Transcript MARKETING FUNCTIONS

OLC EUROPE
PRINCIPLES OF MARKETING
Consumer Behaviour
Eric Agyemang BSc., MA, PGCE, A1, V1
CONSUMER BUYING BEHAVIOUR
Definitions
As a customer, we would engage in a purchase transaction with a
supplier of goods for our own or our family's consumption.
As a client we would be availing `ourselves of a range of professional
services such as accountants, solicitors etc.
As a professional, we would be exercising special skills in purchasing,
often in large quantities and/or expending millions of pounds, as a part of
our job on behalf of an organisation.
As a consumer, we are the end user of the product.
When we are part of a group combining our influences we are known as a
Decision Making Unit. (DMU),
DEFINITION CONSUMER BUYING BEHAVIOUR
Consumer buying `behaviour can be defined as, 'the decision processes
and acts of individuals involved in buying and using products or services.'
(Dibb: Marketing Concepts and Strategies, 2001).
Consumer buying behaviour is important to the marketing manager for
a at least three reasons.
1. The buyer's reaction to the organization's marketing strategy has a
major impact on the success of the organisation.
2. It allows the organisation to examine the main influences on what,
where, when and how customers buy. Only in this way will they be
able to devise a marketing mix that satisfies the needs of the
customers.
3. By gaining a better understanding of the factors influencing their
customers and how their customers will respond, organisations will be
better able to predict the effectiveness of their marketing activities.
A FRAMEWORK FOR CONSUMER
ANALYSIS
Many theories, models, and concepts have been borrowed from other
fields as well as developed by marketing researchers in attempts to
understand consumer behaviour
In many cases, these ideas overlap and even compete with each other as
useful descriptions of consumers.
To date, no one approach is fully accepted; nor is it likely that a single,
grand theory of consumer behaviour can be devised that all researchers
would agree on
This lesson provides a framework for studying, analyzing, and
understanding consumers to help develop successful marketing
strategies.
In addition, we discuss several levels of consumer analysis.
THE WHEEL OF CONSUMER ANALYSIS
CONSUMER AFFECT AND COGNITION
Consumer affect and cognition refer to two types of mental
responses consumers exhibit toward stimuli and events in
their environment.
Affect refers to their feelings about stimuli and events, such
as whether they like or dislike a product.
Cognition refers to their thinking, such as their beliefs about
a particular product.
AFFECTIVE RESPONSES
Affective responses can be favourable or unfavourable and
vary in intensity.
For instance, affect includes relatively intense emotions such
as love or anger, less strong feeling states such as
satisfaction or frustration, moods such as boredom or
relaxation, and milder overall attitudes such as liking
McDonald’s french fries or disliking Bic pens.
Marketers typically develop strategies to create positive affect
for their products and brands to increase the chances that
consumers will buy them.
COGNITION
Cognition refers to the mental structures and processes involved in
thinking, understanding, and interpreting stimuli and events.
It includes the knowledge, meanings, and beliefs that consumers have
developed from their experiences and stored in their memories.
It also includes the processes associated with paying attention to and
understanding stimuli and events, remembering past events, forming
evaluations, and making purchasing decisions and choices.
Although many aspects of cognition are conscious thinking processes,
others are essentially automatic.
Marketers often try to increase consumers’ attention to products and their
knowledge about them.
TECHNOLOGY THAT SEES CLEARLY WHEN
YOU CAN'T
City Safety- At 31 mpg or less, City Safety detects a stopped or slower moving
car in front of you, and applies the brakes. Which is why the Volvo XC60 is
known as "The Car That Stops Itself".
Volvo ads often feature detailed information about the safety features of the
cars to increase consumers’ knowledge and the chances that they will buy
Volvos.
CONSUMER BEHAVIOUR
Behaviour refers to the physical actions of consumers that can be directly
observed and measured by others.
It is also called overt behaviour to distinguish it from mental activities,
such as thinking, that cannot be observed directly.
Thus, a trip to The Gap at the mall involves behaviour; deciding whether
to go there is not an overt behaviour because it cannot be observed by
others.
Examples of behaviours include shopping at stores or on the Internet,
buying products, and using credit cards.
CRITICAL NATURE OF BEHAVIOUR
Behaviour is critical for marketing strategy because only through
behaviour can sales be made and profits earned.
Although many marketing strategies are designed to influence
consumers’ affect and cognition, these strategies must ultimately result in
Overt Consumer behaviour to have value for the company.
Thus, it is critical for marketers to analyze, understand, and influence
overt behaviour.
This can be done in many ways, including offering superior quality
(Toyota), lower prices (Circuit City), greater convenience (Tesco online
groceries), and easier availability (Coke is sold in millions of stores and
vending machines),
Marketers can also influence overt behaviour by offering products, stores,
and brands that are trendier (The Gap), sexier (Calvin Klein jeans), and
more popular (Nike).
CONSUMER ENVIRONMENT
The consumer environment refers to everything external to consumers
that influences what they think, feel, and do.
It includes social stimuli, such as the actions of others in cultures,
subcultures, social classes, reference groups, and families, that influence
consumers.
It also includes other physical stimuli, such as stores, products,
advertisements, and signs, that can change consumers’ thoughts,
feelings, and actions.
The consumer environment is important to marketing because it is the
medium in which stimuli are placed to influence consumers. For example,
marketers run commercials during TV shows that their target markets
watch to inform, persuade, and remind them to buy certain products and
brands.
RELATIONSHIPS AMONG AFFECT AND
COGNITION, BEHAVIOR, AND THE ENVIRONMENT
In the wheel of consumer analysis model, each of the three elements is connected
by a two-headed arrow signifying that any of them can be either a cause or an
effect of a change in one or more of the other elements.
For example, a consumer sees an ad for a new laundry detergent that promises to
clean clothes better than Ariel. This ad changes what the consumer thinks about
the new brand and leads to a purchase of it.
In this case, a change in the consumer’s environment (the ad for the new
detergent) led to a change in cognition (the consumer believed the new detergent
was better), which led to a change in behaviour (the consumer bought the new
brand).
A change in laundry detergent purchase and use could come about in other ways.
For example, a consumer receives a free sample of a new liquid detergent in the
mail, tries it out, likes it, and then purchases it.
In this case, a change in the consumer’s environment (the free sample) led to a
change in behaviour (use and purchase), which led to a change in the consumer’s
affect and cognition (liking the new brand).
RECIPROCAL SYSTEM
Consumer processes not only involve a dynamic and interactive
system but also represent a reciprocal system .
In a reciprocal system , any of the elements can be either a
cause or an effect of a change at any particular time (reciprocal
determinism).
Affect and cognition can change consumer behaviour and
environments.
Behaviour can change consumers’ affect, cognition, and
environments.
Environments can change consumers’ affect, cognition, and
behaviour.
EFFECTS OF THE RECIPROCAL SYSTEM
Viewing consumer processes as a reciprocal system involving affect and
cognition, behaviour, and the environment has five implications.
First, any comprehensive analysis of consumers must consider all three
elements and the relationships among them.
Second, any of the three elements may be the starting point for
consumer analysis.
Third, because this view is dynamic, it recognizes that consumers can
continuously change.
Fourth, although our example focused on a single consumer, consumer
analysis can be applied at several levels.
Finally, this framework for analyzing consumers highlights the importance
of consumer research and analysis in developing marketing strategies.
MARKETING STRATEGY
From a consumer analysis point of view, a marketing strategy is a
set of stimuli placed in consumers’ environments designed to
influence their affect, cognition, and behaviour.
These stimuli include such things as products, brands, packaging
advertisements, coupons, stores, credit cards, price tags,
salespeople’s communications, and, in some cases, sounds
(music), smells (perfume), and other sensory cues.
In our model of the Wheel of Consumer Analysis, Marketing
strategy is treated as the hub of the wheel because it is a central
marketing activity and is designed by marketing organizations to
influence consumers.
Clearly, marketing strategies should be designed not only to
influence consumers but also to be influenced by them.
THE ROLE OF CONSUMER RESEARCH AND
ANALYSIS IN MARKETING STRATEGY
LOGICAL SEQUENCE OF CONSUMER ANALYSIS
A logical sequence is to first research and analyze what consumers think, feel,
and do relative to a company’s offerings and those of competitors.
In addition, an analysis of consumer environments is called for to see what factors
are currently influencing them and what changes are occurring.
Based on this research and analysis, a marketing strategy is developed that
involves setting objectives, specifying an appropriate target market, and
developing a marketing mix (product, promotion, price, place) to influence it.
After the target market has been selected based on careful analysis of key
differences in groups of consumers, marketing strategies involve placing stimuli in
the environment that hopefully will become part of the target market’s environment
and ultimately influence its members’ behaviour.
Consumer research and analysis should not end when a strategy has been
implemented, however. Rather, research should continue to investigate the
effects of the strategy and whether it could be made more effective.
LEVELS OF CONSUMER
ANALYSIS
Consumer research and analysis can be conducted at several
different levels.
The Wheel of Consumer Analysis is a flexible tool that can aid in
understanding different:

societies,

industries,

market segments, or

individual consumers.
It can be used fruitfully by both marketing strategists and public
policy officials to understand the dynamics that shape each of
these levels.
STAGES IN THE BUYING
PROCESS
The general stages in the buying process have been identified as
follows.

Need recognition

Information search

Evaluation of alternatives

Purchase decision

Post purchase evaluation
THE PROCESS OF CONSUMER BUYING
BEHAVIOUR
Awareness
set
Need
recognition
Information
Search
Evaluation of
Alternatives
Internal
factors
Post Purchase
evaluation
Purchase
decision
The Buyer Decision 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
Attempt to stimulate need recognition
The Buyer Decision 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
The Buyer Decision 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.
EVALUATION OF ALTERNATIVES
Consumers are likely to build up a set of brand beliefs about the position of
each brand with regard to each attribute. The sum of these brand beliefs will
make up the brand image.
In order to ensure that the brand has the best chance of being chosen by the
consumer, the marketer has a range of options for action including the following.
 Modifying the brand. Kotler calls this 'real repositioning'.

Altering beliefs about the brand. Kotler calls this 'psychological
repositioning'.

Altering beliefs about competitors' brands. This can be referred to as
'competitive repositioning'.

(d) Altering the importance weighting of attributes.

(e)
Calling attention to neglected attributes,

(f)
Shifting the buyer's ideals.
AWARENESS SET
Schiffman
and Kanuk (1991) describe a model to show how 'set' works in
consumers' brand choice.
a. There will be some brands of which the individual will not be aware at all.
This unawareness set will not impact on his decision.
b. There will be a group of brands of which the customer is aware - his
awareness set - and from which he will make his selection.
c. Within the awareness set, there will be a group of brands which the
consumer will call to mind and consider purchasing. This is called the
evoked set.
There are further subsets, according to the individual's evaluation of the brands
within the awareness set. By definition, the evoked set includes brands which
have been positively evaluated, but there may also be:
a. An inert set of brands, of which the individual is aware but about which he is
completely indifferent
b. An inept set of brands of which the individual is aware, but about which he
is negative - because of past bad experience, negative associations or poor
reports.

CATEGORISING BRAND X
Do you know brand X?
Yes
Awareness
set
No
Awareness
set
Do you like brand X?
Yes
Evoked
set
Consumer purchase
No
No
Inept
set
Inert
set
opinion
IMPLICATIONS OF AWARENESS SET
Awareness sets represent consumer perceptions, so they can be a useful
indicator of a brand's position.
 The presence of a brand in the evoked set of most consumers is very positive.
Awareness campaigns would be required to remind the market of the brand's
presence and key features, in order to keep it in the set.

The presence of a brand in the unawareness set of most consumers would
indicate the need for a marketing strategy to raise the brand's profile in the
market place.

The presence of a brand in the inert set of most consumers would indicate the
need for a marketing strategy to persuade consumers to try the brand - by
giving more information, stressing positive features, or offering samples.

The presence of a brand in the inept set of most consumers would indicate
the need to improve the product, or promotional message, to counteract its
negative image.
The Buyer Decision 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
The Buyer Decision Process
Stages






Satisfaction is key:
– 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.
Need recognition
Information search
Evaluation of
alternatives
Purchase decision
Postpurchase
behavior

Cognitive dissonance
Buyer Decision Process for
New Products
 New
Products
– Good, service or idea
that is perceived by
customers as new.
Buyer Decision Process for
New Products
 Stages
in the Adoption
Process
– Marketers should help
consumers move from
awareness to adoption.
Buyer Decision Process
for New Products
Stages in the Adoption Process
Awareness
Evaluation
Interest
Trial
Adoption
Buyer Decision Process for
New Products

International Consumer Behavior
– Values, attitudes and behaviors differ greatly in
other countries.
– Physical differences exist that 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.
INFLUENCES ON BUYING BEHAVIOUR

The core processes of consumer buying behaviour is influenced by a
number of outside variable classified into:
1.
Cultural –
the learned beliefs, values, customs, artefacts and rituals of a
society or groups
2.
Social -
societal factors such as reference groups, family, social role
and status which have a direct role on behaviour.
3.
Personal - include such factors as age and life cycle, occupation,
economic circumstances and lifestyle.
4.
Psychological – include such factors like motivation, perception, learning
and beliefs and attitudes.
CUTURAL FACTORS
1.
Belief and Values

Beliefs are perceived states of knowing, on the basis of objective and
subjective information

Values are key beliefs which are relatively enduring, relatively general and
fairly widely accepted as a guide to culturally appropriate behaviour
2.
Customs

Customs are modes of behaviour which represent culturally approved ways of
responding to given situations
3.
Rituals

A ritual is a type of activity which takes on symbolic meaning, consisting of a
fixed sequence of behaviour. Ritualised behaviour tends to be public,
elaborate, formal and ceremonial. Rituals commonly require artefacts
4.
Language

Language is an important element of culture that makes the learning and
sharing of meanings possible through verbal and non verbal communication
5.
Symbols

Symbols are important aspect of language, carrying different meanings and
associations for different people
CHARACTERISTICS OF CULTURE
Culture comprises the following underlying characteristics:

Social

Culture exists to satisfy the needs of people in a society

Learned

Cultural norms and values are taught or ‘transferred’ to each new
member of society, formally or informally by socialisation

Shared

A belief or practice must be common to a significant proportion of a
society or group before it can be defined as a cultural characteristic.

Cumulative

Culture is ‘handed down’ to each new generation, and while new
situations teach new responses, there is a strong historical element to
many aspects of culture

Adaptive

Culture must be adaptive or evolutionary in order to fulfil its needsatisfying function
MICRO-CUTURE

For marketing (and segmentation) purposes, it is possible to subdivide a
macroculture into micro-culture (or sub-cultures)

The main micro-culture relevant to the United Kingdom inclde

Class
Nationality
Ethnicity
Geography / region
Religion
Age
Gender







Marketers need to be aware of micro-cultural variations for the purpose of
segmentation and targeting.

Marketers however need to avoid exaggerating the exclusivity of microcultures, since each consumer is simultaneously a member of many
micro-cultural segments.
SOCIALISATION

Socialisation is the process by which the individual learns the social
expectations, goals, beliefs, values, and attitudes that enable him to exist
in society.

It is the process by which the individual acquires sufficient knowledge of a
society and its ways, to be able to function and participate in it.

The learning of gender-related, consumer and occupational roles is part of
the socialisation process.

The various influences on socialisation include:

Family
Religion
Education
Reference group
Mass media





Consumer Socialisation is the process by which children acquire skills,
knowledge and attitudes that enable them function in society as
consumers.
SOCIAL FACTORS

Societal factors such as reference groups, family, social role and status
have a direct effect on buying behaviour.

Reference Groups:

‘Groups with which an individual identifies so much that he or she takes
on many of the values, attitudes or behaviours of group members’

Four types are identified

Primary membership group – family, friends, neighbours & colleagues

Secondary membership group – more formal like trade unions,
professional associations, religious groups etc

Aspirational Group – to which the individual would like to belong - Lodge

Dissociative Groups – whose values and behaviour the individual rejects
OPINION LEADERS

Opinion leaders are those individuals who reinforce the marketing
messages sent and to whom other receivers look for information

In targeting the customer in relation to reference groups, one of the tasks
of the marketer is to identify the groups with which the individual
identifies, and within that group identify the opinion leaders.

Apart from reinforcing the marketing messages received, opinion leaders
may communicate a marketing message to those members of the group
who may have missed the original message.

The task of identifying opinion leaders is made more difficult by the fact
that opinion leadership is dynamic, and not confined to a few prominent
members of society.

A person who may be an opinion leader in certain circumstances, may be
an opinion follower in other circumstances
THE FAMILY

The family is a major social influence on buyer behaviour ,
particularly with regard to the roles and relative influence
exerted by different family members.

Three patterns of decision making within the family have
been identified by researchers with the sorts of product
categories with which each is typically associated:.

Husband dominated – insurance, cars, computers and
televisions

Wife dominated – washing machines, carpets, kitchenware
and non-living room furniture

Equal – living room furniture, holidays, housing and
entertainment
PERSONAL FACTORS

Personal factors are those factors peculiar to the individual’s circumstances
that affect their buying behaviour

Factors classified as personal include:

Age – relevant to products like clothes, cars, furniture and recreation

Stage in Life Cycle – Single, married, Yuppie, Dinky, retired etc (different
stages in life cycle is characterised with different
consumption patterns

Occupation -

Economic circumstances – consists of such variables as
 Spendable income, its stability and time patterns
 Savings and assets, including percentage of liquidity
 Borrowing power and credit worthiness
 Attitude towards spending versus savings

Lifestyle – an individual’s mode of living as identified by his or her activities,
interests and opinions. Marketers will search for relationships between their
products and lifestyle groups
A person occupation will influence their consumption
LIFESTYLE CLASSIFICATIONS

CATEGORY
COMMENT

Upwardly mobile, ambitious
Seeking a better and more affluent
lifestyle, principally through better paid and
more interesting work, and a higher
material standard of living.

Traditional and Sociable
Compliance and conformity to group norms
bring social approval and reassurance.
Conformist purchasing pattern

Security and status seeking
Stressing safety and ego-defensive needs.
This lifestyle links status, income and
security. It encourages the purchase of
strong and well known product brands, those product and services which confer
status and make life as secure and
predictable as possible.

Hedonistic preferable
Places emphasis on ‘enjoying life now’
and the immediate satisfaction of wants
and needs. Little thought is given to the
future
PSYCHOLOGICAL FACTORS

Buyer behaviour is influenced by four major
psychological factors

Motivation
 ‘An inner state that energises, activates or
moves, that directs or channels behaviour
towards a goal (Assael)

Perception
 ‘The process by which people select, organise
and interpret sensory stimuli into a meaningful
and coherent picture’ (Assael)

Learning
 Learning describes changes in an individual’s
behaviour arising from experience
MOTIVATION

Motivation arises from two types of perceived needs.

Biogenic needs

Psychogenic needs

Biogenic
 Biogenic needs arise from physiological states of tension
such as thirst, hunger, and discomfort

Psychogenic
 Psychogenic needs arise from psychological states of
tension such as the need for recognition, esteem and
belonging

A number of different theories of human motivation have been
propounded which have different implications for marketing
and communications activity
FREUDS MOTIVATION THEORY

Freud’s theory of motivation assumes that the real
psychological forces influencing people’s behaviour are
unconscious

Freud regards the process of growing up and accepting social
rules as one which forces an individual to repress many of the
natural urges

These urges can never be eliminated or totally controlled and
can emerge in dreams, slips of tongue or neurotic behaviour

From a marketing perspective, Freud’s theory implies that
people buy a product, not only on for the rational reasons that
they may state overtly, but also for a hidden set of underlying
unconscious motives that they may not articulate

The marketer therefore need be aware of the impact of all
aspects of the product that could trigger consumer emotions
that stimulate purchase
HERZBERG

Hertzberg's two-factor theory of motivation
distinguishes between factor that cause
dissatisfaction and factors that cause satisfaction

The task of the marketer is therefore to avoid
dissatisfiers such as poor after sales service

In addition the marketer should identify the major
satisfiers or motivators of purchase and make sure
that they are supplied to the customer
MASLOW’S NEEDS HIERARCHY

Maslow’s theory of motivation holds that:

People are driven by particular needs at particular times

That human needs are arranged in a hierarchy in their order of
importance: physiological needs, safety needs, social needs,
esteem needs and self actualisation needs.

That the lowest ‘level’ or need which is unsatisfied is dominant

Once satisfied the next level ‘up’ the hierarchy becomes the
dominant motivating impulse, until it in turn is satisfied

A a satisfied ‘lower level’ need can become dominant again
through renewed deprivation.

The levels overlap in practice and more than one level of need
may operate at the same time, but the prime motivator will be
the lowest need that is substantially unsatisfied.
Maslows Hierarchy of Needs
Essential to
maximise personal
development
Essential to
Psychological
well being
Essential
to
survival
Fulfilment of personal potential
Self
Actualisat
ion
Esteem Needs
Love & Social Needs
Safety Needs
Physiological Needs
For independence, recognition,
status, respect etc.
For relationships, affection,
belonging
For security, order,
predictability,
freedom form threat
Food clothing
& shelter
MASLOW’S NEEDS CATEGORIES






Maslow’s need categories are:
Physiological needs
Food, water, air, shelter & sex,
Safety & Security needs
Freedom from threat, good health, security,
order, predictability, and ‘knowing where
you are with people’
Social Needs
Friendship, affection and sense of
belonging
Esteem & Ego needs
For self-respect and self confidence,
competence, achievement, independence,
prestige and their reflection in the
perception of others.
Self-actualisation needs
For the fulfilment of personal potential, to
become everything that one is capable.
The Hierarchy of needs as an operational tool

The hierarchy of needs can be adapted to facilitate market
segmentation and product/brand positioning

Market Segmentation


Advertisers can use the hierarchy to focus their
messages on a need category that is likely to be shared
by a sizeable segment of the target population
Product / Brand Positioning

The hierarchy of needs enable advertisers to establish
the product or brand in people’s perception as the means
to satisfy a particular need category
MODELS IN BUYING BEHAVIOUR

Given the complexity of factors influencing consumer buying
behaviour, models have been developed to simplify the
process to make it more manageable for marketers.

Models help us to put some form of framework on the
thought processes that consumers go through when buying.

Understanding these thought processes enable marketers to
develop communication activities that will effectively influence
the consumer to buy a particular brand.

Two other types of models put forward in addition to those
explained earlier to explain consumer behaviour are:


The Response hierarchy models
The Black box models
RESPONSE MODEL

Response hierarchy models attempts to predict the
sequence of stages that the consumer goes
through on the way to a purchase.

These models attempt to prioritise the
communication objectives at various stages of the
buying process.

These objectives can be classified into three main
areas;

Cognitive objectives


Concerned with creating knowledge or awareness in the
mind of the consumer
Affective objectives

Concerned with the changing the consumer’s attitude to
AIDA RESPONSE HIERARCHY MODEL
Attention

Gain

Stimulate

Create

Generate

Create
Interest
Desire
Action
Satisfaction

Need Recognition/Problem Solving

Information Search

Evaluation of alternatives

Purchase decision

Post Purchase stage
BLACK BOX MODELS

Black box models are concerned with how people respond to
stimuli and are referred to as stimulus-response models

They do not seek to explain the complexities of the
customer’s thought processes

The customer’s mind is likened to a black box which cannot
be penetrated to find out what is inside.

The models focus on the input or stimulus (e.g. advertising)
and the response or output (purchase behaviour)
THE BLACKBOX MODEL
Product
offerings
Other
Stimuli
Person making
buying decision
Product purchased or not purchased
ORGANISATIONAL BUYING BEHAVIOUR

Organisational Buying may be defined as the decision making
process by which formal organisations establish the need for
purchased products and services and identify, evaluate and
choose among alternative brands and suppliers

Organisational markets normally comprise fewer buyers, with
those buyers often concentrated.

There is generally a close relationship between buyer and
seller in organisational markets.

There is a great deal of customisation and cooperation on
product specification and other requirements

The unique characteristics of organisational markets
demands a modified approach in considering the process of
buying behaviour.
MODELS IN BUYING BEHAVIOUR

The specific characteristics of organisational markets may vary
according to the type organisation that comprises the market

Producer Market.
 Organisations that purchase products to produce other
products or use them in their own operations (raw materials)

Reseller Markets.
 Intermediaries such as wholesalers and retailers who buy
finished goods for resale to make profit

Government markets
 National and local governments who buy a variety of goods and
services to support their internal operations and to provide
public services, usually through bids or negotiated contracts.

Institutional markets
 Organisations that seek to achieve charitable, educational,
community or other non-business goals
THE PROCESS OFORGANISATIONAL
BUYING BEHAVIOUR

Organisational buying behaviour usually have the following stages .

Recognise the problem

Develop product specifications to solve the problem

Search for products and suppliers

Evaluate products relative to specifications

Select and order the most appropriate product

Evaluate the product and supplier performance

After the need recognition stage, the Decision Making Unit (DMU)
assess the problem and determine what is required to resolve or
satisfy the need.
FACTORS INFLUENCING ORGANISATIONAL BUYING
BEHAVIOUR
There are four main forces influencing the organisational buyer

Environmental
 Include such factors as level of primary demand, economic
outlook, the cost of money, the rate of technological change,
political and regulatory development and competitive
developments

Organisational
 Organisational objectives, policies, procedures, organisational
structures and systems which may constrain the freedom of
organisational buyers and the decision making process

Interpersonal
 Within the buying group, the use of power and the level of
conflict could significantly influence organisational buying
decisions

Individual
 The personal characteristics of the individuals in the buying
group such as age, education, personality and position within
the organisation
DECISION MAKING UNIT

The Decision Making Unit is ‘all those individuals and groups who
participate in the purchasing decision process, who share some
common goals and the risks arising from that decision.

There are six groups within the DMU

Users – buying initiators who help define specification

Influencers – help define specification and evaluation of alternatives

Deciders – those who decide on requirements and suppliers

Approvers – those who authorise proposals of deciders and buyers.

Buyers – those with authority to select suppliers and negotiate
purchase terms

Gatekeepers – those who by controlling information flow, may be
able to stop sellers from reaching individuals within the buying
centre.
DECISION MAKING UNIT

The size, structure and formality of the DMU will vary in
different situations and will depend on

Who are the principal participants in the buying process?

In what areas do they exert the greatest influence?

What is their level of influence?

What evaluative criteria do each of the participants make use
of and how professional is the buying process?

To what extent, in large organisations, is buying centralised?