Marketing Management - session 5-Consumer and business behavior.pptx

consumer and business behavior

1. Marketing Management Prepared by Shahin Rasoulian 1 Session 5 : Chapter 3 Consumer and business behavior Fall 2014

2. Objectives Business market, consumer market, decision making session 5 2

3. Different types of customers session 5 3

4. Business markets session 5 4

5. Business market Business markets are the set of organizations that buy goods and services that they use to create their own goods or services , which they then offer to consumers or other organizations. Business-to-business (B2B) marketing refers to the need to create value for customers of customers Business markets have fewer customers, but these customers spend more per purchase. session 5 5

6. Differences between B2B and B2C session 5 6 B2B marketing Consumer marketing Market and demand structure Geographically concentrated markets Relatively few customers Demand is derived, volatile and discontinuous Geographically dispersed markets More customers, mass market Demand is direct, generally elastic and less volatile, more stable Products and services May be technically complex Often adapted to customers’ particular needs Service, delivery and availability very important Bought for professional use or industrial use, not personal use Generally standardized Service, delivery and availability less important Bought for personal use Buyer behaviour Purchases made by professionals Generally high buyer involvement Decision process involves numerous actors Rational motivation arising from set objectives Individual purchases Variable level of buyer involvement Individual or family level decision process Motivation often social, psychological or emotional Relations between sellers and buyers Technically complex In general, buyers and sellers are in personal contact Substantial communication of information between actors Generally stable, long-term relationships Not technically complex Generally these relationships are impersonal Little information communicated between actors Generally short-term relationships Distribution channels, communication (promotion) and price Channels are shorter and more direct Communication mainly related to sales Prices generally negotiated or result from a bidding process Channels longer, less direct Communication mainly based on advertising and mass communication Prices generally fixed

7. Important concepts Relational dimension Derived demand: the fluctuation in consumer demand for a company’s product can have repercussions on demand for the company’s supplier’s products. session 5 7

8. Types of organizational customers For-profit companies Industrial distributors Value-added resellers Original equipment manufacturers End-users Governments Non-profit organizations session 5 8

9. Points Governments: Have preference for local companies and the imposition of quotas or contractual clauses with political or social justification. They want supplier to supply product parts for several years after the purchase. Their purchase can be unstable or extremely specialized. session 5 9

10. Types of purchasing situations (B2B) session 5 10 New task Modified rebuy Straight rebuy Simple Low risk Complex Higher risk Company modifies its needs similar to previous need Identical and routine purchase Objectives of current seller? Objectives of competitors? Company faces a new problem

11. Organizational buying process session 5 11 Defining the need Selection / procurement Delivery Post purchase evaluation Define the specification of the product or service. Searching for suppliers that can offer the required product. Choosing the best and purchasing. Supplier should adopt the product to customer’s needs, install, test, and train. Customer evaluates how well the supplier meets the needs and objectives.

12. Roles in the buying process Initiators: are the first to recognize the existence of a need to be filled. Influencers: people who have a considerable effect on the decision because of their experience or expertise. Deciders: people who actually hold power over the decision. They are generally project budget managers. Buyers: people who make the actual purchase. Users: the end users of the products and services purchased. Gatekeeper: people who screen the information and forward the relevant information to the end-users. session 5 12

13. Cultural factors in business markets session 5 13 Individualism Social hierarchy Uncertainty avoidance Masculinity Long-term orientation (LTO)

14. Cultural factors in business markets session 5 14 Individualism Social hierarchy Uncertainty avoidance Masculinity Long-term orientation (LTO)

15. Cultural factors in business markets session 5 15 Individualism Social hierarchy Uncertainty avoidance Masculinity Long-term orientation (LTO)

16. Cultural factors in business markets session 5 16 Individualism Social hierarchy Uncertainty avoidance Masculinity Long-term orientation (LTO)

17. Cultural factors in business markets session 5 17 Individualism Social hierarchy Uncertainty avoidance Masculinity Long-term orientation (LTO)

18. Consumer behaviour session 5 18

19. The basic triad session 5 19

20. Factors affecting consumer behaviour 20 session 5 Internal influences Motivation Perception Learning Attitudes Personality Age group Lifestyle External influences Culture Subculture Social class Reference group Family Situational influences Environment Time Economy Product or service Attributes Price Image Distribution Competitors Decision process Problem recognition Information search Evaluation of alternatives Purchase decision Post-purchase evaluation

21. Factors affecting consumer behaviour 21 1- motivations and needs Imbalance Maslow’s pyramid session 5

22. Factors affecting consumer behaviour 22 2- Perception Process of information session 5

23. Factors affecting consumer behaviour Perception Perception is the process whereby a person chooses, organizes and interprets information from the outside world Consumer behaviour is characterized by three types of perception processes: Selective attention Selective distortion Selective retention 23 session 5

24. Factors affecting consumer behaviour 24 3- Learning Experience modifies the buying behavior. Behaviorist and cognitive approaches. session 5

25. Factors affecting consumer behaviour Learning The behaviourist approach to learning Conditioning occurs when individuals learn to associate a certain stimulus with a given response (stimulus-response). Classical conditioning Instrumental (or operant) conditioning Generalizations 25 session 5

26. Factors affecting consumer behaviour Learning The cognitive approach to learning The cognitive approach considers that human beings learn by processing information perceived by the senses, that they solve problems and do not simply react to associations formed between stimuli Learning by observation 26 session 5

27. Factors affecting consumer behaviour 27 4- Attitude Person’s positive or negative feelings toward an idea or object. How they are formed or can be modified? session 5

28. Factors affecting consumer behaviour Attitude Attitudes are a person’s positive or negative feelings toward an idea or object Attitudes fulfills four main functions: Utilitarian function Ego-defensive function Value-expressive function Construction of a frame of reference An attitude is made up of cognitive , affective and conative components 28 session 5

29. Factors affecting consumer behaviour 29 Personality refers to individuals’ psychological characteristics, which influence the way they react to their environment. Self-concept is the way one considers oneself, or the way people believe others perceive them. session 5 5- Personality and self-concept

30. Factors affecting consumer behaviour 30 6- Age groups People buy and consume different products and services depending on their age group Babies Teenagers Young adults Seniors session 5

31. Factors affecting consumer behaviour 31 7- Life style A lifestyle is a set of thoughts and behaviours that individuals express through their values, interests, activities and opinions. The AIO approach (activities, interests, opinions) is based on the premise that by analyzing people’s activities, interests and opinions, one can determine their lifestyle. session 5

32. Factors affecting consumer behaviour 32 Internal influences External influences 1- Culture Culture is the result of the collective wisdom of a society and the rules of conduct it adopts. These rules of conduct represents the norms and values of the culture. session 5

33. Factors affecting consumer behaviour 33 Internal influences External influences 2- Subculture A subculture is a subgroup of a culture whose members have attitudes and values that are distinct from those of the national culture. session 5

34. Factors affecting consumer behaviour 34 Internal influences External influences 3- Social class A social class is division of the population that includes consumers who largely share the same values, same lifestyles or the same social history. session 5

35. Factors affecting consumer behaviour 35 Internal influences External influences 4- Reference groups A reference group is a set of people who influence an individual’s attitudes and behavior . Related to a person indirectly or directly (family, colleagues, friends) Aspiration groups Groups to which a person would like to belong session 5

36. Factors affecting consumer behaviour Reference groups Opinion leader is someone who influences the other members of the group without necessarily acting as a leader for all products or services. 36 session 5

37. Factors affecting consumer behaviour 37 Internal influences External influences 5- Family Family is the reference group with the greatest power over a person. Just as children are influenced from birth by their parents and siblings, adults are influenced by their partners and their children when they start their own household. session 5

38. Factors affecting consumer behaviour 38 Internal influences External influences 6- Lifecycle of the family Lifecycle of the family Every family passes through different stages, which affects consumers’ buying behaviour. Traditionally, young people formed a couple and then decided to have children. With time they became a middle-aged couple with children, then a couple without dependent children. The final stage, would end with an elderly person who was a widow or widower. session 5

39. Factors affecting consumer behaviour 39 Situational influences Internal influences 1- Environment Pleasant atmosphere at work, at home, or in a place of business affect the behaviour of customers. session 5

40. Factors affecting consumer behaviour 40 Situational influences Internal influences 2- Time Time is valuable, so companies must facilitate transaction. Time of day, month or year. session 5

41. Factors affecting consumer behaviour 41 Situational influences Internal influences 3- Economy The economic climate has a direct or indirect effect on consumers’ lifestyle, attitudes and behaviour, and decision process. session 5

42. Factors affecting consumer behaviour 42 Internal influences Product or service session 5

43. Important concepts in Buying decision process Involvement : The level of effort that a person puts into the decision. 43 Experience: The more extensive the person’s experience, the simpler and shorter the process becomes. Purchase risk: session 5

44. Buying decision process 44 Desired situation R eal situation session 5

45. Buying decision process 45 Information can come from: Internal sources (e.g. person’s experience with a product) External sources: Friend or relative Salesperson Ads Product user manuals Associations Magazines session 5

46. Buying decision process 46 The importance of the purchase is a key determinant of the time the consumer will allot to the information search: Routine purchase (+) Moderately complex purchase (++) Complex purchase (+++) session 5

47. Buying decision process 47 Consumers have to evaluate the alternatives available by first determining the selection criteria and assigning value to these criteria. The choice are ranked in order of importance to ease the selection process. session 5

48. Buying decision process 48 1- Linear compensatory model The consumer weighs each of the selection criteria for a product by importance, and evaluates each brand according to these criteria The decision-making process can be represented through the following equations: session 5

49. Buying decision process 49 Linear compensatory model (example ) session 5

50. Buying decision process 50 Linear compensatory model (example) session 5

51. Buying decision process 51 Linear compensatory model (example) session 5

52. Buying decision process 52 2- Conjunctive model The consumer determines a minimum acceptable threshold for each criterion evaluated. An option is considered only if it satisfies the minimum requirements for each criterion In the example of the choice of video MP3 player, if the student decides that the device should have a digital AM/FM tuner, the Apple iPod brand will automatically be rejected, based on the criteria presented in Table 3.3. The same reasoning applies if the student decides that all video MP3 players priced below $125 are of inferior quality. According to the criteria in the same table, the Coby, Archos and SanDisk brands will be eliminated. session 5

53. Buying decision process 53 3- Disjunctive model The disjunctive model is based on a minimal threshold for each criterion evaluated. An option is considered acceptable if it reaches at least one of the thresholds set session 5

54. Buying decision process 54 4- Lexicographic model This model complements the disjunctive model because it assumes that consumers rank their decision criteria in order of importance Options are thus compared based on the most important criterion, and the top ranked product is selected If two products are ranked equally on the first criterion, the comparison moves to the second criterion, and so on session 5

55. Buying decision process 55 Other models Delegated processes Affective processes Habit Impulsive buying session 5

56. Buying decision process 56 Once the best option is chosen, consumers are ready to make the purchase They will then begin another decision process to evaluate the sources that can provide the product (Internet, retailer, wholesaler, etc.) The simultaneous evaluation of the product and the place of purchase influences the final decision. The retailer’s reputation, customer service and the warranty are among the criteria evaluated session 5

57. Buying decision process 57 Are customers satisfied with the product? Would they buy it again? Will they say good or bad things about it? Consumers’ expectations Product performance Satisfaction or dissatisfaction Gap? Cognitive dissonance : the state of discomfort that a person feels after having made a choice session 5