CHAPTER 3

Connecting with Customers

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Connecting with customers
Three broad topics are covered under this chapter

◦ Part 1 - Analyzing Consumer Markets

◦ Part 2 - Analyzing Business Markets

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 Chapter Questions
◦ How do consumer characteristics influence buying
behavior?
◦ How do consumers make purchasing decisions?
◦ How do marketers analyze consumer decision making?
◦ What is the business market, and how does it differ from
the consumer market?
◦ Who participates in the business-to-business buying
process?
◦ How do business buyers make their decisions?
◦ How can companies build strong relationships with
business customers?
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 Customer Analysis

◦ To develop effective marketing strategies, it requires

to be almost obsessive about understanding the needs
of customers
◦ The success of any customer-focused program will
involve
◦ imaginative product development,
◦ integrated distribution methods,
◦ well calibrated pricing and
◦ state of the art of communications.
◦ Customer analysis involves analysis of
◦ Consumer buying behavior
◦ Organizational buying behavior

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 Analyzing the Consumer Market
◦ Consumer behaviour is the study of how individuals, and
groups select, buy, use, and dispose of goods, services, ideas, or
experiences to satisfy their needs and wants.
◦ Consumer is the customer who buys goods and services of all
types for personal as well as household usage.
◦ Consumers behavior is described as an investigation into the way
individuals make decisions on how to spend their available
resources (time, money, effort) on personal and household
products.
◦ A study of consumer behavior need to consider
◦ what occurs before people consume something,
◦ what goes on during the consumption period itself and
◦ how consumers handle the disposal of what they have
consumed.
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 Factors influencing consumers buying
behavior - What Influences
Consumer Behavior?

◦ Cultural factors
◦ Social factors
◦ Personal factors
◦ Psychological factors

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 Factors affecting the buying
behaviour

Reference groups – refers to membership groups. Primary, secondary, aspirational, and dissociative groups 7
 A. Cultural Factors

◦ Culture, subculture, and social class are

important influences on consumer buying
behavior.
◦ Culture is the fundamental determinant of a
person’s wants and behaviors.
◦ Each culture consists of smaller subcultures
that provide more specific identification and
socialization for their members.
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 Subcultures

◦ Nationalities ( in USA population-we

can find Asians, Europeans, Africans,
Latino and many more..) (in Ethiopia
many nations with their own subculture)
◦ Religions ( Christian, Muslim, )
◦ Racial groups (black, white, Hispanics…
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 B. Social Factors
◦ In addition to cultural factors , social such as
◦ Reference groups
◦ Family
◦ Social roles
◦ Status
Affect our buying behavior

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 Reference Groups
Reference groups refer to membership groups

◦ Primary groups
Dire
◦ Secondary groups ct or
in f lu i n di
e
buy nce on rect
◦ Aspirational groups ing
beha their
◦ Dissociative groups v io r

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 Primary groups

◦ Groups having a direct influence are called

membership groups.

Some membership groups are primary

groups such as family, friends,
neighbors, and co-workers with whom
the person interacts fairly continuously
and informally.

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 Secondary groups

Some membership groups are secondary

groups such as religious, professional
groups that tend to be more formal.

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 Aspirational groups

Aspiration groups are groups that

you wish to join and currently that
you admire.

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 Dissociative groups

◦ Dissociative groups are those

whose values or behavior an
individual rejects.

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 Action of marketers
 Where reference group influence is strong, marketers must
determine how to reach and influence the group’s opinion
leaders.
 An opinion leader is the person in informal, product-related
communications who offers advice or information about a
specific product or product category.
 Marketers try to reach opinion leaders by identifying
demographic and psychographic characteristics associated
with opinion leadership, identifying the media read by opinion
leaders, and directing messages at opinion leaders.

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 C. Personal Factors

Personal characteristics that influence a buyer’s decision include

◦ Age
◦ Life cycle stage and economic circumstances
◦ Occupation
◦ Wealth
◦ Personality
◦ Values
◦ Lifestyle
◦ Self-concept

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 The Nature of Personality
◦ Personality reflects individual differences
◦ Personality is consistent and enduring
◦ Personality can change

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 Theories of Personality
◦ Freudian theory
◦ Unconscious needs or drives are at the heart of human motivation
◦ Id
◦ Warehouse of primitive or instinctual needs for
which individual seeks immediate satisfaction
◦ Superego
◦ Individual’s internal expression of society’s moral
and ethical codes of conduct
◦ Ego
◦ Individual’s conscious control that balances the
demands of the id and superego

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 Self and Self-Image
◦ Consumers have a variety of enduring images of themselves
◦ These images are associated with personality in that individuals consumption
relates to self-image

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 Different Self-Images
◦ . Actual Self-
Ideal Self-Image
Image

Ideal Social
Social Self-Image
Self-Image

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 Cont’d...
◦ Actual Self-Image
◦ How you see your self
◦ Ideal Self-Image
◦ How you would like to see yourself
◦ Social Self-Image
◦ How you think others see you
◦ Ideal Social Self-Image
◦ How you would like others to see you

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 Age and Stage in the Life Cycle
A) Our taste in food, clothes, furniture, and recreation is often related to our age.
B) Consumption is also shaped by the family-life cycle and the number, age, and
gender, of people in the household at any point in time.
C) In addition, psychological life-cycles may matter.
D) Marketers should also consider critical life events or transitions as giving rise to
new needs.

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 Marketers also consider critical life events or transitions

◦ Marriage, ◦ These should alert service providers –

◦ Child Birth ◦ Banks, lawyers,
◦ Illness ◦ And marriage and
◦ Relocation bereavement/grief/mourning/inheritanc
e counselors
◦ Divorce
◦ Career change
◦ Widowhood

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 Occupation and Economic Circumstances

◦ Occupation influences consumption patterns and economic circumstances

influence product. Product choice is greatly affected by economic
circumstances including:
A) Spendable income (level, stability, and time pattern)
B) Savings and assets
C) Debts
D) Borrowing power
E) Attitudes toward spending and saving

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 Lifestyles and Value
◦ People from the same subculture, social class, and occupation may lead
quite different lifestyles.
◦ Consumers who worry about the environment, want products to be produced
in a sustainable way, and spend money to advance their personal health,
development,
◦ Ex: organic food, energy-efficient appliances such as Solar panels,
alternative medicine, etc

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 D. Psychological Factors
◦ A person's buying choices are further influenced by four important
psychological factors:
◦ motivation,
◦ perception,
◦ learning, and
◦ beliefs and attitudes.

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 i. Motivation

◦ Motivation is the driving force within individuals that impels/compels them to

action.

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 Model of the Motivation Process

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 The Dynamic Nature of Motivation
◦ Needs are never fully satisfied
◦ New needs emerge as old ones are satisfied
◦ People who achieve their goals set new and higher goals for themselves

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 Maslow's hierarchy of needs

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 ii. Perception
◦ A motivated person is ready to act. How the person acts is influenced by his or
her perception of the situation.
◦ perception is the process by which people select, organize and interpret
information to form a meaningful picture of the world.
◦ People can form different perceptions of the same stimulus because of three
perceptual processes: selective attention, selective distortion and selective
retention.

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 Perceptual Selection
◦ Stimuli selected depends on:
◦ Consumers’ previous experience
◦ Consumers’ motives
◦ Nature of the stimulus
◦ Expectations

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 Interpretation

◦ Stereotypes: Ascribe meanings based on

fragments of past information.
◦ First Impressions: People look for
relevant, important, or predictive stimuli.
First impressions are lasting
◦ Halo Effect: perceive and evaluate multiple
objects based on just one dimension
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 iii. Learning
◦ The process by which individuals acquire the purchase and consumption
knowledge and experience that they apply to future related behavior
◦ Marketers must teach consumers:
◦ where to buy
◦ how to use
◦ how to maintain
◦ how to dispose of products

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Learning Theories
Behavioral Theories: Learning result
from observable responses to external
stimuli. Also known as stimulus
response theories.
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Cognitive Theories:
Learning is based on mental
information processing, often in
response to problem solving.
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 THE BUYING DECISION PROCESS:
THE FIVE-STAGE MODEL

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Business Markets and Business Buyer
Behaviour

◦ Organization buyers are customers that comprised of

various organizations such as
◦ industrial firms,
◦ commercial businesses, or
◦ governmental organizations and institutions
◦ It is also known as the Business-to- Business Marketing
(B2B marketing)
◦ B2B markets have fewer buyers that can be communicated
through personal selling than mass advertising

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 Characteristics
Dimension Characteristics of Explanation
business market

Nature of Demand Derived Demand The demand from a business is

derived from its own sales volume

Buying influences Many influences There are often many interested

parties who influence the buying
decision (bid committee, experts,
etc)

Market structure Often concentrated A small number of large customers

often make up a substantial share
demand of the market

Purchasing motives organizational, rational Products purchased for the

achievements of organizational
goals

Purchasing decision Often complex and Decisions can involve long and
complex analysis and negotiation
process lengthy

Purchasing skills Professional, trained Buyers are often professionally

qualified in purchasing

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 In sum…the Business Market is
characterized by:

◦ Fewer, larger buyers

◦ Close supplier-customer relationships
◦ Professional purchasing
◦ Many buying influences
◦ Derived demand
◦ Fluctuating demand (demand may
vary from time to time)
◦ Geographically concentrated buyers

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 Stages in the Buying Process: Buy
phases
◦ Problem recognition
◦ General need description and product specification
◦ Supplier search
◦ Proposal solicitation
◦ Supplier selection
◦ Order-routine specification
◦ Performance review

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