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Understanding Local Buyers
Chap
ter
7
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Outline
Local Buyer Behavior BasicsThe Consumer Decision ProcessLocal Market ResearchThe B2B Industrial BuyerThree Market EnvironmentsTakeaways.
Culture and Buyer Behavior
Marketing and MaterialismMarketing actions are basically undertaken in the belief that
more and better goods will bring an increase in consumers’ standard of living, an increase in their satisfaction, and perhaps even more happiness
However, when anticipating customers’ reactions to new products and increased product choices, it is important to note the limits on the relationship between material affluence and personal happiness
“Money can’t buy you love.”
External Influences
Culture
Economics
Technology
Politics
Buyer
characteristics
“Models of Man”Product choice
Brand choice
Store choice
Supplier choice
Buyer Choices
Buyer decision process
Local Marketing
Effort
Local Buyer Behavior
• James Duesenberry - Relative Income hypothesis – consumer’s well-being is a function of how much income they have relative to their peer groups, not the actual income
• Milton Friedman – Permanent income, defined as the regularly expected income, is what determines an individual’s consumption
• Thorstein Veblen – Conspicuous consumption – the notion that people make purchases of expensive brands & products in order to display their ability to afford them
Local Buyer Behavior
•What does the product/service do for the buyer?
• How does it fit into the consumption and use pattern of the buyer?
• What are the core benefits?
• What is the perceived risk and how high is it?
The CORE BENEFIT often differs between local markets.
The generic function of a product depends more on the local environment than on innate individual preferences.
• Remember: Buyers are GOAL-ORIENTED – they buy for a reason. Point is to understand what that reason is.
Local Buyer Behavior
The Buyer Decision Process
Problem RecognitionA problem is when an individual perceives a difference
between an ideal and an actual state of affairsNew products often lead to tension and a recognized
“problem”For the local marketer it is important to recognize that
education about the core benefits might be necessary in order to create a demand for the product
The Buyer Decision Process
SearchA consumer’s search for alternative ways to solve the
problem is closely related to his or her level of involvement with the product category
For product with which involvement is high, search tends to be more comprehensive and time consuming
For convenience and habit purchases, the decision process is shorter, with little need for extensive searches or alternative evaluations
Search intensity is dependent on the perceived availability of the alternativeOne advantage for product with high global brand awareness
is that initial distrust is easier to overcome
The Buyer Decision Process
Evaluation of AlternativesWhen a new product or service is in the “consideration set”
A highly involved individual will process the available information matching the pros and cons of the alternatives against preferences
Consumers can deal with multi-attribute evaluations in several ways:They can use gradually less-important features to successively
screen out alternatives A “hierarchical” decision rule
They can consider all features simultaneously:A “compensatory” rule – hard to do.
Multi-attribute evaluation
(ΣBI)
Preference
Behavioral intent
Choice
Social norms
Social forces
Motivation to comply Situational
factors(P-O-P)
B = beliefs about product attributes; I = importance of the beliefs; P-O-P = point of purchase
Fishbein’s Multi-attribute Model
The Buyer Decision Process
ChoiceThe final choice of which alternative to select or try is
typically influenced by social norms and by situational factors
Social NormsWhere group pressures to comply are strong social norms
influence is expected to override multiattributed evaluation The social norms can be usefully analyzed by the
extended Fishbein modelThe social norms involve two aspects
Social forcesMotivation to comply
The Buyer Decision Process
OutcomesThe main question about the outcomes revolves around the
degree of customer satisfaction.Customer satisfaction is particularly important in mature
markets where choices are many and the needs are already well met.
Satisfaction engenders loyalty to the brand and to the company.Because buying is typically a risky choice between different
brands, the marketer has to make sure that the customer does not encounter cognitive dissonance, a sense of possibly making the wrong choice.
One approach is to get satisfied customers to endorse the product, a common strategy in advertising.
A Strong Brand Simplifies the Decision Process
-- REDUCES INFORMATION SEARCH
-- REDUCES PERCEIVED RISK
-- PLACES A BRAND IN THE EVOKED CONSIDERATION SET MORE EASILY
-- BRAND LOYALTY MEANS DECISIONS GO FAST.
A GLOBAL BRAND CAN FOCUS ON:
-- ATTITUDES
-- NORMS
-- P-O-P (Point-of-Purchase Promotions)
Problem definition
Sampling
Research design
Measurement/scaling
Exploratory
Descriptive
Causal Trade surveys
Observation
Experiments
Causal Models
Secondary data
Qualitative research
Consumer surveys
Questionnaireconstruction
FieldworkData
analysis
The Local Market Research Process
FOCUS GROUPS
• Focus groups have become standard for initial exploratory research
• In foreign markets, focus groups have the advantage of being relatively inexpensive, can be completed quickly, and can reach local pockets of the market
• Unfortunately, they can also constitute an unrepresentative sample because typical screening criteria are incorrect in the new environment or are not implemented correctly
Local Market Research
SURVEY RESEARCH
Consumer Surveys
Surveys of large (n = 500 and above) random samples drawn from a sampling frame of representative product users are of central importance in marketing research
Cultural problems involved in the typical consumer survey:
• In high context cultures especially, one cannot fully understand consumers from their responses to standard survey questions.
• At the same time, informal face-to-face interviews are prone to bias because of demand characteristics
• However, even if surveys are afflicted by a number of problems in many foreign markets, they can still be useful if care is taken.
Local Market Research
TRADE SURVEYS
• Trade surveys of distribution channels and trade associations can provide a good starting point for further data gathering and analysis
• In the U.S., the use of middlemen for information about consumers is usually limited to the sales and scanner records of retailers and wholesalers
• In countries with less social mobility and less diversity than the U.S., key informants in the trade are good sources of information about buyers.
Local Market Research
MEASUREMENT & SCALING
•In attitude scaling, very basic factors can create difficulties
• The cognitive and emotional concepts measured might not be equivalent across cultures.
•This means measurement equivalence is questionable.
Local Market Research
•The questionnaire employed in the typical consumer survey needs to be carefully pre-tested & translated into the foreign language.
• It should then be back-translated for verification and adjustment.
• In high context cultures the questionnaires are typically much longer because of the need to establish the proper context for
the questions.
Local Market Research
QUESTIONNAIRE CONSTRUCTION
SAMPLING
Lack of comprehensive and reliable sampling frames has long been a problem for marketing researchers in many countries.
• Emergence of firms that specialize in developing lists for direct marketing and survey research is gradually resolving this problem.
• Still sampling equivalence can be questionable because the appropriate profiles differ (e.g. “high” income in one country might not be“high” in another).
Local Market Research
Typically handled by a subcontracting marketing research firm, sometimes a full-service advertising agency
• As economic growth occurs, mature markets with differentiated demand requiring formal and scientific market research applications will emerge in many countries.
FIELDWORK
Local Market Research
Understanding Industrial Buyers
The Business-to-Business (B2B) Marketing Task:The marketer should help the buying organization succeed.
Industrial Buyers are influenced by the same forces as individual consumers, but also conditioned by the organizational culture in which they operate.
The organizational culture reflects company policies and ways of making decisions.
The industrial buying process involves several stages from problem recognition to performance review.
Performance review
Order specificationOrder specification
Supplier selection
Proposal solicitation
Search for suppliers
Product specificationProduct specification
Problem recognitionProblem recognition
Industrial Buying Process
Industrial Buyers: Building Relationship
“Relationship Marketing” is important in B2B.The term is applied to a marketing effort involving
Various personalized servicesCreation of new and additional servicesCustomizing a company’s offering to the needs of a special
buyerTakes a long-term view
Since without it, the effort required to build a relationship is not worth it.
• ADOPT THE BUYER’S VIEWPOINT.
• GROW WITH THE RELATIONSHIP.
• ACCEPT AND DEMAND TRANSPARENCY.
• BE PROACTIVE.
THINGS A MARKETER CAN DO TO CREATE A WORKABLE RELATIONSHIP:
Always consider how the culture of the nation and the culture of the organization affect relationship marketing.
Relationship Marketing
Feature
Emerging
New growth
Mature
Life cycle stage Intro Growth Mature
Tariff barriers High Medium Low
Nontariff barriers High High Medium
Domestic competition Weak Getting stronger Strong
Foreign competitors Weak Strong Strong
Financial institutions Weak Strong Strong
Consumer markets Embryonic Strong Saturated
Industrial markets Getting stronger Strong Strong
Political risk High Medium Low
Distribution Weak Getting stronger Strong
Media advertising Weak Strong In-store promotion
Dominant Market Features
product/market situationtask emerging new growth maturemarketing analysisresearch focus feasibility economics segmentationprimary data sources visits middlemen respondentscustomer analysis needs aspirations satisfactionsegmentation base income demographics life stylemarketing strategystrategic focus market development participation in growth compete for sharecompetitive focus lead/follow domestic/foreign strengths/weaknessesproduct line low end limited wideproduct design basic advanced adaptednew product intro rare selective fastpricing affordable status valueadvertising awareness image value-addeddistribution build-up penetrate conveniencepromotion awareness trial valueservice extra desired required
Dominant Marketing Tasks
Understanding local markets involves conceptual skills & imaginative rethinking more than new analytical
marketing skills.
Takeaway
The core benefit of a product or service can vary considerably across countries because of differing
environmental conditions surrounding product usage.
Consumer behavior concepts and models are useful tools when examining buyers in foreign markets, but underlying
cultural assumptions have to be reconsidered.
Takeaway
Local market research is difficult because of lack of data, language problems, & cultural differences in how people
respond to surveys, but can be done with proper adaptation.
Takeaway
• In B2B the local marketer should help the buying organization succeed, and make the buyer look good
• Firms must take into account the culture of the purchasing agent and the culture of the organization
Takeaway
It is useful to distinguish between three market environments:
1. The MATURE market, where share and customer satisfaction define the strategies
2. The NEW GROWTH market, where the global marketer needs to participate & “all boats rise with the tide”.
3. The EMERGING market, where the aim is market development with a long time horizon.
Takeaway