FDM Marketing Unit 3 M Understanding Buyer Behavior

Fundamentals of Marketing
DMK 1023
Diploma in Business Administration

Megatech International
College
Learning Outcomes
• Understand and explain micro and macro
marketing environments
• Describe consumer motivations and buying
decision process models
• Differentiate between the concept of market
segmentation, market targeting and market
positioning
• Understand and explain marketing mix elements
such as product, pricing, place and promotion
• Discuss the integrated marketing
communication process
College
Recommended Texts
• Kotler, Armstrong, Marketing: An Introduction,

10th ed Prentice Hall 2010
• Nor Khalida, Y, Principles of Marketing, Revision
series, Oxford, 2009
• Evan, Joel R and Barry Berman, Marketing, 5th ed,
McMillan Publishing 2006
• Slides © Kotler, Armstrong, Marketing: An

Introduction, 10th ed Prentice Hall 2010
College
Unit 3:
Understanding Buyer Behavior

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Consumer Buying Behavior
• Consumer Buying Behavior refers to the
buying behavior of final consumers -
individuals & households who buy goods
and services for personal consumption.
• Study consumer behavior to answer:
“How do consumers respond to
marketing efforts the company might
use?”
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Model of Consumer Behavior
Product Economic
Price Technological
Place Stimuli
OtherStimuli
Other Political
and
Marketingand
Promotion Cultural
Marketing
Characteristics
Buyer’s Decision Affecting
Process Box
Black Box
Buyer’s Black
Buyer’s Consumer
Behavior
Product Choice Purchase

Brand Choice Timing
Response
Buyer’s Response
Buyer’s
Dealer Choice Purchase
Diploma in Business Administration Amount
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Characteristics Affecting
Consumer Behavior
Culture
Social
Personal
Psychological
Buyer
Buyer

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Factors Affecting Consumer Behavior: Culture
••Most
Most basic
basic cause
cause of
of aa person's
person's wants
wants and
and behavior.
behavior.
••Values
Values
••Perceptions
Perceptions
Subculture Social
Subculture SocialClass
Class
••Groups of people with shared value systems ••People within a social class tend to
Groups of people with shared value systems People within a social class tend to
based
basedononcommon
commonlife
lifeexperiences.
experiences. exhibit
exhibitsimilar
similarbuying
buyingbehavior.
behavior.
••Hispanic Consumers ••Occupation
Hispanic Consumers Occupation
••African American Consumers ••Income
African American Consumers Income
••Asian American Consumers ••Education
Asian American Consumers Education
••Mature Consumers ••Wealth
Mature Consumers Wealth

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College
Roles
Rolesand
andStatus
Status
Family
Family
••Husband,
Husband,wife,
wife,kids
kids
Social
Social Factors
Factors ••Influencer,
Influencer,buyer,
buyer,user
user
Groups
Groups
••Membership
Membership
••Reference
Reference
Factors Affecting Consumer Behavior: Social
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Interests
Interests
Opinions
Opinions Activities
Activities
Lifestyle
Lifestyle Identification
Identification
rsonality
rsonality && Self-Concept
Self-Concept Economic
Economic Situation
Situation
Age
Age and
and Family
Family Life
Life Cycle
Cycle
Occupation
Occupation Stage
Stage
Personal
Personal Influences
Influences
Factors Affecting Consumer Behavior: Personal
Factors
FactorsAffecting
AffectingConsumer
Consumer Behavior:
Behavior: Psychological
Psychological
Motivation
Motivation
Beliefs
Beliefs and
and Psychological
Factors PPerception
erception
Attitudes
Attitudes
Learning
Learning
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Maslow’s Hierarchy of Needs
Self
Actualization
(Self-development)
Esteem Needs
(self-esteem, status)
Social Needs
(sense of belonging, love)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)
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College
Postpurchase
Postpurchase Behavior
Behavior
Purchase
Purchase Decision
Decision
Evaluation
Evaluation of
of Alternatives
Alternatives
Information
Information Search
Search
Need
Need Recognition
Recognition
The Buyer Decision Process
The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 1.
1. Need
Need Recognition
Recognition
Need
Need Recognition
Recognition
Difference
Difference between
between an
an actual
actual state
state and
and aa desired
desired state
state
Internal
Internal Stimuli
Stimuli External
External Stimuli
Stimuli
•• Hunger ••TV advertising
Hunger TV advertising
•• Thirst
Thirst •• Magazine
Magazine ad
ad
•• AAperson’s
person’s normal
normal •• Radio
Radio slogan
slogan
needs
needs
••Stimuli
Stimuli inin the
the
environment
environment
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Step 2. Information Search
Personal Sources
Personal Sources •Family, friends, neighbo
•Most influential source o
information
Commercial Sources
Commercial Sources •Advertising, salespeople
•Receives most informati
from these sources
Public Sources
Public Sources •Mass Media
•Consumer-rating groups
Sources
Experiential Sources
Experiential •Handling the product
•Examining the product
•Using the product
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The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 3.
3. Evaluation
Evaluation of
of Alternatives
Alternatives
Product
ProductAttributes
Attributes
Evaluation
Evaluationof
ofQuality,
Quality,Price,
Price,&&Features
Features
Degree
Degreeof
ofImportance
Importance
Which
Whichattributes
attributesmatter
mattermost
mostto
tome?
me?
Brand
BrandBeliefs
Beliefs
What
Whatdo
doIIbelieve
believeabout
abouteach
eachavailable
availablebrand?
brand?
Total
TotalProduct
ProductSatisfaction
Satisfaction
Based
Basedon
onwhat
whatI’m
I’mlooking
lookingfor,
for,how
howsatisfied
satisfied
would
wouldIIbe
bewith
witheach
eachproduct?
product?
Evaluation
EvaluationProcedures
Megatech International Procedures
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Step 4. Purchase Decision
Purchase
Purchase Intention
Intention
Desire
Desire to
to buy
buy the
the most
most preferred
preferred brand
brand
Attitudes Unexpected
of others situational
factors
Purchase
Purchase Decision
Decision
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The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 5.
5. Postpurchase
Postpurchase Behavior
Behavior
Consumer’s
Consumer’s Expectations
Expectations of
of
Product’s
Product’s Performance
Performance
Product’s Perceived
Performance
Satisfied Dissatisfied
Dissatisfied
Satisfied
Customer! Customer
Customer
Customer!Diploma in Business Administration
Cognitive Dissonance
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Business Markets
• Business buying process is the process where

business buyers determine which products and
services are needed to purchase and then find,
evaluate, and choose among alternative brands.
• Business markets differ from consumer markets in:
– Market structure and demand
– Nature of the buying unit
– Types of decisions & the decision-making process

Megatech International 6-20
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Business Markets
Market Structure and Demand
• Huge market – fewer and larger
• Geographic concentration
• Derived demand – It ultimately derives from the

demand of consumer goods
– Inelastic demand (not affected much by price changes)
– Fluctuating demand (change more & more quickly)

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Business Markets
Nature of the Buying Unit
 A business purchase involves more decision
participants (buying center)& a more professional
purchasing effort.
 Many companies upgrade purchasing functions to

“supply management” or “supplier development”

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Business Markets
Types of Decisions & the Decision Process
 Business buyers usually face more complex buying
decisions
 More formalized
 Buyer and seller dependency
 Supplier development - the systematic

development of networks of supplier-partners to
ensure an appropriate and dependable supply of
products and materials that they will use in making
their own products or resell.
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Business Buyer Behavior
 Business buyer behavior refers to
– the buying behavior of the organizations that buy
goods and services for use in production of other
products and services that are sold, rented, or
supplied to others; for facilitating their daily
operations.
– Also included are retailing and wholesaling firms that

acquire goods to resell or rent to others for profit.

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A Model of Business Buyer Behavior

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Marketing Stimuli
Similar to consumer buying, business buying consists of

the four Ps:
 Product
 Price
 Place
 Promotion

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Other Stimuli
Additional stimuli include major economic forces:

 Political
 Economic
 Technological
 Cultural
 Competitive

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Buyer Responses to Marketing Stimuli
 Product or service choice

 Supplier choice
 Order quantities
 Delivery
 Service
 Payment terms

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Black box of business buying
Marketers must understand what happens within the

organization to turn stimuli into purchase
responses.
 Major Types of Buying Situations
 Participants in the Business Buying Process
 Major Influences on Business Buyers
 The Business Buying Process
 E-Procurement

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Major Types of Buying Situations
 Straight rebuy is a routine purchase decision such as a
reorder without any modification.
 Modified rebuy is a purchase decision that requires
some research where the buyer wants to modify the
product specification, price, terms, or suppliers.
 New task is a purchase decision that requires thorough
research such as a new product.

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Major Types of Buying Situations
 Systems selling involves the purchase of a packaged
solution from a single seller.
 Two-step process of selling:
 Interlocking products
 System of production, inventory control, distribution,
and other services to meet the buyer’s need for a
smooth-running operation

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Participants in the Business Buying Process
 The buying center is all of the individuals and units
that play a role in the purchase decision-making
process:
 Users
 Influencers
 Buyers
 Deciders
 Gatekeepers

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 Users are those that will use the product or service.
 Influencers help define specifications and provide
information for evaluating alternatives.
 Buyers have formal authority to select the supplier and
arrange terms of purchase.
 Deciders have formal or informal power to select and
approve final suppliers.
 Gatekeepers control the flow of information.

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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
user – is most likely to make each of the following statements?
 “This bonding agent better be good, because I have to put this product
together.”
 “I specified this bonding agent on another job, and it worked for them.”
 “Without an appointment, no sales rep gets in to see Mr. Johnson.”
 “I don’t see any reason why we can’t use this bonding agent on the next
job.”
 “Okay, it is a deal – we’ll buy it.”
 “I’ll place the order first thing tomorrow.”

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Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
user – is most likely to make each of the following statements?
 “This bonding agent better be good, because I have to put this product
together.” - user
 “I specified this bonding agent on another job, and it worked for them.” -
influencer
 “Without an appointment, no sales rep gets in to see Mr. Johnson.” -
gatekeeper
 “I don’t see any reason why we can’t use this bonding agent on the next
job.” - influencer
 “Okay, it is a deal – we’ll buy it.” - decider
 “I’ll place the order first thing tomorrow.” - buyer
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The buying center provides a major challenge:

 Who participates in the process
 Their relative authority
 What evaluation criteria each participant uses
 Informal participants

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Major Influences on Business
Buyer Behavior
 Economic factors
 Personal factors
 Environmental factors
 Organizational factors
 Interpersonal factors

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Major Influences on Business
Buyer Behavior

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The Buying Process

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Problem recognition occurs when someone in the
company recognizes a problem or need.
 Internal stimuli
 Need for new product or production equipment
 External stimuli
 Idea from a trade show or advertising

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The Buying Process
General need description describes the characteristics and
quantity of the needed item.
Product specification describes the technical criteria.
 Value analysis is an approach to cost reduction where
components are studied to determined if they can be
redesigned, standardized, or made with less costly
methods of production.

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The Buying Process
Supplier search involves compiling a list of qualified

suppliers.
Proposal solicitation is the process of requesting

proposals from qualified suppliers.

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The Buying Process
Supplier selection is the process when the buying

center creates a list of desired supplier attributes
and negotiates with preferred suppliers for
favorable terms and conditions.
Order-routine specifications is the final order with the
chosen supplier and lists all of the specifications
and terms of the purchase.

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The Buying Process
Performance review involves a critique of supplier

performance to the purchase terms.

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E-Procurement and Buying on the Internet
75% of business buyers indicated that they use the

Internet to make at least some of their purchases.
Online purchasing
 Company buying sites
 Extranets

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Advantages
 Access to new suppliers
 Lowers costs
 Speed in order processing and delivery
 Share information
 Sales track
 Service and support

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Disadvantages
 Can erode relationships as buyers search for new
suppliers
 Lack of security

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– E-Procurement
Much online purchasing takes place through online

auctions and e-market-places:
• An intranet is an internal corporate computer network

that uses Internet technology to link company
departments, employees, and databases
• An extranet allows outsiders to the organization to

access its intranet
• A private exchange
Diplomalinks
in Businessinvited
Administration groups of suppliers
and partners over the Web College
- E-Procurement
Security
• Authentication - making sure only authorized
individuals are allowed to access a site
• Firewalls - combination of hardware and software that

ensures only authorized individuals gain entry
• Encryption - scrambling a message so that only

another individual has the right “key” for deciphering
it
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Institutional and Government Markets
Institutional markets consist of schools, hospitals,
nursing homes, prisons and other institutions that
provide goods and services to people in their care.
 Characteristics
 Low budgets
 “Captive” audience

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Institutional and Government Markets
 Government markets tend to favor domestic suppliers
and require suppliers to submit bids and normally
award to the lowest bidder
 Carefully monitored by outside publics – require
considerable paperwork
 Affected by similar environmental factors
 Good credit
 Non-economic factors – tend to favor
 Minority suppliers
 Depressed suppliers
 Small businesses

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Question and Answer Session
Q&A

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Next Lecture
• UNIT 4 – MARKET SEGMENTATION, TARGETING
AND POSITIONING

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Fundamentals of Marketing

Diploma in Business Administration

• Kotler, Armstrong, Marketing: An Introduction,

• Slides © Kotler, Armstrong, Marketing: An

Diploma in Business Administration

Product Choice Purchase

Diploma in Business Administration

Diploma in Business Administration

• Business buying process is the process where

Diploma in Business Administration

Market Structure and Demand

• Huge market – fewer and larger

• Derived demand – It ultimately derives from the

Diploma in Business Administration

 Many companies upgrade purchasing functions to

Diploma in Business Administration

 Supplier development - the systematic

– Also included are retailing and wholesaling firms that

Diploma in Business Administration

Diploma in Business Administration

Similar to consumer buying, business buying consists of

Diploma in Business Administration

Additional stimuli include major economic forces:

Diploma in Business Administration

 Product or service choice

Diploma in Business Administration

Marketers must understand what happens within the

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

The buying center provides a major challenge:

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

The Buying Process

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Supplier search involves compiling a list of qualified

Proposal solicitation is the process of requesting

Diploma in Business Administration

Supplier selection is the process when the buying

Diploma in Business Administration

Performance review involves a critique of supplier

Diploma in Business Administration

75% of business buyers indicated that they use the

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Much online purchasing takes place through online

• An intranet is an internal corporate computer network

• An extranet allows outsiders to the organization to

• Firewalls - combination of hardware and software that

• Encryption - scrambling a message so that only

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

Diploma in Business Administration

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