AND ANALYSIS IN MARKETING STRATEGY

LOGICAL SEQUENCE OF CONSUMER ANALYSIS

A logical sequence is to first research and analyze what consumers think, feel, and do relative to a company’s offerings and those of competitors.

In addition, an analysis of consumer environments is called for to see what factors are currently influencing them and what changes are occurring.

Based on this research and analysis, a marketing strategy is developed that involves setting objectives, specifying an appropriate target market, and developing a marketing mix (product, promotion, price, place) to influence it.

After the target market has been selected based on careful analysis of key differences in groups of consumers, marketing strategies involve placing stimuli in the environment that hopefully will become part of the target market’s environment and ultimately influence its members’ behaviour. Consumer research and analysis should not end when a strategy has been implemented, however. Rather, research should continue to investigate the effects of the strategy and whether it could be made more effective.

LEVELS OF CONSUMER ANALYSIS

Consumer research and analysis can be conducted at several different levels.

The Wheel of Consumer Analysis is a flexible tool that can aid in understanding different: societies, industries, market segments, or individual consumers.

It can be used fruitfully by both marketing strategists and public policy officials to understand the dynamics that shape each of these levels.

STAGES IN THE BUYING PROCESS

The general stages in the buying process have been identified as follows.

Need recognition

Information search

Evaluation of alternatives

Purchase decision

Post purchase evaluation

THE PROCESS OF CONSUMER BUYING BEHAVIOUR

Need recognition

Information Search

Evaluation of Alternatives

Purchase decision

Awareness set

Internal factors

Post Purchase evaluation

6 - 22

The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Needs can be triggered by:– Internal stimuli

Normal needs become strong enough to drive behavior

– External stimuliAdvertisementsFriends of friends

Stages

6 - 23

Attempt to stimulate need recognition

6 - 24

The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Consumers exhibit heightened attention or actively search for information.

Sources of information:– Personal– Commercial– Public– Experiential

Word-of-mouth

Stages

6 - 25

The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Evaluation procedure depends on the consumer and the buying situation.

Most buyers evaluate multiple attributes, each of which is weighted differently.

At the end of the evaluation stage, purchase intentions are formed.

Stages

EVALUATION OF ALTERNATIVESConsumers are likely to build up a set of brand beliefs about the position of each brand with regard to each attribute. The sum of these brand beliefs will make up the brand image.

In order to ensure that the brand has the best chance of being chosen by the consumer, the marketer has a range of options for action including the following. Modifying the brand. Kotler calls this 'real repositioning'.

Altering beliefs about the brand. Kotler calls this 'psychological repositioning'.

Altering beliefs about competitors' brands. This can be referred to as 'competitive repositioning'.

(d) Altering the importance weighting of attributes.

(e) Calling attention to neglected attributes,

(f) Shifting the buyer's ideals.

AWARENESS SETSchiffman and Kanuk (1991) describe a model to show how 'set' works in consumers' brand choice.

a. There will be some brands of which the individual will not be aware at all. This unawareness set will not impact on his decision.

b. There will be a group of brands of which the customer is aware - his awareness set - and from which he will make his selection.

c. Within the awareness set, there will be a group of brands which the consumer will call to mind and consider purchasing. This is called the evoked set.

There are further subsets, according to the individual's evaluation of the brands within the awareness set. By definition, the evoked set includes brands which have been positively evaluated, but there may also be:

d. An inert set of brands, of which the individual is aware but about which he is completely indifferent

e. An inept set of brands of which the individual is aware, but about which he is negative - because of past bad experience, negative associations or poor reports.

CATEGORISING BRAND X

Awareness set

Consumer purchase

Do you know brand X?

Awareness set

Do you like brand X?

Evoked set

Inept set

Inertset

No opinionNo Yes

Yes No

IMPLICATIONS OF AWARENESS SET

Awareness sets represent consumer perceptions, so they can be a useful indicator of a brand's position. The presence of a brand in the evoked set of most consumers is very positive.

Awareness campaigns would be required to remind the market of the brand's presence and key features, in order to keep it in the set.

The presence of a brand in the unawareness set of most consumers would indicate the need for a marketing strategy to raise the brand's profile in the market place.

The presence of a brand in the inert set of most consumers would indicate the need for a marketing strategy to persuade consumers to try the brand - by giving more information, stressing positive features, or offering samples.

The presence of a brand in the inept set of most consumers would indicate the need to improve the product, or promotional message, to counteract its negative image.

6 - 30

The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Two factors intercede between purchase intentions and the actual decision:– Attitudes of others– Unexpected

situational factors

Stages

6 - 31

The Buyer Decision Process

Need recognition Information search Evaluation of

alternatives Purchase decision Postpurchase

behavior

Satisfaction is key:– Delighted

consumers engage in positive word-of-mouth.

– Unhappy customers tell on average 11 other people.

– It costs more to attract a new customer than it does to retain an existing customer.

Cognitive dissonance

Stages

6 - 32

Buyer Decision Process for New Products

New Products–Good, service or idea

that is perceived by customers as new.

6 - 33

Buyer Decision Process for New Products

Stages in the Adoption Process–Marketers should help

consumers move from awareness to adoption.

6 - 34

Buyer Decision Process for New Products

Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption

6 - 35

Buyer Decision Process for New Products

International Consumer Behavior– Values, attitudes and behaviors differ greatly in

other countries.– Physical differences exist that require changes in

the marketing mix.– Customs vary from country to country.– Marketers must decide the degree to which they

will adapt their marketing efforts.

INFLUENCES ON BUYING BEHAVIOUR

The core processes of consumer buying behaviour is influenced by a number of outside variable classified into:

1. Cultural – the learned beliefs, values, customs, artefacts and rituals of a society or groups

2. Social - societal factors such as reference groups, family, social role and status which have a direct role on behaviour.

3. Personal - include such factors as age and life cycle, occupation, economic circumstances and lifestyle.

4. Psychological – include such factors like motivation, perception, learning and beliefs and attitudes.

CUTURAL FACTORS

1. Belief and Values Beliefs are perceived states of knowing, on the basis of objective and

subjective information Values are key beliefs which are relatively enduring, relatively general and

fairly widely accepted as a guide to culturally appropriate behaviour

2. Customs Customs are modes of behaviour which represent culturally approved ways of

responding to given situations

3. Rituals A ritual is a type of activity which takes on symbolic meaning, consisting of a

fixed sequence of behaviour. Ritualised behaviour tends to be public, elaborate, formal and ceremonial. Rituals commonly require artefacts

4. Language Language is an important element of culture that makes the learning and

sharing of meanings possible through verbal and non verbal communication

5. Symbols Symbols are important aspect of language, carrying different meanings and

associations for different people

CHARACTERISTICS OF CULTURE

Culture comprises the following underlying characteristics: Social

Culture exists to satisfy the needs of people in a society

Learned Cultural norms and values are taught or ‘transferred’ to each new

member of society, formally or informally by socialisation

Shared A belief or practice must be common to a significant proportion of a

society or group before it can be defined as a cultural characteristic.

Cumulative Culture is ‘handed down’ to each new generation, and while new

situations teach new responses, there is a strong historical element to many aspects of culture

Adaptive Culture must be adaptive or evolutionary in order to fulfil its need-

satisfying function

MICRO-CUTURE

For marketing (and segmentation) purposes, it is possible to subdivide a macroculture into micro-culture (or sub-cultures)

The main micro-culture relevant to the United Kingdom inclde

Class Nationality Ethnicity Geography / region Religion Age Gender

Marketers need to be aware of micro-cultural variations for the purpose of segmentation and targeting.

Marketers however need to avoid exaggerating the exclusivity of micro-cultures, since each consumer is simultaneously a member of many micro-cultural segments.

SOCIALISATION

Socialisation is the process by which the individual learns the social expectations, goals, beliefs, values, and attitudes that enable him to exist in society.

It is the process by which the individual acquires sufficient knowledge of a society and its ways, to be able to function and participate in it.

The learning of gender-related, consumer and occupational roles is part of the socialisation process.

The various influences on socialisation include:

Family Religion Education Reference group Mass media

Consumer Socialisation is the process by which children acquire skills, knowledge and attitudes that enable them function in society as consumers.

SOCIAL FACTORS

Societal factors such as reference groups, family, social role and status have a direct effect on buying behaviour.

Reference Groups:

‘Groups with which an individual identifies so much that he or she takes on many of the values, attitudes or behaviours of group members’

Four types are identified

Primary membership group – family, friends, neighbours & colleagues

Secondary membership group – more formal like trade unions, professional associations, religious groups etc

Aspirational Group – to which the individual would like to belong - Lodge

Dissociative Groups – whose values and behaviour the individual rejects

OPINION LEADERS

Opinion leaders are those individuals who reinforce the marketing messages sent and to whom other receivers look for information

In targeting the customer in relation to reference groups, one of the tasks of the marketer is to identify the groups with which the individual identifies, and within that group identify the opinion leaders.

Apart from reinforcing the marketing messages received, opinion leaders may communicate a marketing message to those members of the group who may have missed the original message.

The task of identifying opinion leaders is made more difficult by the fact that opinion leadership is dynamic, and not confined to a few prominent members of society.

A person who may be an opinion leader in certain circumstances, may be an opinion follower in other circumstances

THE FAMILY

The family is a major social influence on buyer behaviour , particularly with regard to the roles and relative influence exerted by different family members.

Three patterns of decision making within the family have been identified by researchers with the sorts of product categories with which each is typically associated:.

Husband dominated – insurance, cars, computers and televisions

Wife dominated – washing machines, carpets, kitchenware and non-living room furniture

Equal – living room furniture, holidays, housing and entertainment

PERSONAL FACTORS Personal factors are those factors peculiar to the individual’s circumstances

that affect their buying behaviour

Factors classified as personal include:

Age – relevant to products like clothes, cars, furniture and recreation

Stage in Life Cycle – Single, married, Yuppie, Dinky, retired etc (different stages in life cycle is characterised with different consumption patterns

Occupation - A person occupation will influence their consumption

Economic circumstances – consists of such variables as Spendable income, its stability and time patterns Savings and assets, including percentage of liquidity Borrowing power and credit worthiness Attitude towards spending versus savings

Lifestyle – an individual’s mode of living as identified by his or her activities, interests and opinions. Marketers will search for relationships between their products and lifestyle groups

LIFESTYLE CLASSIFICATIONS

CATEGORY COMMENT

Upwardly mobile, ambitious Seeking a better and more affluent lifestyle, principally through better

paid and more interesting work, and a higher material standard of living.

Traditional and Sociable Compliance and conformity to group norms bring social approval and reassurance. Conformist purchasing pattern

Security and status seeking Stressing safety and ego-defensive needs. This lifestyle links status, income and

security. It encourages the purchase of strong and well known product brands, - those product and services which confer status and make life as secure and

predictable as possible.

Hedonistic preferable Places emphasis on ‘enjoying life now’ and the immediate satisfaction of wants and needs. Little thought is given to the future

PSYCHOLOGICAL FACTORS

Buyer behaviour is influenced by four major psychological factors

Motivation ‘An inner state that energises, activates or

moves, that directs or channels behaviour towards a goal (Assael)

Perception ‘The process by which people select, organise

and interpret sensory stimuli into a meaningful and coherent picture’ (Assael)

Learning Learning describes changes in an individual’s

behaviour arising from experience

Beliefs and attitudes A belief is a descriptive thought that a person

holds about something

An attitude comprises a person’s enduring favourable or unfavourable cognitive evaluation, emotions and action tendencies toward some object or idea.

MOTIVATION

Motivation arises from two types of perceived needs.

Biogenic needs

Psychogenic needs

Biogenic Biogenic needs arise from physiological states of tension

such as thirst, hunger, and discomfort

Psychogenic Psychogenic needs arise from psychological states of

tension such as the need for recognition, esteem and belonging

A number of different theories of human motivation have been propounded which have different implications for marketing and communications activity

FREUDS MOTIVATION THEORY

Freud’s theory of motivation assumes that the real psychological forces influencing people’s behaviour are unconscious

Freud regards the process of growing up and accepting social rules as one which forces an individual to repress many of the natural urges

These urges can never be eliminated or totally controlled and can emerge in dreams, slips of tongue or neurotic behaviour

From a marketing perspective, Freud’s theory implies that people buy a product, not only on for the rational reasons that they may state overtly, but also for a hidden set of underlying unconscious motives that they may not articulate

The marketer therefore need be aware of the impact of all aspects of the product that could trigger consumer emotions that stimulate purchase

HERZBERG

Hertzberg's two-factor theory of motivation distinguishes between factor that cause dissatisfaction and factors that cause satisfaction

The task of the marketer is therefore to avoid dissatisfiers such as poor after sales service

In addition the marketer should identify the major satisfiers or motivators of purchase and make sure that they are supplied to the customer

MASLOW’S NEEDS HIERARCHY Maslow’s theory of motivation holds that:

People are driven by particular needs at particular times

That human needs are arranged in a hierarchy in their order of importance: physiological needs, safety needs, social needs, esteem needs and self actualisation needs.

That the lowest ‘level’ or need which is unsatisfied is dominant

Once satisfied the next level ‘up’ the hierarchy becomes the dominant motivating impulse, until it in turn is satisfied

A a satisfied ‘lower level’ need can become dominant again through renewed deprivation.

The levels overlap in practice and more than one level of need may operate at the same time, but the prime motivator will be the lowest need that is substantially unsatisfied.

Maslows Hierarchy of Needs

Physiological Needs

Safety Needs

Love & Social Needs

Esteem Needs

Self Actualisat

ion

Essential to maximise personal development

Fulfilment of personal potential

Essential to Psychological well being

For independence, recognition, status, respect etc.

For relationships, affection, belonging

Essential to survival

For security, order, predictability, freedom form threat

Food clothing & shelter

MASLOW’S NEEDS CATEGORIES Maslow’s need categories are: Physiological needs

Food, water, air, shelter & sex, Safety & Security needs

Freedom from threat, good health, security, order, predictability, and ‘knowing where

you are with people’ Social Needs

Friendship, affection and sense of belonging

Esteem & Ego needsFor self-respect and self confidence, competence, achievement,

independence, prestige and their reflection in the perception of others.

Self-actualisation needsFor the fulfilment of personal potential, to become everything that one is capable.

The Hierarchy of needs as an operational tool

The hierarchy of needs can be adapted to facilitate market segmentation and product/brand positioning

Market Segmentation

Advertisers can use the hierarchy to focus their messages on a need category that is likely to be shared by a sizeable segment of the target population

Product / Brand Positioning

The hierarchy of needs enable advertisers to establish the product or brand in people’s perception as the means to satisfy a particular need category

MODELS IN BUYING BEHAVIOUR

Given the complexity of factors influencing consumer buying behaviour, models have been developed to simplify the process to make it more manageable for marketers.

Models help us to put some form of framework on the thought processes that consumers go through when buying.

Understanding these thought processes enable marketers to develop communication activities that will effectively influence the consumer to buy a particular brand.

Two other types of models put forward in addition to those explained earlier to explain consumer behaviour are:

The Response hierarchy models

The Black box models

RESPONSE MODEL

Response hierarchy models attempts to predict the sequence of stages that the consumer goes through on the way to a purchase.

These models attempt to prioritise the communication objectives at various stages of the buying process.

These objectives can be classified into three main areas;

Cognitive objectives Concerned with creating knowledge or awareness in the

mind of the consumer

Affective objectives Concerned with the changing the consumer’s attitude to

the product as a whole or a specific aspect of the product

Behavioural objectives Getting the consumer to act in some way (to buy the

product)

AIDA RESPONSE HIERARCHY MODEL

Gain Attention

Stimulate Interest

Create Desire

Generate Action

Create Satisfaction

Need Recognition/Problem Solving

Information Search

Evaluation of alternatives

Purchase decision

Post Purchase stage

BLACK BOX MODELS

Black box models are concerned with how people respond to stimuli and are referred to as stimulus-response models

They do not seek to explain the complexities of the customer’s thought processes

The customer’s mind is likened to a black box which cannot be penetrated to find out what is inside.

The models focus on the input or stimulus (e.g. advertising) and the response or output (purchase behaviour)

THE BLACKBOX MODEL

Product offerings

Other Stimuli

Person making

buying decision

Product purchased or not purchased

ORGANISATIONAL BUYING BEHAVIOUR

Organisational Buying may be defined as the decision making process by which formal organisations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers

Organisational markets normally comprise fewer buyers, with those buyers often concentrated.

There is generally a close relationship between buyer and seller in organisational markets.

There is a great deal of customisation and cooperation on product specification and other requirements

The unique characteristics of organisational markets demands a modified approach in considering the process of buying behaviour.

MODELS IN BUYING BEHAVIOUR

The specific characteristics of organisational markets may vary according to the type organisation that comprises the market

Producer Market. Organisations that purchase products to produce other

products or use them in their own operations (raw materials)

Reseller Markets. Intermediaries such as wholesalers and retailers who buy

finished goods for resale to make profit

Government markets National and local governments who buy a variety of goods and

services to support their internal operations and to provide public services, usually through bids or negotiated contracts.

Institutional markets Organisations that seek to achieve charitable, educational,

community or other non-business goals

THE PROCESS OFORGANISATIONAL BUYING BEHAVIOUR

Organisational buying behaviour usually have the following stages .

Recognise the problem

Develop product specifications to solve the problem

Search for products and suppliers

Evaluate products relative to specifications

Select and order the most appropriate product

Evaluate the product and supplier performance

After the need recognition stage, the Decision Making Unit (DMU) assess the problem and determine what is required to resolve or satisfy the need.

FACTORS INFLUENCING ORGANISATIONAL BUYING BEHAVIOUR

There are four main forces influencing the organisational buyer

Environmental Include such factors as level of primary demand, economic

outlook, the cost of money, the rate of technological change, political and regulatory development and competitive developments

Organisational Organisational objectives, policies, procedures, organisational

structures and systems which may constrain the freedom of organisational buyers and the decision making process

Interpersonal Within the buying group, the use of power and the level of

conflict could significantly influence organisational buying decisions

Individual The personal characteristics of the individuals in the buying

group such as age, education, personality and position within the organisation

DECISION MAKING UNIT

The Decision Making Unit is ‘all those individuals and groups who participate in the purchasing decision process, who share some common goals and the risks arising from that decision.

There are six groups within the DMU

Users – buying initiators who help define specification

Influencers – help define specification and evaluation of alternatives

Deciders – those who decide on requirements and suppliers

Approvers – those who authorise proposals of deciders and buyers.

Buyers – those with authority to select suppliers and negotiate purchase terms

Gatekeepers – those who by controlling information flow, may be able to stop sellers from reaching

individuals within the buying centre.

DECISION MAKING UNIT

The size, structure and formality of the DMU will vary in different situations and will depend on

Who are the principal participants in the buying process?

In what areas do they exert the greatest influence?

What is their level of influence?

What evaluative criteria do each of the participants make use of and how professional is the buying process?

To what extent, in large organisations, is buying centralised?