Module 4

Understanding Consumer and Industrial Markets

Kotler’s Chapters 6 and 7

Chapter 6: Analyzing Consumer Markets and Buyer Behavior

• Learning Objectives– 1. Describe and apply the cultural, social, personal, and

psychological factors that influence buying behavior of consumers.

– 2. Describe and apply the four categories of consumer buying behavior (complex, dissonance-reducing, habitual, and variety-seeking buying behavior).

– 3. Describe and apply the stages of the buying process.

Chapter 6/Objective 1: The factors that influence buying behavior of consumers.

• Cultural: culture, subculture, social class

• Social: reference groups, family, roles and statuses

• Personal: age/stage in life cycle, occupation and economic circumstances, lifestyle, personality and self-concept

• Psychological: motivation, perception, learning, beliefs and attitudes

Chapter 6/Objective 1: The factors that influence buying behavior of consumers.

• Culture: Is what binds a society together. It’s the values, ideas, perceptions, and experiences we hold in common. The most fundamental determinant of a person’s wants and behaviors.

– Subculture: provides more specific identification and socialization for their members; based on nationality, ethnicity, religion, age, and geographic region.

– Social Class: relatively homogeneous and enduring divisions in society, which are hierarchically ordered and whose members share similar values, interests, and behavior;based not just on wealth but also on the source of wealth, education, neighborhood.

Chapter 6/Objective 1: The factors that influence buying behavior of consumers.

• Social Factors– Reference Groups: groups that have a direct or

indirect influence on a person’s attitudes or behaviors; can be membership, secondary, aspirational,or dissociative. Focus on opinion leaders who can spread word of mouth.

– Family: the most influential primary reference group

– Roles and Statuses: a role consists of the activities that a person is expected to perform and each role carries a status. Need to be aware of status symbols.

Chapter 6/Objective 1: The factors that influence buying behavior of consumers.

• Personal Factors– Age/Stage in the Life Cycle - family life cycle

– Occupation and Economic Circumstances - product choice affected by income, savings and assets, debts, borrowing power, and attitude toward spending/saving

– Lifestyles - the person’s pattern of living in the world as expressed in AIO (activities, interests, and opinions)

– Personality (distinguishing psychological characteristics that lead to consistent and enduring responses to the environment) and Self Concept

Chapter 6/Objective 1: The factors that influence buying behavior of consumers.

• Psychological Factors– Motivation - a need becomes a motive when it is aroused to a

sufficient level of intensity; presses the person to act

– Perception - the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world; selective attention, selective distortion, and selective retention

– Learning - involves changes in an individual’ls behavior arising from experience

– Beliefs - a descriptive thought that a person holds about something

– Attitudes - a person’s enduring favorable/unfavorable evaluations, emotional feelings, and action tendencies toward some object

Chapter 6/Objective 2: The four categories of consumer buying behavior.

• Complex - high involvement with significant differences between brands; think-feel-do; usually product is expensive, bought infrequently, risky and self-expressive.

• Dissonance-Reducing - high involvement with few differences between brands; usually product is expensive, infrequent, and risky; consumer wants info to support decision

• Habitual - low involvement with few differences between brands; ad repetition creates brand familiarity

• Variety-Seeking - low involvement with significant differences between brands; brand switching common.

Chapter 6/Objective 3: The 5 Stages of the Buying Process.

• Problem Recognition - recognizes need; marketers need to identify circumstances that trigger need.

• Information Search - 4 groups of sources: personal (most effective), commercial, public, experiential. Need to get brand into awareness set, consideration set, and choice set.

• Evaluation of Alternatives - compare benefits/attributes• Purchase Decision - purchase intention and buy• Postpurchase Behavior - postpurchase satisfaction a

function of buyers’ expectation versus product perceived performance.

Chapter 7: Analyzing Business Markets and Business Buying Behavior

• Learning Objectives– 1. Describe how the business market differs

from the consumer market.– 2. Describe and apply the major influences

(environmental, organizational, interpersonal, and individual) in the business buying process.

– 3. Describe the purchasing/procurement process (including purchasing orientation and the 8 stages in the process).

Chp 7/Obj 1: How the Business Market differs From the Consumer Market

– Fewer and Larger buyers

– Closer supplier-customer relationship

– Geographically concentrated buyers (7 key states)

– Derived, Inelastic, and Fluctuating Demand

– Professional Purchasing w/ Several Buying Influences

– Need for Multiple Sales Calls - 4-5 calls to close

– Direct Purchasing - buy from manufacturers rather than intermediaries

– Reciprocity - select suppliers who buy from them

– Leasing - lease instead of buy

Chapter 7/Objective 2: The 4 major influences in the buying process

• Environmental– Current and expected economic factors, supply of key

materials; Technological; Political/ legal; Competitive; Social responsibility - ex. environmental concerns

• Organizational

• Interpersonal

• Individual

Chapter 7/Objective 2: The 4 major influences in the buying process

• Organizational - objectives, policies, procedures, organizational structures, and systems– Trends Include Purchasing-Department Upgrading (more

strategic oriented); Cross-Functional Roles (more responsibility); Centralized Purchasing (fewer, higher level buyers); Decentralized Purchasing of Small-Ticket Items (ex. use of corporate purchasing cards to empower employees to buy smaller items); Internet Purchasing; Long-Term Contracts; Purchasing-Performance; Evaluation, and Buyers’ Professional Development; and Lean Production (ex. JIT).

Chapter 7/Objective 2: The 4 major influences in the buying process

• Interpersonal - interests, authority, status, empathy, and persuasiveness– Recognize several participants that may differ

• Individual - age, income, education, job position, personality, risk attitudes, and culture– Recognize individuals have different styles

• Also have to address Cultural Factors in doing business globally.

Chapter 7/Objective 3: The Purchasing/Procurement Process

• Business buyers seek to obtain the highest benefit package (economic, technical, service, and social) in relation to a market offering’s costs. Incentive higher if benefit>cost.

• Purchasing Orientation– Buying - executing discrete transactions with suppliers where the

relationships are arms-length and possibly adversarial; focus short-term and tactical.

– Procurement - seek quality improvements and cost reductions; more collaborative with smaller # suppliers.

– Supply Management - purchasing becomes strategic value-added; improve entire value chain from raw materials to end users.

Chapter 7/Objective 3: The Purchasing/Procurement Process

• 8 Stages in Process– 1. Problem Recognition– 2. General Need Description– 3. Product Specification – 4. Supplier Search– 5. Proposal Solicitation– 6. Supplier Selection– 7. Order-Routine Specification– 8. Performance Review

Chapter 7/Objective 3: The Purchasing/Procurement Process

• 8 Stages in More Detail

• 1. Problem Recognition– Recognize a problem due to creating a new

product, break down of equipment, unsatisfactory material, and opportunity for lower prices or better quality.

• 2. General Need Description – Determine general characteristics and required

quantity.

Chapter 7/Objective 3: The Purchasing/Procurement Process

• 3. Product Specification– Product Value Analysis - an approach to cost

reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production.

• 4. Supplier Search– Use trade directories, computer search, trade

shows and ads, www.wiznet.net, etc...

Chapter 7/Objective 3: The Purchasing/Procurement Process

• 5. Proposal Solicitation– Qualified suppliers invited to submit proposals.

• 6. Supplier Selection - price still key– Rate suppliers on specific, weighted attributes.– Companies reducing # of suppliers.

• 7. Order-Routine Specification– Negotiate final order, list technical specs, quantity

needed, expected time of delivery, return policies, warranties, etc . . .

Chapter 7/Objective 3: The Purchasing/Procurement Process

• 8. Performance Review– Contact end users and ask for their evaluations.– Rate supplier on several criteria using a weighted

score method.– Aggregate the cost of poor supplier performace

to come up with adjusted cost of purchase, including price.

– May result in continuing, modifying, or ending relationship with supplier.

Module 4: Understanding Consumer and Industrial Markets• Chapter 6:

– Consumer Markets and Buying Behavior

• Chapter 7:– Business Markets and

Buying Behavior

• Any Questions