Strategic Marketing
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chap5.pptx
Chapter 5-UNDERSTANDING CONSUMER AND BUSINESS BUYER BEHAVIOR
Strategic Marketing, MASY1-GC 1230
Shinola: Nobody’s Confusing Sh*t with Shinola Anymore
“Built in Detroit”: Shinola is selling gritty Detroit, authentically American values, emotions, and a roll-up-our-sleeves lifestyle.
Premium watches, high-end bicycles, apparel, leather accessories, and audio equipment
$125 million in sales
1,000 stores worldwide, including high-end department stores such as Nordstrom, Neiman Marcus, and Saks Fifth Avenue
“We’re starting with the reinvigoration of a storied American brand, and a storied American city,” says the company. Shinola “is a brand committed to turning out high-quality products in America with…American suppliers and American labor.”
Shinola is selling much more than just watches or bikes or leather accessories. It’s selling gritty Detroit, authentically American values, emotions, and a roll-up-our-sleeves lifestyle, things that lie at the heart consumers’ feelings and behavior toward the brand.
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Consumer Buyer Behavior and Consumer Markets
Consumer buyer behavior
Buying behavior of final consumers
Consumer market
All the individuals and households that buy or acquire goods and services for personal consumption
Consumer buyer behavior refers to the buying behavior of final consumers who are the individuals and households that buy goods and services for personal consumption. All of these final consumers combine to make up the consumer market.
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The Model of Buyer Behavior
This figure shows that marketing and other stimuli enter the consumer’s “black box” and produce certain responses. Marketers must figure out what is in the buyer’s black box. The whats, wheres, and whens of consumer buying behavior can be measured. But it’s very difficult to figure out the whys of buying behavior (that’s why it’s called the black box). Marketers spend a lot of time and money trying to figure out what makes customers tick.
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Factors Influencing Consumer Behavior
Consumer purchases are influenced strongly by cultural, social, personal, and psychological characteristics, as shown in this figure. For the most part, marketers cannot control such factors, but they must take them into account. The following slides will discuss these characteristics in more detail.
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Cultural Factors
Culture
Set of basic values, perceptions, wants, and behaviors learned by an individual from family and other important institutions
Subculture
Group of people with shared value systems based on common life experiences and situations
Total market strategy integrates ethnic themes and cross-cultural perspectives within a brand’s mainstream marketing.
Social class
Relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors
Culture is the most basic cause of a person’s wants and behavior. Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions.
A subculture is a group of people with shared value systems based on common life experiences and situations.
A total market strategy integrates ethnic themes and cross-cultural perspectives within a brand’s mainstream marketing, appealing to consumer similarities across subcultures rather than differences.
A social class is the relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors. It is measured as a combination of occupation, income, education, wealth, and other variables.
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TikTok SUBCULTURES 2021
Dark Academia - Like a high fashion version of Harry Potter, revolves around the literary classics, beautiful libraries, plenty of starched collars, tweed jackets, and perfectly worn-in leathers.
Scene Kids - the early Aughts are back. Recreation of old MySpace photos from the original scene kid era, big hair and all. Think of the scene kid as a cross between a punk and raver.
Grunge -Patchwork sweaters, ripped jeans, and grown-out roots, with unexpected touches like pearls and a more Goth approach to makeup.
DARK ACADEMIA
SCENE KIDS
GRUNGE
Social Factors
Groups
Word-of-mouth (WOM) influence
Opinion leaders
Online social networks
Family
Roles and status
A consumer’s behavior is also influenced by social factors.
Groups that have a direct influence and to which a person belongs are called membership groups. Reference groups serve as direct or indirect points of comparison or reference in forming a person’s attitudes or behavior. An aspirational group is one to which the individual wishes to belong.
Word-of-mouth influence refers to the impact of the personal words and recommendations of trusted friends, associates, and other consumers on buying behavior. Rather than leaving it to chance, marketers can help to create positive conversations about their brands.
An opinion leader is a person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts social influence on others. Opinion leaders are also referred to as influentials or leading adopters. Buzz marketing involves enlisting or even creating opinion leaders to serve as brand ambassadors who spread the word about a company’s products.
Online social networks are online communities where people socialize or exchange information and opinions.
Family members can strongly influence buyer behavior. Marketers are interested in the roles and influence of the husband, wife, and children on the purchase of different products and services.
A person’s position in each group can be defined in terms of both role and status. People usually choose products appropriate to their roles and status.
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Personal Factors
Occupation
Age and family life-cycle
Economic situation
Lifestyle
Personality and self-concept
A buyer’s decisions also are influenced by personal characteristics of the buyer. A person’s occupation affects the goods and services bought. Marketers try to identify the occupational groups that have an above-average interest in their products and services. A company can specialize in making products needed by a given occupational group.
Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle. One of the leading life-stage segmentation systems is the Nielsen PRIZM Lifestage Groups system. PRIZM classifies every American household into one of 66 distinct life-stage segments, which are organized into 11 major life-stage groups.
A person’s economic situation will affect his or her store and product choices. Marketers watch trends in spending, personal income, savings, and interest rates.
Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumers’ major AIO dimensions - activities, interests, and opinions. The lifestyle concept can help marketers understand changing consumer values and how they affect buyer behavior.
Personality refers to the unique psychological characteristics that distinguish a person or group. It can be useful in analyzing consumer behavior for certain product or brand choices. A person’s self-concept is also made use of by marketers. The idea is that people’s possessions contribute to and reflect their identities.
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Personal Factors (CONT’D)
MINI owners—who times call themselves “MINIacs”—have a strong and emotional connection with their cars.
Brand personality: MINI markets to personality segments of people who are “adventurous, individualistic, open-minded, creative, tech-savvy, and young at heart”—anything but “normal”—just like the car.
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SIXTEEN COVID-19 PERSONALITY TYPES
| PERSONALITY TYPE | DESCRIPTION |
| 1. Deniers | Downplay the viral threat, promoting business as usual |
| 2. Spreaders | Want the virus to spread, herd immunity to develop, and normality to return |
| 3. Harmers | Try to harm others, e.g. by spitting or coughing at them |
| 4. Realists | Recognize the reality of the potential harm and adjust their behaviors |
| 5. Worriers | Stay informed and safe to manage their uncertainty and fear |
| 6. Contemplators | Isolate and reflect on life and the world |
| 7. Hoarders | Panic-buy and hoard products to quell their insecurity |
| 8. Invincibles | Often young, who believe themselves to be immune |
Source: “Research Says There Are 16 Covid-19 Personality Types. Leaders Have to Plan for Them All”, Inc., 2.12.21
SIXTEEN COVID-19 PERSONALITY TYPES (CONT’D)
| PERSONALITY TYPE | DESCRIPTION |
| 9. Rebels | Defiantly ignore social rules restricting their individual freedoms |
| 10. Blamers | Vent their fears and frustrations onto others |
| 11. Exploiters | Exploit the situation for power, profit or brutality |
| 12. Innovators | Design or re-purpose resources to fight the pandemic |
| 13. Supporters | Show their solidarity in support of others |
| 14. Altruists | Help the vulnerable, elderly, and isolated |
| 15. Warriors | Like the front-line health care workers, combat its grim reality |
| 16. Veterans | Experienced SARS or MERS and willingly comply with restrictions |
Source: “Research Says There Are 16 Covid-19 Personality Types. Leaders Have to Plan for Them All”, Inc., 2.12.21
Psychological Factors
Motivation
Perception
Learning
Beliefs and Attitudes
A motive (or drive) is a need that is sufficiently pressing to direct a person to seek satisfaction. Many companies employ teams of psychologists, anthropologists, and other social scientists to carry out motivation research.
Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe. Selective retention means that consumers are likely to remember good points made about a brand they favor and forget good points made about competing brands. Some consumers worry that they will be affected by marketing messages without even knowing it—through subliminal advertising.
Learning describes changes in an individual’s behavior arising from experience. The practical significance of learning theory for marketers is that they can build up demand for a product by associating it with strong drives by using motivating cues and providing positive reinforcement.
A belief is a descriptive thought that a person holds about something. Marketers are interested in the beliefs that people formulate about specific products and services because these beliefs make up product and brand images that affect buying behavior. Attitudes put people into a frame of mind of liking or disliking things, of moving toward or away from them.
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Maslow’s Hierarchy of Needs
Abraham Maslow sought to explain why people are driven by particular needs at particular times. Why does one person spend a lot of time and energy on personal safety and another on gaining the esteem of others? Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing at the bottom to the least pressing at the top. They include physiological needs, safety needs, social needs, esteem needs, and self-actualization needs.
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Buyer Decision Process
This figure shows that the buyer decision process consists of five stages.
The first stage is need recognition. The need can be triggered by internal stimuli when one of the person’s normal needs rises to a level high enough to become a drive. A need can also be triggered by external stimuli.
The second stage is information search. Consumers can obtain information from several sources like personal, commercial, public, and experiential sources.
The third stage is the evaluation of alternatives, that is, how consumers process information to choose among alternative brands.
The fourth stage is the purchase decision. Two factors can come between the purchase intention and the purchase decision: the attitudes of others and unexpected situational factors.
The last stage is postpurchase behavior. Determining if the consumer is satisfied or dissatisfied with the purchase lies in the relationship between the consumer’s expectations and the product’s perceived performance. However, all major purchases result in cognitive dissonance, or discomfort caused by postpurchase conflict.
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Postpurchase Behavior
Postpurchase customer satisfaction is a key to building profitable customer relationships.
Postpurchase customer satisfaction is a key to building profitable customer relationships. Most marketers go beyond merely meeting the customer expectations—they aim to delight customers.
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Stages in the Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
The adoption process is the mental process through which an individual passes from first learning about an innovation to final adoption. Consumers go through five stages in the process of adopting a new product, which is a good, service, or idea that is perceived by some potential customers as new.
The first stage is awareness. In this stage the consumer becomes aware of the new product but lacks information about it.
The second stage is interest, which involves the consumer seeking information about the new product.
The third stage is evaluation, where the consumer considers whether trying the new product makes sense.
The fourth stage is trial. In this stage, the consumer tries the new product on a small scale to improve his or her estimate of its value.
The final stage is adoption where the consumer decides to make full and regular use of the new product.
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Adopter Categories Based on Relative Time of Adoption of Innovations
People can be classified into the adopter categories shown in Figure 5.5. The curve illustrates that after a slow start, an increasing number of people adopt the new product.
The five adopter groups have differing values. Innovators try new ideas at some risk. Early adopters are opinion leaders in their communities and adopt new ideas early but carefully. Early mainstream adopters adopt new ideas before the average person. Late mainstream adopters adopt an innovation only after a majority of people have tried it. Finally, lagging adopters adopt the innovation only when it has become something of a tradition itself.
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Characteristics Influencing an Innovation’s Rate of Adoption
Relative advantage
the degree to which the innovation appears superior to existing products.
Compatibility
the degree to which the innovation fits the values and experiences of potential consumers.
The characteristics of the new product affect its rate of adoption.
Relative advantage is the degree to which the innovation appears superior to existing products.
The second characteristic is compatibility, which is the degree to which the innovation fits the values and experiences of potential consumers.
The third characteristic is complexity, which refers to the degree to which the innovation is difficult to understand or use.
The fourth characteristic is divisibility, which is the degree to which the innovation may be tried on a limited basis.
The fifth characteristic is communicability. This refers to the degree to which the results of using the innovation can be observed or described to others.
Other characteristics that influence the rate of adoption include initial and ongoing costs, risk and uncertainty, and social approval.
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Characteristics Influencing an Innovation’s Rate of Adoption (CONT’D)
Complexity
the degree to which the innovation is difficult to understand or use.
Divisibility
the degree to which the innovation may be tried on a limited basis.
Communicability
the degree to which the results of using the innovation can be observed or described to others.
The characteristics of the new product affect its rate of adoption.
Relative advantage is the degree to which the innovation appears superior to existing products.
The second characteristic is compatibility, which is the degree to which the innovation fits the values and experiences of potential consumers.
The third characteristic is complexity, which refers to the degree to which the innovation is difficult to understand or use.
The fourth characteristic is divisibility, which is the degree to which the innovation may be tried on a limited basis.
The fifth characteristic is communicability. This refers to the degree to which the results of using the innovation can be observed or described to others.
Other characteristics that influence the rate of adoption include initial and ongoing costs, risk and uncertainty, and social approval.
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Business Buyer Behavior
Business buyer behavior
Purchasing goods and services are used in the production of other products and services
Business-to-business (B-to-B) marketers must understand business markets and business buyer behavior
Business buying process: Determining which products and services to purchase
Finding, evaluating, and choosing among alternative suppliers and brands
Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.
Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior. Then, like businesses that sell to final buyers, they must engage business customers and build profitable relationships with them by creating superior customer value.
The business buying process is the decision process by which business buyers determine which products and services their organizations need to purchase and then find, evaluate, and choose among alternative suppliers and brands.
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Business Markets
Business markets are huge and involve more money and items than consumer markets.
Differ from consumer markets in terms of
Market structure and demand
Nature of the buying unit
Types of decisions and the decision process
The business market is huge and involves more dollars and items than do consumer markets. Business markets differ from consumer markets in terms of market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.
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Market Structure and Demand
Business market structure and demand
Fewer but larger buyers
Derived demand: Business demand that comes from the demand for consumer goods
Inelastic and fluctuating demand
The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large business markets, a few buyers often account for most of the purchasing. Further, business demand is derived demand. It ultimately derives from the demand for consumer goods. Finally, many business markets have inelastic and more fluctuating demand. The total demand for many business products is not much affected by price changes, especially in the short run.
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Nature of the Buying Unit
Nature of the business market buying unit
More decision participants
More professional purchasing effort
Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Business buying is done by trained purchasing agents who spend their working lives learning how to buy better. Buying committees composed of technical experts and top management are common in the buying of major goods. B-to-B marketers now face a new breed of higher-level, better-trained supply managers. Therefore, companies must have well-trained marketers and salespeople to deal with these well-trained buyers.
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Types of Decisions
Business purchases
More complex buying decisions
Large sums of money
Complex technical and economic considerations
Interactions among people at many levels of the buyer’s organization
Business buyers usually face more complex buying decisions than do consumer buyers. Business purchases often involve large sums of money, complex technical and economic considerations, and interactions among people at many levels of the buyer’s organization.
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Decision Process
Buying processes
Longer and more formalized procedures
Buyer and seller more dependent on each other
Supplier development: Systematic development of networks of supplier-partners to ensure a dependable supply of products and materials
The business buying process tends to be longer and more formalized. Large business purchases usually call for detailed product specifications, written purchase orders, careful supplier searches, and formal approval. In the business buying process, the buyer and seller are often much more dependent on each other. In the short run, sales go to suppliers who meet buyers’ immediate product and service needs. In the long run, however, business-to-business marketers keep customers by meeting current needs and by partnering with them to help solve their problems.
Supplier development refers to the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others.
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A Model of Business Buyer Behavior
Types of Buying Situations
Straight rebuy
Buyer routinely reorders something without any modifications
Modified rebuy
Buyer wants to modify product specifications, prices, terms, or suppliers
New task
Buyer purchases a product or service for the first time
Systems selling (or solutions selling)
Buying a packaged solution to a problem from a single seller
Avoids the separate decisions involved in a complex buying situation
There are three major types of buying situations: straight rebuy, modified rebuy, and a new task situation.
In a straight rebuy, the buyer reorders something without any modifications. It is usually handled on a routine basis by the purchasing department. In a modified rebuy, the buyer wants to modify product specifications, prices, terms, or suppliers.
A company buying a product or service for the first time faces a new task situation. The marketer not only tries to reach as many key buying influences as possible, but also provides help and information. The buyer makes the fewest decisions in the straight rebuy and the most in the new task situation.
Systems selling (or solutions selling) refers to buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation.
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Types of Buying Situations (CONT’D)
Solutions selling: IBM works with Six Flags to provide a complete solution.
Delivering a fun and safe experience for Six Flags guests requires careful and effective management of thousands of park assets across its 19 regional theme parks. IBM works hand in hand with Six Flags to provide not just software but a complete solution.
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Participants in the Business Buying Process
Buying center: All the individuals and units that play a role in the purchase decision-making process
Actual users of the product or service
People who make the buying decision
People and units influencing the buying decision
People who do the actual buying
Individuals and units controlling the buying information
The buying center consists of all the individuals and units that play a role in the purchase decision-making process. This group includes the actual users of the product or service, those who make the buying decision, those who influence the buying decision, those who do the actual buying, and those who control buying information.
The buying center is not a fixed and formally identified unit within the buying organization. It is a set of buying roles assumed by different people for different purchases. Within the organization, the size and makeup of the buying center will vary for different products and for different buying situations.
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Major Influences on Business Buying Behavior
Figure 5.7 illustrates that business buying behavior is influenced by a complex combination of environmental, organizational, interpersonal, and individual factors.
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Stages of the Business Buyer Decision Process
Figure 5.8 lists the eight stages of the business buying process. The buying process begins with problem recognition. Problem recognition can result from internal or external stimuli. Having recognized a need, the buyer next prepares a general need description that describes the characteristics and quantity of the needed items or solutions. Once the buying organization has defined the need, it develops the item’s technical product specifications, often with the help of a value analysis engineering team. Product value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.
In the next buying process step, the buyer conducts a supplier search to find the best vendors. In the proposal solicitation stage, the buyer invites qualified suppliers to submit proposals. The buyer next reviews the proposals and selects a supplier or suppliers. During supplier selection, the buyer will consider many supplier attributes and their relative importance. The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers. Many large buyers now practice vendor-managed inventory, in which they turn over ordering and inventory responsibilities to their suppliers. The final stage of the business buying process is the supplier performance review, in which the buyer reviews the supplier performance. The seller’s job is to monitor the same factors used by the buyer to make sure that the seller is giving the expected satisfaction.
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E-Procurement and Online Purchasing
Purchasing through electronic connections between buyers and sellers—usually online
E-procurement occurs through
Reverse auctions
Online trading exchanges
Company buying sites
Extranet links with key suppliers
Advances in information technology have dramatically affected the face of the B-to-B buying process. Online purchasing, often called e-procurement, refers to purchasing through electronic connections between buyers and sellers—usually online.
Companies can do e-procurement in any of several ways. They can conduct reverse auctions, in which they put their purchasing requests online and invite suppliers to bid for the business. They can engage in online trading exchanges, through which companies work collectively to facilitate the trading process. Companies also can conduct e-procurement by setting up their own company buying sites. Companies can also create extranet links with key suppliers.
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Benefits of E-Procurement
Benefits
Cuts transaction costs
Results in efficient purchasing for both buyers and suppliers
Reduces the time between order and delivery
Helps an organization keep better track of all purchases
Frees buyers from a lot of paperwork
Business-to-business e-procurement yields many benefits. First, it shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. E-procurement reduces the time between order and delivery, and eliminates the paperwork associated with traditional requisition and ordering procedures. It helps an organization keep better track of all purchases. Finally, e-procurement frees purchasing people from a lot of drudgery and paperwork.
However, the rapidly expanding use of e-procurement also presents some problems. At the same time that the Internet makes it possible for suppliers and customers to share business data and even collaborate on product design, it can also erode decades-old customer-supplier relationships. Buyers now use the power of the Internet to pit suppliers against one another and search out better deals, products, and turnaround times on a purchase-by-purchase basis.
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Problems WITH E-Procurement
Problems
Can affect the customer-supplier relationship
Pits suppliers against one another
Business-to-business e-procurement yields many benefits. First, it shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. E-procurement reduces the time between order and delivery, and eliminates the paperwork associated with traditional requisition and ordering procedures. It helps an organization keep better track of all purchases. Finally, e-procurement frees purchasing people from a lot of drudgery and paperwork.
However, the rapidly expanding use of e-procurement also presents some problems. At the same time that the Internet makes it possible for suppliers and customers to share business data and even collaborate on product design, it can also erode decades-old customer-supplier relationships. Buyers now use the power of the Internet to pit suppliers against one another and search out better deals, products, and turnaround times on a purchase-by-purchase basis.
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Business-to-Business Digital and Social Media Marketing
B-to-B marketers are now using a wide range of digital and social media marketing approaches.
Compared with traditional media and sales approaches, digital and social media can create greater customer engagement and interaction.
B-to-B marketers are now using a wide range of digital and social media marketing approaches—from Web sites, blogs, mobile apps, e-newsletters, and proprietary online networks to mainstream social media such as Facebook, LinkedIn, YouTube, Google+, and Twitter—to engage customers and manage customer relationships anywhere, any time.
Compared with traditional media and sales approaches, digital and social media can create greater customer engagement and interaction. B-to-B marketers know that they aren’t really targeting businesses, they are targeting individuals in those businesses who affect buying decisions. Today’s business buyers are always connected via their digital devices—whether it’s PCs, tablets, or smartphones.
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B2B SOCIAL MEDIA MARKETING EXAMPLES
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