Consumer Decision Making

Chapter 3

Topic
1. Important of understanding of consumer behavior 2. Consumer buying behavior 3. Consumer decision process 4. Types of consumer buying decision 5. Factors influencing consumer buying decision 6. Business buying behavior

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Case Study Harley Davidson

Building Success
Understanding the customers emotions and motivation Determining the factors of loyalty Translating this information to effective advertising

Measuring Success
Currently 22% of all U.S. bike sales Demand above supply Sales doubled in the past 5 years with earnings tripled.
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Definitions
Consumer buyer behavior refers to the buying behavior of final consumers individuals and households who buy goods and services for personal consumption All of these final consumers combine to make up the consumer market
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Goal 1: Learn the consumer market & construct model of buyer behavior

Stimulus-Response Model of Consumer Behavior

Stimuli
4Ps Other characteristics economic technological political cultural

Buyers Black Box

Buyer characteristics Buyer decision process

Buyer Response
Product choice Brand choice Dealer choice Purchase timing Purchase amount

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Goal 1: Learn the consumer market & construct model of buyer behavior

Factors Influencing Consumer Behavior

Cultural
Social
Culture Sub-culture Reference groups

Personal
Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept

Psychological
Motivation Perception Learning Beliefs and attitudes

Social class

Family
Roles and status

Buyer

Characteristics Affecting Consumer Behavior Key Factors

Cultural Social Personal Psychological
Culture Forms a persons wants

and behavior systems

Subculture Groups with shared value Social Class Societys divisions who

share values, interests and behaviors

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Goal 2: Know the four factors that influence consumer buying behavior

Characteristics Affecting Consumer Behavior Key Factors

Cultural Social Personal Psychological
Groups Membership Reference Aspirational Opinion Leaders Buzz marketing Family Many influencers Roles and Status

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Goal 2: Know the four factors that influence consumer buying behavior

Characteristics Affecting Consumer Behavior Key Factors

Cultural Social Personal Psychological
Age and life cycle Occupation Economic situation Lifestyle Activities, interests and

opinions Lifestyle segmentation

Personality and self-concept

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Goal 2: Know the four factors that influence consumer buying behavior

Characteristics Affecting Consumer Behavior

Brand Personality Dimensions

Sincerity Ruggedness Excitement Competence

Sophistication
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Goal 2: Know the four factors that influence consumer buying behavior

Characteristics Affecting Consumer Behavior Key Factors

Cultural Social Personal Psychological
Motivation Perception Learning Beliefs and attitudes

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Goal 2: Know the four factors that influence consumer buying behavior

Psychological Factors
Motivation

Beliefs and Attitudes

Psychological Factors Affecting Buyers Choices

Perception

Learning

Psychological Factors Motivation

A motive is a need that is sufficiently pressing to direct the person to seek satisfaction Motivation research is based on Freud; Looks for hidden and subconscious motivation Maslow ordered needs based on how pressing they are to the consumer
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Goal 2: Know the four factors that influence consumer buying behavior

Maslows Hierarchy of Needs

Self Actualization

Esteem Needs (self-esteem)

(sense of belonging, love)

Social Needs

(security, protection)

Safety Needs

Physiological Needs
(hunger, thirst)

Psychological Factors Perception

Perception is the process by which people select, organize, and interpret information Perception Includes:
Selective attention
Consumers screen out information

Selective distortion
People interpret to support beliefs

Selective retention
People retain points to support attitudes
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Goal 2: Know the four factors that influence consumer buying behavior

Psychological Factors Learning

Learning describes changes in an individuals behavior arising from experience Learning occurs through:
Drives
Stimuli Cues
Internal stimulus that calls for action Objects that move drive to motive

Reinforcement

Minor stimuli that affect response

Feedback on action
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Goal 2: Know the four factors that influence consumer buying behavior

Psychological Factors Beliefs and Attitudes

Belief
a descriptive thought about a brand or service may be based on real knowledge, opinion, or faith

Attitude
describes a persons evaluations, feelings and tendencies toward an object or idea They are difficult to change
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Goal 2: Know the four factors that influence consumer buying behavior

Types of Buying Decision Behavior

Complex
Dissonance-reducing Habitual
Highly involved, significant brand differences Example computer Highly involved, little brand differences Example carpeting Low involvement, little brand differences Example salt

Variety-seeking

Low involvement, significant perceived brand differences Example cookies

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Goal 3: Understand types of buying decisions and stages in the process

Buyer Decision Process

Purchase Decision

Evaluation of Alternatives
Information Search Need Recognition

Postpurchase Behavior

The Buyer Decision Process

Process Stages
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior
Needs can be triggered by: Internal stimuli Normal needs become strong enough to drive behavior External stimuli Advertisements Friends of friends

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Goal 3: Understand types of buying decisions and stages in the process

The Buyer Decision Process

Process Stages
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior
Consumers exhibit heightened attention or actively search for information. Sources of information: Personal Commercial Public Experiential Word-of-mouth

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Goal 3: Understand types of buying decisions and stages in the process

The Buyer Decision Process

Process Stages
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior
Evaluation procedure depends on the consumer and the buying situation. Most buyers evaluate multiple attributes, each of which is weighted differently. At the end of the evaluation stage, purchase intentions are formed.

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Goal 3: Understand types of buying decisions and stages in the process

The Buyer Decision Process

Process Stages
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior
Two factors intercede between purchase intentions and the actual decision: Attitudes of others Unexpected situational factors

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Goal 3: Understand types of buying decisions and stages in the process

The Buyer Decision Process

Process Stages
Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior
Satisfaction is important: Delighted consumers engage in positive wordof-mouth. Unhappy customers tell on average 11 other people. It costs more to attract a new customer than it does to retain an existing customer. Cognitive dissonance is common
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Goal 3: Understand types of buying decisions and stages in the process

Buyer Decision Process for New Products

New Products
Good, service or idea that is perceived by customers as new.

Stages in the Adoption Process

Marketers should help consumers move through these stages.

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Goal 4: Comprehend the diffusion & adoption process for new products

Buyer Decision Process for New Products

Stages in the Adoption Process
Awareness Evaluation
Adoption
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Interest Trial

Goal 4: Comprehend the diffusion & adoption process for new products

Buyer Decision Process for New Products

Individual Differences in Innovativeness
Consumers can be classified into five adopter categories, each of which behaves differently toward new products.

Product Characteristics and Adoption

Five product characteristics influence the adoption rate.

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Goal 4: Comprehend the diffusion & adoption process for new products

Buyer Decision Process for New Products

Product Characteristics
Relative Advantage Compatibility Complexity Divisibility

Communicability
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Goal 4: Comprehend the diffusion & adoption process for new products

Buyer Decision Process for New Products

International Consumer Behavior
Values, attitudes and behaviors differ greatly in other countries. Physical differences exist which require changes in the marketing mix. Customs vary from country to country. Marketers must decide the degree to which they will adapt their marketing efforts.

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Goal 4: Comprehend the diffusion & adoption process for new products

Types of Consumer Buying 4 Decisions

Routine Response Behavior Limited Decision Making Extensive Decision Making

Less Involvement
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More Involvement
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Five Factors influencing 4 Decisions

1.
2. 3.

Level of consumer involvement

Length of time to make decision Cost of good or service

4. Degree of information search 5. Number of alternatives considered

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Routine Response Behavior

Little involvement in selection process
Frequently purchased low cost goods

May stick with one brand

Buy first/evaluate later

Quick decision
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Limited Decision Making

Low levels of involvement
Low to moderate cost goods Evaluation of a few alternative brands Short to moderate time to decide
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Extensive Decision Making

High levels of involvement
High cost goods

Evaluation of many brands

Long time to decide May experience cognitive dissonance
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Level of Involvement
Previous Experience Interest

Factors Determining Level of Involvement

Perceived Risk of Negative Consequences

Situation Social Visibility

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Marketing Implications of 4 Involvement

High-involvement purchases require: extensive promotion to target market and good advertisement Low-involvement purchases require: in-store promotion and eye-catching package design

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Business Markets and Business Buyer Behavior

Case Study UPS

Customer Needs
Consumers need fast, friendly, low-cost package delivery Business needs are more complex Shipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns

Services
Its 360,000 people and 88,000 vehicles offer ground, air, freight worldwide Helps customer navigate the complexities of international shipping Offers a wide range of financial services Provides consulting services to improve logistics operations

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Definition
Business Buyer Behavior:
The buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.

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Goal 1: Define the business market

Characteristics of Business Markets

Sales in the business market far exceed sales in consumer markets. Business markets differ from consumer markets in many ways.
Marketing structure and demand Nature of the buying unit Types of decisions and the decision process

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Goal 1: Define the business market

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process

Compared to consumer markets:

Business markets Business customers
are more geographically concentrated have fewer but larger customers

Demand is different

Demand is derived Demand is price inelastic

Demand fluctuates more
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Goal 1: Define the business market

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process
Compared to consumer purchases:
Involve more buyers in the decision process More professional purchasing effort

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Goal 1: Define the business market

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process
Compared to consumer purchases
More complex buying decisions The buying process is more formalized Buyers and sellers work more closely together and build long-term relationships

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Goal 1: Define the business market

Business Buyer Behavior

Major Types of Buying Situations Straight rebuy Reordering without modification Modified rebuy Requires modification to prior purchase New task First-time purchase

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Goal 1: Define the business market

Business Buyer Behavior

Systems Selling
Buying a packaged solution to a problem from a single seller. Often a key marketing strategy for businesses seeking to win and hold accounts.

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Goal 1: Define the business market

Business Buyer Behavior

Buying Center
The decision-making unit of a buying organization Includes all individuals and units that participate in the decision making

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Goal 1: Define the business market

Business Buyer Behavior

Members of the Buying Center
Users Buyers Influencers Deciders

Gatekeepers
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Goal 1: Define the business market

Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual
Economic trends Supply conditions Technological, political and competitive changes Culture and customs

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Goal 2: Identify the major factors that influence business buyer behavior

Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual
Objectives Policies Procedures Organizational structure Systems

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Goal 2: Identify the major factors that influence business buyer behavior

Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual
Influence of members in the buying center

Authority Status Empathy Persuasiveness

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Goal 2: Identify the major factors that influence business buyer behavior

Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual
Personal characteristics of members in the buying center
Age and income Education Job position Personality Risk attitudes Buying styles

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Goal 2: Identify the major factors that influence business buyer behavior

Stages in the Business Buying Process

Stage 1: Problem Recognition Stage 2: General Need Description Stage 3: Product Specification
Value analysis helps to reduce costs

Stage 4: Supplier Search

Supplier development

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Goal 3: List and define the steps in the business buying decision process

Stages in the Business Buying Process

Stage 5: Proposal Solicitation Stage 6: Supplier Selection Stage 7: Order-Routine Specification
Blanket contracts are often used for maintenance, repair and operating items.

Stage 8: Performance Review

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Goal 3: List and define the steps in the business buying decision process

Business Buying on the Internet

E-procurement is growing rapidly Online auctions and online trading exchanges (e-marketplaces) account for much of the online purchasing activity E-procurement offers many benefits:
Access to new suppliers Lower purchasing costs Quicker order processing and delivery

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Goal 3: List and define the steps in the business buying decision process