CUSTOMERS

1112-Q2-TOPIC 1-MARKETING

Markets
Consumer market (Chapter 5 Kotler) individuals and households who buy goods and services for personal consumption Business market (Chapter 6 Kotler) Organisations that buy goods and services to use in the production of other goods and services or for the purpose of reselling or renting them to others at a profit

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Learning Goals
Define the consumer market and construct a simple model of consumer buyer behaviour Tell how consumer buyer characteristics influence consumer buyer behaviour List and understand the major types of buying decision behaviour and the stages in the buyer decision process

Discuss how consumer decision making varies with the type of buying decision

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Analysing consumer buying behaviour

What do customers buy? Where do they buy? When do they buy? Why do they buy? How do they buy? Who buys?

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Buyer behaviour

HOW do consumers respond to various marketing efforts?

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Stimulus-response model of buying behaviour

HOW do consumers respond to various marketing efforts?

Marketing Q2 TOPIC 1: CUSTOMERS Theory

Buyer characteristics

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1. Cultural factors
Culture Culture is the set of basic values, perceptions, wants and behaviours learned by a member of society from family and other important institutions.

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Culture

France Power distance Individualism Uncertainty avoidance Masculinity

Germany

Japan

Holland

USA

68 71 86 43

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http://www.geert-hofstede.com

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Culture
Specific information on different business cultures
http://www.worldbusinessculture.com

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1. Cultural factors (cont.)

Subculture Nationalities Religion Racial groups Geographic regions

HSBC is the first to offer Islamic financial products

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1. Cultural factors (cont.)

Social class

Source: Class Thompson Hickey

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Buyer characteristics

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2. Social factors
Reference groups Reference groups serve as direct or indirect points of comparison or reference in forming a persons attitudes or behaviour

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2. Social factors (cont.)

Reference groups Opinion leaders are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert influence on others

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Groups

Extent of group influence on product and brand choice

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2. Social factors (cont.)

Family Family of orientation Family of procreation Decision-making unit: consumers buying roles Initiator Influencer Decider Buyer User Roles and status

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Buyer characteristics

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3. Personal factors
Buyers age and lifecycle stage
Young
Single Married without children Married with children Divorced with children Single Married without children Married with children Married without dependent children Divorced without children Divorced with children Divorced without dependent children

Middle-aged

Older
Older married Older unmarried

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3. Personal factors (cont.)

Occupation Economic situation Lifestyle Activities Interests Opinions Demographics Personality and self-concept

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Personality
Personality is a persons distinguishing psychological characteristics that lead to relatively consistent and lasting responses to his or her own environment. Brand personality: a set of human characteristics related to a brand

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Buyer characteristics

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4. Psychological factors
Motivation Freud: suggested that a persons buying decisions are affected by subconscious motives that even the buyer may not understand. Maslow: Human needs are arranged in a hierarchy from the most pressing at the bottom to the least pressing at the top.

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Maslows theorys of motivation

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4. Psychological factors (cont.)

Perception The process by which people select, organise and interpret information to form a meaningful picture of the world Three perceptual processes: Selective attention Selective distortion Selective retention

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Perception

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4. Psychological factors (cont.)

Learning changes in an individuals behaviour arising from experience Beliefs and attitudes A belief is a descriptive thought that a person has about something An attitude describes a persons relatively consistent favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea

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Beliefs

Consumer market beliefs Products and brands The best brands are the ones that sell best Keep clear of products new to the market until bugs have been ironed out

Store You can tell a store by its window display Larger stores offer better prices than smaller ones Specialty stores are great to learn about product options, but it is best to buy from a discount store A store offering good value on some of its items probably offers it on all its items

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Beliefs

Consumer market beliefs Price Higher prices often mean higher quality Sales are designed to remove poorly selling products Prices will fall soon after the product is launched Promotion The harder the sell the poorer the quality Free gifts to products mean the product may not be up to much Packaging Big containers are always cheaper per unit than smaller sizes Environmentally friendly packaging adds cost to the product

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Stimulus-response model of buying behaviour

HOW do consumers respond to various marketing efforts?

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How consumers make buying decisions

Types of decisions that consumers face

Main steps in the buyer decision process

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Determinants of the extent of problem solving

Price

Perceived risk Level of involvement Purchase frequency Self-expressive Differentiation and number of alternatives Extent of problem solving

Time pressure

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Types of buying behaviour

High Involvement Significant differences
between

Low Involvement
Varietyseeking behavior

brands

Complex buying behavior

Few differences
between

brands

Dissonancereducing buying behavior

Habitual buying behavior

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What is complex buying behaviour?

Complex buying behaviour is consumer buying behaviour in situations characterised by high consumer involvement in a purchase and significant perceived differences among brands.

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What is dissonance-reducing buying behaviour?

Dissonance-reducing buying behaviour is consumer behaviour in situations characterised by high involvement but few perceived differences among brands.

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What is habitual buying behaviour?

Habitual buying behaviour is consumer behaviour in situations characterised by low consumer involvement and few perceived brand differences.

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What is variety-seeking buying behaviour?

Variety-seeking buying behaviour is consumer behaviour in situations characterised by low consumer involvement, but significant perceived brand differences.

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Buyer decision process

Need recognition Information search Attitude of others Evaluation of alternatives Purchase intention Unexpected situational factors

Purchase decision
Postpurchase behaviour

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Buyer decision process

Need recognition Information search Evaluation of alternatives Encourage consumers to see that existing state does not equal desired state Provide information when and where consumers are likely to search Understand the criteria consumers use in comparing between brands and communicate own brand superiority Understand choice heuristics (beliefs) used by consumers and provide communication that encourages brand decision Encourage accurate consumer expectations

Purchase decision
Postpurchase behaviour

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Markets
Consumer market (Chapter 5 Kotler) individuals and households who buy goods and services for personal consumption Business market (Chapter 6 Kotler) Organisations that buy goods and services to use in the production of other goods and services or for the purpose of reselling or renting them to others at a profit

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Learning Goals
Define the business market and explain how business markets differ from consumer markets Identify the major factors that influence business buyer behaviour List and define the steps in the business buying decision process Compare the institutional and government markets and explain how institutional and government buyers make their buying decisions

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Business market
1. Business market business buyers 2. Institutional market includes schools, hospitals, nursing homes, prisons and other institutions providing care 3. Government market includes national and local units that purchase or rent goods to carry out government functions.
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Characteristics of business markets

Market structure and demand Fewer but larger buyers Geographically concentrated Derived from final consumer demand More inelastic More fluctuations Nature of buying unit More buyers in process More professional purchasing effort Types of decisions and the decision process More complex and formalised buying decisions Based on long-term relationships
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Model of business buyer behaviour

The environment
Marketing stimuli Other stimuli Economic Technological Political Cultural Competitive
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The buying organisation

Buyer response

The buying centre Product choice Buying decision process Supplier choice Order quantities Delivery terms and times Service terms Payment

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The buying centre

All the individuals and units that play a role in the business purchase decision-making process Five roles in the purchase decision process: Users Influencers Buyers Deciders Gatekeepers

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Major influences on business buyers

Environmental factors Organisational factors Interpersonal factors Individual factors

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The business buying process

The business buying process is the decision-making process by which businesses establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers.

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Stages of the business buying process

Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order-routine specification Performance review
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E-procurement: buying on the internet

Benefits: Gives buyers access to new suppliers Lowers purchasing costs Hastens order processing and delivery Frees purchasing people to focus on strategic issues

Acme Whistles
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Major types of buying situations

Involved Decision Making

New Task Buying

Modified Rebuy

Straight Rebuy
Extranet; e-procurement
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Marketing Q2

Differences B2B and B2C marketing

B2B customers often / usually
purchase goods and services that meet specific business needs need emphasis on economic benefits lengthy purchasing policies and processes

Consumer customers often / usually

purchase goods & services to meet individual or family needs
need emphasis on psychological benefits buy on impulse or with minimal processes purchase as individuals or as a family unit are content with a standardized product package
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buy large quantities and buy infrequently

want a customized product package

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Marketing Q2

Differences B2B and B2C marketing

B2B customers often / usually
experience major problems if supply fails find switching to another supplier difficult negotiate on price purchase direct from suppliers emphasis on personal selling

Consumer customers often / usually

experience minor irritation if supply fails

find switching to another supplier easy

accept the stated price purchase from intermediaries emphasis on mass media

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Questions:
1. How do the market structure and demand of the business markets for Michelin tyres sold to car makers differ from those selling Michelin tyres to final consumers? 2. Discuss several ways in which a straight rebuy differs from a new-task situation. 3. How does the business buying process differ from the consumer buying process?

4. Suppose that you own a small printing firm and have the opportunity to bid on a government contract that could bring a considerable amount of new business to your company. List 3 advantages and 3 disadvantages of working in a contract situation with the government.
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