Chapter 3
ANALYSING
MARKETING
OPPORTUNITIES
Chapter objectives
To define consumer buying behavior
To understand the process of buying decisions by
consumers
To define organizational buying behavior
To understand process of buying decisions by
organizations
To discuss on the model of organizational buying
behavior
To explain the differences of the two behaviors
CONSUMER BUYING BEHAVIOR
Definition of Buying Behavior:
Buying Behavior is
the decision processes
and acts of people
involved in buying
and using products.
A firm needs to analyze buying behavior for:
◦ Buyers reactions to a firms marketing strategy has a
great impact on the firms success.
◦ The marketing concept stresses that a firm should
create a Marketing Mix (MM) that satisfies (gives
utility to) customers, therefore need to analyze the
what, where, when and how consumers buy.
Marketers can better predict
how consumers will respond
to marketing strategies.
Why should I understand
Consumer Buying Behavior?
The Consumer Decision Making Process
Problem Recognition
Information Search
Evaluation of alternatives
Purchase
Post purchase Behavior
Types of Consumer Buying Behavior
Types of consumer buying behavior are
determined by:
Level of Involvement in purchase decision.
Importance and intensity of interest in a product
in a particular situation.
Buyers level of involvement determines why
he/she is motivated to seek information about a
certain products and brands but virtually ignores
others.
High involvement purchases--Honda Motorbike,
high priced goods, products visible to others, and
the higher the risk the higher the involvement.
Types of risk:
Personal risk
Social risk
Economic risk
The four type of
consumer buying behavior are:
Routine Response/Programmed Behavior
-buying low involvement frequently purchased
low cost items; need very little search and
decision effort; purchased almost automatically.
Examples include soft drinks, snack foods, milk
etc.
Limited Decision Making
buying product occasionally. Requires a moderate
amount of time for information gathering.
Examples include Clothes--know product class
but not the brand.
Extensive Decision Making/Complex
high involvement, unfamiliar, expensive and/or
infrequently bought products. High degree of
economic/performance/psychological risk.
Examples include cars, homes, computers,
education.
Spend a lot of time seeking information and
deciding.
Information from the companies MM; friends and
relatives, store personnel etc. Go through all six
stages of the buying process.
Impulse buying, no conscious planning
The purchase of the same product does not
always elicit the same Buying Behavior. Product
can shift from one category to the next.
Factors influencing customer decision
process
FACTORS SUB FACTORS
CULTURAL INFLUENCES Culture, Values, Subculture , Social
Class
SOCIAL Reference group, opinion leaders,
INFLUENCES Family & Friends
INDIVIDUAL Gender, Age and Family Life Cycle,
INFLUENCES Personality, Lifestyle and concept
PSYCHOLOGICAL Perceptions, Motivation, Learning,
INFLUENCES Beliefs and attitudes
Can you give more examples?
Organizational Buying Behavior
“the decision-making process by which
organisations establish the need for
purchased products and services, and
identify, evaluate and choose among
alternative brands and suppliers”
Webster and Wind
(1972)
The eight stage model
organizational buying process
The eight stages may be contracted depending upon
the nature of the purchasing situation.
The next focus of the chapter is a discussion of the
types of buying situations which occur in
organizational buying. These include "new task,"
"straight rebuy," and "modified rebuy."
The Process
Problem recognition
Determine product dimensions and quantity
Precise description of product characteristics
Search and qualification of potential sources
Acquisition and analysis of proposals
Evaluation of proposals and supplier selection
Selection of an order routine
Performance feedback and evaluation
Determinants and definition
of organisational buying
Organisation
•Structure and style
Environment •Politics Buying centre
•Government regulations •Product use
•Group decisions
•Economic climate •Individual behaviour
•Technological change
•Gatekeeper
•Derived demand
•Conflict resolution
ORGANISATIONAL BUYING
“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” Webster and Wind 1972
Buying centre influences
Market factors – characteristics which
differentiate organizational buying markets
from consumer markets (bulk, value, demand,
geographical concentration, reciprocal trading
arrangements)
Company factors – size, specialisation,
orientation
Buying situation – new buy, modified rebuy,
straight rebuy
Product factors – essentiality, technical
complexity, value, consequence of failure,
novelty, frequency
Organization Buying Roles
Policy makers – general corporate policies
dictate purchase decisions
Purchasers – person with formal authority for
ordering
Users – of product or service – most
concerned with performance and ease of use
Technologists – specialist knowledge allows
objective differentiation of product performance
Influencers – anyone not in any of other
categories inside or outside organisation
Gatekeeper – opinion leader – may have
another role
Deciders – formal authority for approving
Models of organisational
buying
THE SHETH MODEL THE WEBSTER AND WIND
The psychological world of MODEL
the decision maker The firm’s environment
Product and company
The organisation
variables
Structure and methods for The buying team
problem solving (interpersonal influences)
Situational factors The individual
“organisational buying “the individual as the real
decisions are often decision maker in the
determined by ad hoc organisation ….motivation,
situational factors and not by personality, perception,
any systematic decision learning and experience are
making process”
all vital to the decision
process”
Sheth’s model of organisational buying
Market Segmentation
Market segmentation is the
identification of portions of the
market that are different from
one another. Segmentation allows
the firm to better satisfy the
needs of its potential customers
The Need for
Market Segmentation
Mass marketing
◦ refers to treatment of the market as a homogenous
group and offering the same marketing mix to all
customers. Mass marketing allows economies of scale to
be realized through mass production, mass distribution,
and mass communication.
◦ The drawback of mass marketing is that customer needs
and preferences differ and the same offering is unlikely
to be viewed as optimal by all customers.
◦ If firms ignored the differing customer needs, another
firm likely would enter the market with a product that
serves a specific group, and the incumbent firms would
lose those customers.
Target marketing
◦ on the other hand recognizes the diversity
of customers and does not try to please all
of them with the same offering. The first
step in target marketing is to identify
different market segments and their needs.
Bases for Segmentation in
Consumer Markets
Consumer markets can
be segmented on the
following customer characteristics
Geographic
Demographic
Psychographic
Behavioralistic
Geographic Segmentation
The following are some examples of geographic
variables often used in segmentation.
Region: by continent, country, state, or even
neighborhood
Size of metropolitan area: segmented according
to size of population
Population density: often classified as urban,
suburban, or rural
Climate: according to weather patterns common
to certain geographic regions
Some demographic segmentation
variables include:
Age
Gender
Family size
Family lifecycle
Generation: baby-boomers, Generation X, etc.
Income
Occupation
Education
Ethnicity
Nationality
Demographic Segmentation
Religion
Social class
Psychographic Segmentation
Psychographic segmentation groups
customers according to their lifestyle.
Activities, interests, and opinions (AIO)
surveys are one tool for measuring lifestyle.
Some psychographic variables include:
Activities
Interests
Opinions
Attitudes
Values
Behavioralistic Segmentation
Behavioral segmentation is based on actual
customer behavior toward products. Some
behavioralistic variables include:
Benefits sought
Usage rate
Brand loyalty
User status: potential, first-time, regular, etc.
Readiness to buy
Occasions: holidays and events that stimulate
purchases