Marketing-Case Study

Topic 5 – Overview

Digital age and Buyer Behaviour

Learning Objectives

· Assess the Buyer Behaviour process

· Diagnose the factors influencing customer Buying Behaviour

· Evaluate the role of Digital Technology in Strategic Marketing

· Examine the use of Customer Relationship Marketing

Introduction

Topic 5 examines the role and use of consumers’ buying behaviour in relation to the recent developments of digital technology. Why are consumers purchasing certain goods and services? When, how, and what do they purchase? Clearly, failing to understand consumer behaviour is the recipe for disaster as some companies have found it the hard way. The consumers’ buying behaviour is influenced by individual’s own personality traits. These personality traits do not remain the same but change with the life cycle. Social, cultural, individual and emotional forces play a big part in defining consumer buying behaviour. Cultural, sub-culture and social class are also important in finalizing consumer behaviour. In addition, the development of digital technology, including information databases, the internet and information technology have helped the understanding and evaluation of consumers’’ buyer behaviour.

Main Analysis

Buyer Behaviour

‘A customer is the most important person ever in this office, in person, by email or on the telephone’

‘A customer is not depended upon us... we are dependent upon them’

A customer is not an interruption to our work... they are the purpose of it. We are not doing a favour by serving them, they are doing us a favour by giving us the opportunity to do so’

Most people are familiar with these motivational phrases which emphasise the centrality of the customer. These phrases form part of the organisational culture, becoming mantras for managers and their staff. However, like anything, if you say it too many times it starts to sound silly and the meaning is lost. Too many organisations lay emphasis on their customer orientation without appreciating the need to understand the consumer and the difficulty of achieving this understanding. A Blindly followed customer orientation can in certain circumstances be as dangerous as ignoring the customer.

If the essence of strategic marketing is to understand and satisfy the customer, then an organisation must be close to the customer and produce products, or provide services that people want. At the crux of this, is a dynamic relationship that is based upon commitment and trust. If organisations want to attain this closeness to the customer, they must consider:

· Who makes up the market (teenagers, locals, tourists, or elderly?)

· The reasons for purchase (birthday, anniversary, daily purchase?)

· What buying decisions are made (a house decision?)

· Who the key participants in the buying process are (is a kid 5 years old buying or parent?)

· What influences the buyer (quality, monetary ability?)

· How buyers arrive at their decision (how long does it take to form a decision?)

Marketing as we have said is concerned with the relationship with the customer or customer through time and why they use a particular product or service. We may for example, use a product or a service:

· To solve a specific problem

· To prevent a problem arising

· For symbolic purposes

· Out of habit

· Because of persuasion

· Because we are forced

Whatever the reason, the assumption is that if customers are satisfied with the goods or services they should become loyal and supportive customers. Satisfied customers are more likely to be repeat purchasers and speak favourably to others about their experiences.

Moreover, a product or service that does not provide an answer to a buyer’s problem will not be sought or accepted by customers, even if other aspects of the marketing mix, such as advertising, are perfectly designed and executed. Effective marketers find out what customers need and offer them a need-satisfying product; they do not present a product and hope to convince customers that they should want it.

The study and appreciation of consumer behaviour should, therefore give effective marketing management information which can be used to increase the chances of success in the marketplace. Remember, each customer follows a purchasing decision process. A usual process is the following:

Problem recognition

Information Search

Evaluation of alternatives

Outcome

Problem recognition: at this stage occurs when a buyer becomes aware of a difference between a desired state and an actual condition. So for example, you may want a new laptop because you don’t have one.

Information search begins after the consumer becomes aware of the problem or need and is motivated to achieve the desired stage. The search information involves internal search (customer search their memories for information about products that might solve the problem) and external search (buyers look for information provided by organisations, consumer associations, friends, and relatives).

Evaluation of alternatives. In this stage the consumer establishes a set of criteria against which to compare the characteristics of different products.

Outcome stage can be divided into the purchase stage and post-purchase stage. The purchase stage is where the consumer selects the product or brand to be purchased. During the post-purchased purchased stage the buyer begins to evaluate the product after purchase, based on many of the criteria used in the evaluation of alternatives. Think about a major purchase that you have made. What did you think afterwards?

This process, nevertheless, is also influenced by a number of factors. According to Doyle (2008:307), the various factors shaping choice can be grouped into four:

1. The buyer’s role: Organisational buyers make different decisions than people buying for themselves or their households. For example, senior managers will expect to fly business class when they represent their company, but on holiday they will fly economy. Organisational buyers often have different constraints, attitudes and objectives than personal consumers.

2. The buyer’s background: The cultural, social and personal background of the buyer influences decisions. For example, governments have been encouraging much wider access to the Internet across age, socio-economic group and gender to try and prevent a ‘digital divide’ among different groups of the population. Political, technological and economic forces also affect decisions. For example, firms increase their advertising budgets when the economy is growing and cut back in recessions.

3. The buyer’s experience: A person buying his or her first car approaches the decision quite differently from someone who changes their car every year. If the buyer has made the same decision many times before the choice will generally be a routine, low involvement one. If he or she is satisfied with the previous service they are likely to buy from the same source. For someone who has never bought before, the decision is a much more complex problem, requiring more information, an evaluation of the alternatives and often involving more people.

4. The buyer’s information sources: When buyers need to supplement their experience they have four sources of information:

· Personal sources. Information can be obtained from family, friends and neighbours. Organisational buyers can draw on the knowledge of other functional experts within the business.

· Public sources. Television, newspapers, consumer-rating organisations and the Internet all provide information, comment and criticism about businesses.

· Experiential sources. Buyers can often learn about the product before purchase by handling, examining and trialling it.

· Commercial sources. The buyer receives information in two ways. First, from the company’s presence in the market the buyer perceives the quality of its service, products, prices and positioning in the distribution channels. Second, the buyer can be influenced by the firm’s marketing and communications – its advertising, promotions, web activities, PR, personal selling and direct marketing.

Let us now examine an example that relates to buyers background. For instance, when the popular Kentucky Fried Chicken (KFC) entered the Chinese market in 1973, to their horror they discovered that their slogan and brand messaging "finger lickin' good" came out as "eat your fingers off". Well, this is certainly not good for chicken sales isn’t it!

As soon as KFC entered Hong Kong in 1973, it quickly grew to 11 restaurants in the following year. But it misjudged the local market and failed to develop a suitable business model. By 1975, all 11 restaurants were forced to close their shutters. Companies build their brands around a small set of carefully chosen words that they believe embody the true essence of the brand. Everyone in the company gets behind it. It’s like the gospel. And then it’s time to branch out, so we get people to translate this cornerstone of the brand.

Ten years later (1987), KFC return to China, eventually franchising its operations to a company called Birdland, which was backed by a group of local investors. During this 2nd attempt, the company paid better emphasis to the Chinese local conditions and cultural differences. KFC has also done a lot of work to continuously invent and launch new products; products that better fit the Chinese consumer’s taste preference. Also, although KFC’s original recipe was accepted by most Chinese, KFC China did not stop there. The highly localised menu includes congee or Chinese-style porridge for breakfast; Beijing Chicken Roll (à la Beijing Duck) served with scallion and seafood sauce; Spicy Diced Chicken resembling a popular Sichuan-style dish. This has allowed them to keep the competition at bay. Within 20 years they opened more than 2000 stores throughout China, becoming one of Chinese’s favour quick service restaurants. It got a 2:1 ratio over McDonald’s in China, whereas outside China it's the other way around (online at http://knowledge.insead.edu/leadership-management/strategy/kfc-chinas-recipe-for-success-1706 , accessed 10/03/2012).

Apparently, the impact that the right or wrong words can have on the success of a campaign and the overall reputation of a brand is immense. Also, taking into consideration local cultural conditions (as we explained in Topic 2), including the local norms, ethics, beliefs, values and general behaviour can make the difference between success and failure. Therefore, it is necessary to keep investigating buyers’ behaviour, and they way they buy. This process provides vital information to strategic marketing and as we explain below, it has become more organised and systematic through the use of digital technology.

Digital Technology - The Internet

According to our Doyle (2011: 325), the growth and speed of the impact of the Internet on business and society has had few precedents. ‘The Internet changes everything’ is a cry heard on every business platform. What accounts for the obsession with the Internet? The Internet has offered such enormous improvements in operating efficiency and market effectiveness that, in many markets, traditional ways of doing business look to be unviable. The Internet is fundamental for marketing, despite the bursting of the dot.com bubble in the early 2000s. Most companies’ web sites are managed by their marketing departments. More importantly, the Internet radically affects how the firm communicates with its customers and builds relationships with them.

Also, the Internet’s impact on globalization is only one of the ways that technology is vitally important in the business world. According to Bateman and Snell (2013), technology both complicates things and creates new opportunities. The challenges come from the rapid rate at which communication, transportation, information, and other technological changes. For example, after just a couple of decades of widespread desktop use, customers switched to laptop models, which require different accessories. Any company that serves desktop users had to rethink its customers’ wants and needs, not to mention the possibility that these customers are now working at the airport or a local Starbucks outlet, rather than in an office.

The internet is a marketplace (EBay is the biggest marketplace in the world – AMAZON is the second), a means for manufacturing goods and services, a distribution channel, an information service and many more. It drives down costs and speeds up globalisation. It improves efficiency of decision making. Managers and leaders can watch and learn what local competitors and other companies are doing ont he other side of the world. It facilitates design of new products, from pharmaceuticals to post office and parcel services.

For example, think of the the parcel, mail and logistics companies.

The British Royal Mail for instance, is responsible for universal mail collection and delivery the last 500 years! Letters are deposited in a  pillar  or  wall box , taken to a post office, or collected in bulk from businesses. Deliveries are made at least once every day except Sundays and  Bank Holidays  at uniform charges for all British destinations. First Class deliveries are generally made the next business day throughout the nation.

Today, however, with the introduction of technology, the Royal Mail offers a logistics system, enabling you to access the net and track and trace your parcel.

However, technological change brings not only opportunities for leaders but also threats. Things are changing at breakneck speed. The developing digital environment create major opportunities to increase the efficiency and effectiveness of marketing. To exploit these, the first step is to map out in detail the firm’s marketing processes. At the aggregate level these processes consist of first understanding customer needs, then involving customers in the design of products and services. Next, the products have to be communicated, sold and delivered. Finally, customer service has to be provided and customer relationships built. The second stage looks for opportunities to substitute digital material. Market research materials can be converted to online formats; the firm’s intranet can be a vehicle for cross-functional new product development; web sites can augment the selling efforts; online customer support can be used to build an interface with customers. The third stage is to fundamentally redesign marketing processes to capitalize on digital capabilities.

Moreover, one example of a company utilizing the digital technology for market research is the Jelly Belly Beans Co.

Originally, it started with 6 flavours, then 8, then 12 and now offers 50 different tastes. The company’s market research has capitalised on consumers’ desires to produce fifty varieties of jelly beans as well as recipes on how to create snacks with them.

Some flavours come from suggestions of visitors to Jelly Belly’s website. In return for filling out an interactive questionnaire, visitors had samples sent to them. Researchers categorise the suggestions, grouping them by similar flavours. More recently, Jelly Belly is trying to capitalize on consumers’ desires to have a healthy snack without giving up tasty treats, such as the ‘sport beans’, which contain added enzymes carbohydrates and vitamins.

Customer Relationship Marketing (CRM)

Another important practice that utilizes the use of digital technology is the co called ‘Customer Relationship Marketing’. This is “a holistic process of identifying, attracting, differentiating, and retaining customers.” More specifically, Customer Relationship Marketing (CRM) is a business process in which client relationships, customer loyalty and brand value are built through marketing strategies and activities. CRM allows businesses to develop long-term relationships with established and new customers while helping streamline corporate performance. CRM incorporates commercial and client-specific strategies via employee training, marketing planning, relationship building and advertising. This practice could not be materialized without the use of Information technology, digital databases, internet research and other digital developments.

Moreover, CRM's core strength is an ability to glean insight from customer feedback to create enhanced, solid and focused marketing and brand awareness. Key motivating drivers for the development of more innovative CRM strategies are Web technologies and a sharpened global focus on customer loyalty. Also, CRM:

· Provides a way to directly evaluate customer value. For example, a business that is genuinely interested in its customers will be rewarded with customer and brand loyalty. Because CRM is mutually advantageous, market share viability advances at a sound pace.

· Provides cross-selling opportunities, where, based on customer approval, a business may pitch proven marketing or brand strategies to more than one client.

At this point you are required access our ebook and read Chapters 9 & 10. In addition, there are a number of articles you may find interesting posted on the VLE. These articles are not compulsory to read but may support the development of your assignment analysis.

Further Reading

An interesting, funny, and indicative article linking corporate advertising mistakes to foreign culture and language, read the ‘Some Humorous Cross-Cultural Advertising Gaffes’ online at http://www.takingontobacco.org/intro/funny.html .

Also, please find below a selection of links to useful websites for further reading:

The Society for Intercultural Education, Training and Research (SIETAR): http://www.sietar.org.uk/

The Society for Intercultural Education, Training and Research (or SIETAR) is the world's largest interdisciplinary network for students and professionals working in the field of intercultural communication. There is an online library on the website which provides access to a wide selection of publications on intercultural studies and research.

The websites of the famous authors of cultural studies: Geert Hofstede -  http://www.geert-hofstede.com/ Trompenaars Hampden-Turner –  www.7d-culture.nl

Virtual Society Research Programme:  http://www.virtualsociety.org.uk An ESRC funded programme at Oxford University into the impacts of virtual electronic relationships, including studies of online buying behaviour.

ESRC Archive:  http://www.qualidata.essex.ac.uk/

A data archive of social sciences and humanities, providing links to many social sciences resources relevant to the study of buyer behaviour.

Social Science:  http://www.intute.ac.uk/socialsciences/

A listing of social sciences resources, listed by subject headings.

Business for Social Responsibility:  http://www.bsr.org   (BSR) is a global organization that helps member companies achieve success in ways that respect ethical values, people, communities and the environment. BSR provides information, tools, training and advisory services to make corporate social responsibility an integral part of business operations and strategies. The site includes free access to a large archive of case material and company illustrations.

Institute of Business Ethics:  http://www.ibe.org.uk This is a UK based organization which offers help and advice to companies with respect to ethical issues and ethical training. There is free access to a number of publications and information about events sponsored by the Institute.

Transparency International:  http://www.transparency.org Transparency International is a non-governmental institution dedicated to combating corruption around the world. It publishes the Corruption Perceptions Index and the Bribe Payers Index. The website provides free access to these indexes and free access to Global Corruption Reports for 2003 and 2004.