UNDERSTANDING MARKETConsumer BehaviorSession 3Chapter 5&6

The Gaps Model

The GapsCustomers GapCustomers expectation not matching with customers perception (Gap 5)Providers GapsNot Knowing what Customers Expect (Gap 1)Not Selecting Right Product Designs & Standards (Gap 2)Not Delivering to Product Standards (Gap 3)Not Matching Performance to Promises (Gap 4)

Consumer BehaviorRole of Marketing is: To Understand the INTERVENING PROCESS that Influences Buying Decision.

Think on:Who buys?How do they buy? When do they buy?Where do they buy? Why do they buy?

Consumer Behavior Model Consumer Buying BehaviorBuying behavior of individuals and households that buy products for personal consumption.

Stimulus Response ModelMarketing and other stimuli enter the buyers black box and produce certain choice/purchase responses.

Marketers must figure out what is inside of the buyers black box and how stimuli are changed to responses.

Characteristics Affecting Consumer BehaviorCultural Social Personal PsychologicalCultureSubcultureSocial ClassUpper classMiddle ClassWorking ClassLower ClassKey Factors

Characteristics Affecting Consumer BehaviorCultural Social Personal PsychologicalGroupsMembershipReference Aspirational groupsOpinion leaders Buzz marketingFamilyChildren can influenceRoles and Status

Key Factors

Characteristics Affecting Consumer BehaviorCultural Social Personal PsychologicalAge and life cycle

Occupation

Economic situation

LifestyleLifestyle segmentation

Personality and self-conceptBrand personalityKey Factors

Family Life Cycle & Banking NeedsAn Example

Characteristics Affecting Consumer BehaviorCultural Social Personal PsychologicalMotivationNeeds provide motives for consumer behaviorMotivation researchMaslows hierarchy of needs

PerceptionSelective attention, selective distortion, selective retention

LearningDrives, stimuli, cues, responses and reinforcement

Beliefs and attitudesKey Factors

Maslows Hierarchy of NeedsOnce a Lower-level need is Satisfied, a Higher-level need Emerges, and Demands Satisfaction

Types of Buying Decision Behavior

Five Stages Buyer Decision ProcessNeed recognitionInformation searchEvaluation of alternativesPurchase decisionPostpurchase behaviorNeeds can be triggered by:Internal stimuliNormal needs become strong enough to drive behaviorExternal stimuliAdvertisementsFriends of friendsProcess Stages

Need recognitionInformation searchEvaluation of alternativesPurchase decisionPostpurchase behaviorConsumers exhibit heightened attention or actively search for information.

Sources of information:PersonalCommercialPublicExperiential

Word-of-mouthProcess Stages Five Stages Buyer Decision Process

Need recognitionInformation searchEvaluation of alternativesPurchase decisionPostpurchase behaviorEvaluation 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.Process Stages Five Stages Buyer Decision Process

Need recognitionInformation searchEvaluation of alternativesPurchase decisionPostpurchase behaviorTwo factors intercede between purchase intentions and the actual decision:

Attitudes of othersUnexpected situational factorsProcess Stages Five Stages Buyer Decision Process

Need recognitionInformation searchEvaluation of alternativesPurchase decisionPost-purchase behaviorSatisfaction is important:

Delighted consumers engage in positive word-of-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.

Cognitive dissonance is common!Process Stages Five Stages Buyer Decision Process

Marketing Research The process of planning, collecting and analyzing data relevant to a marketing decision.

Much can be learned about consumers through marketing research byCollecting, recording, and analyzing data important in marketing productsCommunicating results to management

Must be done prior and after the sale

Marketing Research ProcessDefine the Marketing ProblemChoose a Method of ResearchCollect the DataAnalyze the DataMake Recommendations to Management

Buyer Decision Process for New ProductsNew Products are goods, services or ideas that are perceived by customers as new.

Marketers should help consumers move through these stages:AwarenessInterestEvaluationTrialAdoption

Individual Differences in InnovativenessConsumers can be classified into five adopter categories

InnovatorsEarly AdoptersEarly MajorityLate MajorityLaggardsBuyer Decision Process for New ProductsProduct Characteristics and AdoptionFive product characteristics influence the adoption rate

Relative AdvantageCompatibilityComplexityDivisibilityCommunicability

Business Markets: Buyer BehaviorMarketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision ProcessCompared to consumer marketBusiness markets have fewer but larger customersBusiness customers are more geographically concentratedDemand is differentDemand is derived Demand is price inelasticDemand fluctuates more, and changes more quicklyCharacteristics The buying behavior of organizations that buy goods/services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.

Marketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision ProcessCompared to consumer purchasesBusiness purchases involve more buyers in the decision process.

Purchasing efforts are undertaken by professional buyers.Characteristics Business Markets: Buyer Behavior

Marketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision ProcessCompared to consumer purchasesBusiness buyers face more complex buying decisions.

Buying process is more formalized, more participants in the process:UsersInfluencersDecidersBuyersGatekeepers

Buyers and sellers work more closely together and build long-term relationships.Characteristics Business Markets: Buyer Behavior

Eight Stages Business Buying ProcessStage 1: Problem RecognitionStage 2: General Need DescriptionStage 3: Product SpecificationValue analysis helps to reduce costsStage 4: Supplier SearchSupplier development Stage 5: Proposal SolicitationStage 6: Supplier SelectionStage 7: Order-Routine SpecificationBlanket contracts are often used for maintenance, repair and operating items.Stage 8: Performance Review

Major Influences on Business BuyersEnvironmental Organizational Interpersonal IndividualEconomic trendsSupply conditionsTechnological changeRegulatory and political environmentsCompetitive developmentsCulture and customsKey Factors

Major Influences on Business BuyersEnvironmental Organizational Interpersonal IndividualObjectivesPoliciesProceduresOrganizational structureSystems

Key Factors

Major Influences on Business BuyersEnvironmental Organizational Interpersonal IndividualAuthorityStatusEmpathyPersuasiveness

Key Factors

Major Influences on Business BuyersEnvironmental Organizational Interpersonal IndividualAuthorityAgeEducationJob positionPersonalityRisk attitudesKey Factors

Business Buying on the InternetE-procurement is growing rapidly.E-procurement offers many benefits:Access to new suppliers Lower purchasing costs Quicker order processing and deliveryStrategies Influencing Customer Perception Measure & manage Customer Satisfaction and Service QualityAim for Service Quality & Satisfaction in every encounterFacilitate Adaptability & FlexibilityEncourage SpontaneityHelp Employees cope with problem customerManage Dimensions of Quality at encounters

Tips for MarketersEnsure the Quality of Service

Sound Distribution to the End Customer

Ensure a Composite Promotional Effort AdvertisingSales Promotion Personal SalesPublic Relation

Make Right Prices Have Satisfied People who have (PAI) P = (right) Personality A = (right) Attitude I = Interest / Initiative Simplified Procedure Proper Show-off Keep good Relationship Ensure cross-sell & repeat sellKnow your OrganizationKnow your ProductKnow your CustomersKnow your CompetitorsKnow your Process of SellingKnow Yourself