Buyer Behaviour
1 Importance
of understanding customer motives
The task of
marketing is to identify consumers’ needs and wants accurately, then to develop
products and services that will satisfy them.
For marketing to be successful, it is not sufficient to merely discover
what customers require, but to find out why it is required. Only by gaining a deep and comprehensive
understanding of buyer behaviour can marketing’s goals be realised. Such an understanding of buyer behaviour
works to the mutual advantage of the consumer and marketer, allowing the
marketer to become better equipped to satisfy the consumer’s needs efficiently
and establish a loyal group of customers with positive attitudes towards the
company’s products.
Consumer behaviour
can be formally defined as: the acts of individuals directly involved in
obtaining and using economic goods and services, including the decision
processes that precede and determine these acts. The underlying concepts of this chapter form
a system in which the individual consumer is the core, surrounded by an
immediate and a wider environment that influences his or her goals. These goals are ultimately satisfied by
passing through a number of problem-solving stages leading to purchase
decisions. The study and practice of
marketing draws on a great many sources that contribute theory, information,
inspiration and advice. In the past, the
main input to the theory of consumer behaviour has come from psychology. More recently, the interdisciplinary importance
of consumer behaviour has increased such that sociology, anthropology,
economics and mathematics also contribute to the science relating to this
subject.
2 Social
and cultural influences
Culture is
‘learned’ behaviour that has been passed down over time, reinforced in our
daily lives through the family unit and through educational and religious
institutions. Cultural influences,
therefore, are powerful ones and if a company does not understand the culture
in which a particular market operates, it cannot hope to develop products and
market them successfully in that market.
It is important
to recognise that culture, although immensely powerful, is not fixed
forever. Changes in culture tend to be
slow and are not fully assimilated until a generation or more has passed. An example of this is the custom of marriage,
which has been openly challenged in the UK over the past twenty years. When couples first began to set up home
together and raise families outside marriage, society, for the most part, adopted
an attitude of condemnation, whereas today there is a much more relaxed
attitude to those who choose to ignore the convention.
The twentieth
century has witnessed significant cultural changes, for example, changing
attitudes towards work and pleasure. It
is no longer accepted that work should be difficult or injurious to mind or
body, and many employers make great efforts to ensure that the work-place is as
pleasant an environment as possible, realising that this probably increases
productivity. Employees now more
frequently regard work as a means to earn the money to spend on goods or
services that give them pleasure, and not just to pay for the necessities of
life. The shortened working week, paid
holidays and labour-saving devices in the home have all led to increased
leisure time that influences how, when and what the consumer buys. Another major cultural change in this century
is the changing role of women in society.
Increased independence and economic power have not only changed the
lives of women, but have also influenced society’s and women’s own perception
of their socio-economic role.
In most Western
societies today, when considering culture, we must also consider
subcultures. Immigrant communities have
become large enough in many countries to form a significant proportion of the
population of that country, and marketers must consider them because of their
interactive influence on society and because, in some cases, they constitute
individual market segments for certain product areas. Subcultures can also exist within the same
racial groups sharing common nationality.
Their bases may be geographical, religious or linguistic differences and
marketers must recognise these differences and should regard them as providing
opportunities rather than posing problems.
3 Specific
social influences
3.1 Social class
This is the most
prominent social influence.
Traditionally, one of the chief determinants of social class was
income. Since pay structures have
altered a great deal in terms of the lower C2, D and E categories moving more
towards levels previously enjoyed by the higher A, B and C1 categories over the
past thirty years or so, classification of consumers on the basis of ‘life
style’ is becoming more meaningful today.
Income aside, social class is an indicator of life style and its
existence exerts a strong influence on individual consumers and their
behaviour. There is evidence to suggest
that whatever income level a consumer reaches during his or her lifetime, basic
attitudes and preferences do not change radically. As consumers, we usually identify with a
particular class or group, but often it is not the actual social class that is
revealing, but that which the consumer aspires to. Income and/or education allows young people
to ‘cross’ social class barriers and adopt life styles which are different from
those of their parents. They will tend
to absorb the influences of the group to which they aspire and gradually reject
the life styles of their parents and relations.
It can thus be seen that occupation is a strong determinant towards an
individual’s behavioural patterns, which includes buyer behaviour.
When studying
social class, the marketer should make decisions on the basis of information
revealed by objectively designed research, without any preconceptions or
associations with inferiority or superiority in ‘lower’ or ‘higher’ social
groupings. This is the only way that
changes in behaviour can be identified.
3.2 Reference groups
This can be
described as group of people whose standards of conduct mould an individual’s
dispositions, beliefs and values. This
group can be small or large. Reference
groups can range from the immediate family to the place of work. They can also be found in a person’s social
life. An individual is unlikely to
deviate too far from the behavioural norms laid down by the members of a club
or hobby group. Reference group theory
does not state that individualism cannot exist within a group, but it does
suggest that even rigid independent thinkers will at least be aware of what is
considered ‘normal’ within a group.
In a small group
like the family the advice and opinions of those who are regarded as
knowledgeable will be highly regarded.
Such people are termed ‘opinion leaders’. Extraneous to groups influences might also be
at work in opinion forming, and here there is the existence of opinion leaders
who are outside of the immediate group.
Their opinions are taken up by ‘opinion followers’. In the case of a number of products, a
deliberate direct appeal is made to the so-called ‘snob appeal’. This is done
by using a marketing strategy of making a company’s products acceptable to
opinion leaders, or famous personalities (who are paid for their endorsement)
in the hope that other sectors of the population will follow them.
The family is
perhaps the strongest reference group for most people because of its intimacy
and relative permanence. Strong
associations means that individuals within this group will influence each
other.
The family life
cycle traditionally contains six stages, although more recently different
divisions have been quoted. These
divisions are:
1. Unmarried Here, financial
commitments and family responsibilities tend to be low, with disposable income
being high. These younger unmarried
consumers tend to be more leisure-orientated and more fashion conscious. This segment thus comprises a very important
market for many new and innovative products.
2. Young newly married couples
- no children This group focuses its expenditure on those items considered
necessary for setting up home.
3. Young married couples with
children Outlay here is
children-orientated, and there is little surplus cash for luxury items.
Although they are receptive to new product ideas, this group sees economy as
being the over-riding factor when making purchases.
4. Older married couples still
with children at home Disposable income will probably have increased, often with both parents working and children being
relatively independent. In some cases
children may be working and the parents are able to engage increasingly in
leisure activities often in the form of more than the ‘standard’ annual
holiday. Consumer durables, including
major items of furniture, are often replaced at this stage. Such purchases are often made with different
motivations to the original motivations of strict functionality and economy
that was necessary at an earlier life cycle stage.
5. Older married couples with
no children living in the home Here, disposable income can be quite high. However, tastes are likely to be firmly
rooted reflected in unchanging purchasing patterns. Thus marketers will have difficulty when
attempting to change predispositions, so the best policy will be through
attempts to refine and add value rather than to introduce new concepts and
ideas.
6. Older retired couples and
single people At this stage, most consumer durables have been purchased although
occasional replacements will be required.
Purchasing is low and patterns of purchasing are conservative and
predictable. This group of consumers is
increasing rapidly. Such people tend to
be less reliant solely on the ‘State pension’, many having subscribed to
occupational pensions from former employers, which boosts the State
pension. This allows this group to lead
more active lives and the tourist industry now actively targets this particular
market segment.
In the past the
tendency was for clearer demarcations of purchasing responsibility in terms
which partner was responsible for which purchases. Nowadays, this distinction is far less clear
cut as family roles have tended to merge in terms of women taking on
traditionally viewed male roles and vice versa.
Marketers should, therefore, engage in research before determining whom
to target for their marketing efforts.
3.3 Individual
buyer behaviour
As well as
being influenced by the outside environment, people also have their own
individual beliefs. It is important that
we should know what these are in order that we can better understand how
individuals respond to marketing efforts.
Individuals are different in terms of how they look, their education,
their feelings and their responses to marketing efforts. Some will behave predictably and others less
predictably according to an individual’s personality. The individual consumer absorbs information
and develops attitudes and perceptions. In marketing terms, this will affect an
individual’s needs as well as determining how to satisfy them. The task of marketing is to identify patterns
of behaviour which are predictable under given conditions, which will increase
the marketer’s ability to satisfy customer needs, which is at the very base of
marketing. In order to more fully
understand this concept we shall concentrate on five psychological concepts
which are recognised as being very important when attempting to understand
buyer behaviour:
·
personality and self concept
This means how we think other people see us, and how we see
ourselves. As individuals we might wish
to create a picture of ourselves that is acceptable to our reference
group. This is communicated to the
outside world by our individual behaviour.
Marketers are interested in this behaviour as it relates to our purchase
and consumption of goods. The sum of
this behaviour is an individual self-statement and is a non-verbal form of
communication. This self image is
expressed in a way which relates to our inner selves and this promotes
acceptance within a group. Direct
advertising appeals to the self image are now being made through behavioural
segmentation.
‘Self’ is influenced by social interaction and people make purchases
that are consistent with their self concept in order to protect and enhance it.
The constant process of re-evaluating and modifying the self concept results
from a changing environment and changing personal situations.
Personality is the principal component of the self concept. It has a strong effect upon buyer
behaviour. Many purchase decisions are
likely to reflect personality, and marketers must consider personality when
making marketing appeals. Psychological
theory suggests that we are born with instinctive desires which cannot be
satisfied in a socially acceptable manner and are thus repressed. The task of marketing in this context is to
appeal to inner needs, whilst, at the same time, providing products which
enable them to be satisfied in a socially acceptable way.
· Motivation
An early thinker insofar as motivation is concerned was the
psychologist, Sigmund Freud who lived between 1856 and 1939. His theories have been criticised since, but
as a theorist, his theories are of fundamental value. He was responsible for identifying three
levels of consciousness:
·
The conscious which includes
all sensations and experiences of which we are aware;
·
The pre-conscious which
includes the memories and thoughts which we have stored from our experiences
and we can bring to mind when we wish;
·
The unconscious that is the
major driving force behind our behaviour and this includes our wishes and
desires of which we are not always aware.
Within these levels of consciousness there are mental forces at work
attempting to reconcile our instincts with the social world in which we live
and these are not always in accord so we experience emotional
difficulties. Freud’s term for these
are:
·
The ‘Id’ which is the reservoir for all our physiological and sensual
instincts. It is selfish and seeks
instant gratification regardless of social consequences;
·
The ‘superego’ which develops as we grow and learn from family,
friends, teachers and other influences.
It functions as our internal representation of the values and morals of
the society in which we have grown up.
It is a potent force and comes into conflict with the demands made by
our id for the gratification of what
might be anti-social desires;
·
The ‘ego’ which attempts to resolve the conflict between the id and the superego and tries to redirect our id impulses into socially and morally acceptable modes of
expression.
Marketers are interested in motivation when it relates to purchasing
behaviour. This behaviour relates to the
motive for wishing to possess the goods or services in question, and it has
been termed ‘goal-related behaviour’.
For a motive to exist there must be a corresponding need. Motives like hunger, thirst, warmth and
shelter are physiological. Others, like
approval, success and prestige are psychological. Motives like staying alive are instinctive
whilst motives like cleanliness, tidiness and proficiency are motives that are
learned during life. We can also discern
between rational and emotional motives. Most purchasing decisions are a
composite of such motives, quite often a deciding factor might be price which
is of course more of an economic restriction than a motive. It can, therefore, be seen that a number of
motives might be at play when making a purchasing decision - some motives
stronger than others - and the final decision might be a compromise solution.
In 1954 the psychologist Abraham Maslow put forward his classic
‘hierarchy of needs’ which is shown in Figure 1. This hierarchy is now central to much
thinking in buyer behaviour.
actualis-
Achievement
qualifications
Social needs - recognition
and
belonging
Physiological needs - hunger,
Figure 1
Hierarchy of needs (from A.H.Maslow)
Physiological needs are concerned with self preservation and these
are the basic needs of life involving those elements required to sustain and
advance the human race. Safety needs
relate to protection against danger and deprivation. Once the more basic needs have been satisfied
behaviour is influenced by the need for belonging, association and acceptance
by others. In many texts the next two
needs are put together, but here we have separated respect and self esteem in
terms of confidence, competence and knowledge and have then placed achievement
in terms of qualifications and recognition above this. The final need is what Maslow termed ‘self
actualisation’ which means self-fulfilment in terms of becoming all that one is
capable of being and one has reached the pinnacle of personal potential.
It is argued that when more basic needs like hunger ant thirst have
been satisfied, then individuals will move towards satisfying higher order
needs towards the apex of the pyramid and look increasingly for satisfactions
that will increase status and social acceptability. When the apex of the pyramid has been reached
and other satisfactions have been achieved the prime motivation is then one of
acquiring products and accomplishing activities that allow self
expression. This can be in the form of
hobbies, particularly collecting, which may have been desired for a long time,
but have been neglected until the lower order needs have been satisfied. It is
of course not possible to formulate marketing strategies on the hierarchy
theory on its own. Its real value is
that it suggests that marketers should understand and direct their effort at
the specific needs of their customers, wherever the goods one is attempting to
promote is in the hierarchy.
Maslow
was not the only theorist to focus upon human needs as the motivating force
behind human behaviour. McGregor argued
that two sets of theories motivate people and these he labelled Theory X and
Theory Y. Such motivations apply
principally to the place of work, but the workplace is where attitudes and
opinions are accumulated, so its relevance to marketing is in an indirect
sense. Under Theory X certain
assumptions are made:
·
people have an inherent dislike
for work and will avoid it if possible;
·
because of this, they must be
coerced, controlled, directed and threatened with punishment in order to complete
their work satisfactorily;
·
people like to be directed and
don’t crave responsibility. They have
little ambition and want security.
Under
Theory Y he makes an alternative set of assumptions:
·
people are not naturally
passive or resistant to organisational needs.
They have become so as the result of experience in organisations;
·
motivation and the capacity to
develop and assume responsibility are all present and it is management’s
responsibility to develop these characteristics;
·
it is management’s responsibility
to organise production towards economic ends, but it is their task to arrange
conditions and methods of operation so that people can achieve their own goals
best by directing their own efforts towards organisational objectives;
·
if the right conditions
prevail, individuals will not only accept responsibility. They will actively seek it;
·
most of the population is
capable of imagination, ingenuity and creativity in problem solving within an
organisation;
·
industrialisation has meant
that such capabilities are under-utilised.
There are thus two ways in which human behaviour can be interpreted,
depending upon whether the observer assumes Theory X or Theory Y. What McGregor argued was that management by
control (Theory X) was based on an inaccurate set of negative assumptions and
that organisations would work more effectively if ‘management by objectives’
(MBO) or Theory Y, was applied.
Frederick Herzberg also contributed to motivation theory through his
‘Motivation-hygiene’ theory. He believed that performance is at its
pinnacle when people are satisfied with their jobs as long as the necessary
resources are provided to carry out this work effectively. Satisfaction with work and personal happiness
do not necessarily work in harmony, but when they are and when the person is
stretched to the limits of his or her ability then there may be a feeling of
‘self actualisation’ (see Figure 1).
Whilst this feeling might be more evident in recreational or home
situations, it is less common in the workplace because of the conditions and
deadlines imposed in an occupational situation.
According to Herzberg, self actualisation depends on what he terms ‘motivators’ and these he distinguishes
from another set of factors termed ‘hygiene
factors’. Motivators can positively contribute to satisfaction at work,
whereas hygiene factors cannot
promote satisfaction, but they can prevent dissatisfaction. He uses the medical analogy to describe
hygiene factors and cited the case of unhygienic conditions as being a source
of infection that may make a person unhealthy.
In an organisation, hygiene
factors are:
·
financial reward;
·
supervision;
·
working conditions;
·
company policy;
·
status and relationships with
colleagues.
. Similarly, in an organisation motivators are:
·
recognition for achievement;
·
opportunities for advancement;
·
responsibility;
·
the job itself.
It can be seen that motivating
factors are those that are part of the job whereas hygiene factors are more concerned with the job environment
· Perception
Unlike motivation that requires a reaction to a stimulus, perception
relates to the meaning that is assigned to that stimulus. As marketers we are interested in how buyers
perceive and react to products in relation to such matters as quality,
aesthetics, price and image, since products not only exist in practical terms,
but also how they are perceived by consumers in relation to need satisfaction.
This perception by the buyer is affected by the nature of the product itself,
by the circumstances of the individual buyer, and by the buyer’s innate
situation in terms of how ready they are to make the purchase in terms of
needing it at a particular point in time.
It is, or course, necessary that the product or service (i.e. the
stimulus) receives the attention of the potential buyer. Buyers have numerous stimuli competing for
their attention, so marketers must make their stimuli as interesting and
attractive as possible because potential buyers only act on information that is
retained, and this is the foundation of how the product or service is
communicated together with the choice of media.
There is of course no certainty that perception of a product or service
will be as the marketer expected, even though the marketer has successfully
alerted the consumer to a particular offering through successful manipulation
of the marketing mix. Consumers might be
influenced by many kinds of illogical motives as well as the practical ones
presented to them by the marketer. These
might be favourable or unfavourable preconceptions from personal experience,
from peer group or family advice, or from other psychological motives, all
combining to alter and shape the final perception and indeed the ultimate
buying decision.
· Attitudes
Our strongest basic attitudes are implanted in our formative years and
these come largely from the influence of our close family group and other
social interaction. More refined
attitudes develop later. In marketing
terms, the sum total of our attitudes can be regarded as a set of cognitions
that a potential buyer has in relation to a potential purchase or a purchasing
environment. This is why certain stores
or companies go out of their way to engender favourable attitudes and it is why
manufacturers seek to induce loyalty towards their particular brand or
product. Once this attitude has been
established in the mind of the consumer, it might be difficult to alter. Even a
minor dissatisfaction can cause a fundamental shift in disposition. This process can work for and against a manufacturer
or retail establishment, an a method of attempting to change attitude is
through promotional appeals and through a programme of public relations.
· Learning
Experience precedes learning and this can alter perceptions and
attitudes. It also intensifies a shift
in behaviour, so when a buyer perceives that certain products are more
favourable than others within his or her reference group, repeat purchases are
made to promote this acceptability.
Every time a satisfactory purchase is made, the consumer becomes less
likely to depart from this purchasing behaviour
The result is brand loyalty,
and the ultimate success of marketing is in terms of customers making repeat
purchases or becoming ‘brand loyal’.
In the context of marketing, learning is a result of information
received through advertising or other publicity or through some reference group
or other. In order to have an effect on
motives or attitudes, marketing effort should associate the product with
positive drives and reinforcing messages.
A fundamental aim of marketers is to bring about satisfaction for
their customers, and this is cardinal to the concept of marketing. Having looked at some of the issues that make
up consumer behaviour, we can now look at the consumer’s central goal. Because they are continually occupied in the
quest for satisfaction, competitive offerings will always have potential
appeal. Firms must seek continuous
improvement to the products or services and the levels of support they
provide. This is a matter of balancing
costs and potential profit with customer demands, as ‘total satisfaction’,
except in a minority of cases, is an unrealistically expensive goal.
4 Models
of consumer behaviour
Now that we
have examined the psychological factors that influence consumer buyer behaviour
we are now in a position to examine some consumer behaviour models. The aim is to bring together our present
understanding by presenting a series of models that endeavour to explain the
purchase decision process in relation to pertinent variables.
4.1 The
buyer/decision process
Different
buying tasks present different levels of complexity to the purchaser. The ‘AIDA’ model that is presented in Figure
2 considers the steps leading to a purchase in the form of a sequential
problem-solving process:
Action
Figure 2 AIDA
Model of buying behaviour
This classical
model was first promoted by E.K.Strong in 1925 and it is still useful today
because it is easy to apply as it describes the activities involved in the
buyer decision process. Products and
services vary in the complexity of decision making involved in their
acquisition. The purchase of a new
shower unit, for instance, is more
complicated than the purchase of a tube of shower gel.
Robinson, Faris
and Wind in 1967 put forward a model that viewed purchasing as a problem. This is shown in Figure 3 and it describes
the activities involved in the purchasing process:
Post-purchase behaviour
Figure 3 The
buyer/decision model
An individual
needs a particular product. Information
will be sought from a variety of sources including family and friends (called
‘word of mouth’) from advertising, from catalogues, from visits to retail
establishments, and from many other sources.
The more complex the product, the greater will tend to be this
information search. The task of marketing is to ensure that the company’s
products receive high exposure during this
‘information search’ period and that the best points of the product are
emphasised during the ‘evaluation of
alternatives’ phase. This will put
the company’s product in the best light prior to the ‘purchase decision’, because
even then the consumer is still susceptible to further influences in relating
to making the correct choice. Marketers
must also be aware of ‘post-purchase
behaviour’ because this can affect repeat business and forward looking
companies attach as much importance to after-sales service as they do to making
the initial sale. This reduces the
degree of dissatisfaction (or dissonance) in the case of genuine
complaints. One method that is now
practised for sales of major items like new motor cars is where companies
follow up a sale by some form of communication by letter or telephone with
their customers. This builds confidence
in the mind of the customer in having made the ‘correct’ purchasing
decision. The terminology that has been
attached to this kind of after-sales follow-up is ‘customer care’.
A knowledge of
how the buyer/decision process works is critical to the success of marketing
strategy. For simple products, the task
of marketing is to direct the purchasing routine in favour of the company’s
products, perhaps through an effective mass advertising campaign. For more complicated purchases, the more
important it is that customers are helped in their problem-solving process and
that reassure is provided to show that their choice has been a wise one.
4.2 The adoption process
The
buyer/decision model (Figure 3) was not specifically designed for new products
and its substance was concerned with search and problem solving. The model shown in Figure 4 was avanced by
Everett Rogers, and it relates to new products.
It begins with awareness.
Marketers must first create awareness and then assist customers through
subsequent stages of the process.
Consumers cannot begin to consider a new product or service as a
solution to need-related problems without this awareness. Successful innovative products should attempt
to be problem-solving as far as the customer is concerned.
Post-adoption confirmation
Figure 4 The adoption process
Awareness can come about
as a result of the marketing effort of the company or simply by ‘word of mouth’
communication. If the product has
potential interest and appeal, then
potential purchasers will seek further information. Consumers then evaluate the new product against existing products, and then make
an initial adoption by obtaining a trial sample,
which might be a free sample or a ‘trial’
purchase. The adoption stage is when a decision is made whether to use the
product (in the case of a fast moving consumer good on a repeat purchase
basis). Post adoption confirmation is when the product has been adopted and
the consumer is seeking reassurance about the wisdom of the purchase. After a major purchase, dissonance (termed
cognitive dissonance) is present in the sign of unease that what was thought to
be value for money at the time of purchase may not, after all, turn out to be
true value. Such dissonance should be
countered by the provision of some kind of follow-up - either written or
through the telephone.
A more
detailed model is suggested in figure 5 that develops the adoption
process. A series of inputs feed into
the knowledge base. The ‘self’ input
includes the psychological notions of perception, attitudes, motivation and
learning. Similar to other inputs, they
set the scene for knowledge to be interpreted into a favourable situation of
awareness. Figure 5 also shows that
persuasion governs the rate of adoption that is affected by relative advantage,
compatibility, complexity, trial opportunity and observability. The model also allows for review after the
decision stage, and here consumers can be sensitive to the influence of
external information sources from promotional appeals and from such influences
as reference groups.
O I
SOCIAL CONTINUED
REJECTION
observability
Figure 5 New product
purchasing decision process
It can be seen
that various inputs contribute to knowledge, ranging from personal factors to
company marketing activity. Persuasion
is an important phase and here a number of factors which are functions of the
product itself can lead to the decision whether or not to purchase the new
product or service in question. The
decision means adoption or rejection. If
it is adoption, then good experience can lead to its continued adoption, but if
the experience of the product or service is bad then it will be
discontinued. Conversely, rejection
might be the decision and this might be followed by continued rejection, or
later adoption, perhaps, in the latter case, through hearing good experience of
reference group members who have purchased.
Continued adoption and later adoption need confirmation in order to
continue the repeat purchase pattern.
It is
important that we look at innovator categories insofar as purchasing behaviour
is concerned because consumers, as individuals, can be more, or less, receptive
to new product or service ideas.
The process of
the diffusion of innovations proposes that certain groups of consumers will
take on new ideas more quickly than other groups and they tend to influence
later consumer groups. These group have
particular common features.
1. Innovators are the first small segment to take on new product ideas and they
are likely to be younger people, from well-educated, relatively affluent
backgrounds and having a high social status.
They are more probably unprejudiced, discerning people whose
understanding of the new product has been more objectively ascertained than
through salespeople or company promotional material.
2. Early adopters, possess some of the characteristics of innovators, but they are
more part of ‘local’ systems, acting as opinion leaders within their specific
group.
3. Early majority adopters tend to be above average in terms of social class and rely
upon company promotional efforts for data.
Opinion leaders of the early adopter category will tend to be their
biggest inspiration.
4. Late majority adopters tend to adopt the product or service because it has become
generally accepted by earlier groups.
5. Laggards make up the final group.
They tend to be more careful and older and of a lower socio-economic
standing.
Clearly,
adopter categories will tend to differ depending upon the new product or
service being marketed.
4.3 Hierarchy of effects
Lavidge and
Steiner produced a ‘hierarchy of effects’
model of purchasing behaviour in 1961.
The model starts at the awareness stage,
but it could be argued that there is a stage prior to this which is when the
potential purchaser is completely unaware of the product or service offering,
and it is through marketing communication that such awareness is made
known. The model is described in Figure
6:
KNOWLEDGE
LIKING
CONVICTION
Figure
6 The Innovation/Adoption model PURCHASE
5 Organisational
buying behaviour
The term
‘organisational buying’ reflects purchasing in three different buying
situations as shown in Figure 7:
Industrial buying Buying for resale Institutional
buying
Figure 7 Elements of
organisational buying
Industrial
buying and organisation buying tend to be used interchangeably in the
literature, but as we can see, industrial buying is really a subset of
organisational buying. The process of
organisational buying behaviour differs from consumer buying in that the
psychological and emotional considerations attached to the latter should not
apply here. However, organisational
buyers are human, so clearly some ‘emotion’ might be involved, but generally it
can be said that commercial considerations are of prime significance when arriving
at purchasing decisions.
The principal
similarity between consumer and organisational purchasing is that they both
represent a need satisfying process.
This need reflects itself in buying behaviour, and this is why it is
important that marketers understand purchasing motives in order to target their
marketing efforts effectively in a way that satisfies these needs.
It can be seen
that organisational purchasers have to work with more stringent purchasing
constraints, because they have the commercial and budgetary interests of their
respective organisations to serve. They
also have logistical factors like delivery schedules to maintain. There is little opportunity for ‘impulse’
purchasing in which everyday consumers can indulge. As purchasing professionals they should have
a great deal of technical and commercial knowledge about their prospective
purchases.
5.1 Models of organisational buying
In figure 8 we
propose a model of the organisational purchasing decision process. It is, perhaps, more precise in its
application than the models that were suggested for consumer buying behaviour
as items for purchase require a more
business-like description through a formal specification at the ‘need description’ and ‘product specification’ stages. Likely suppliers tend to be more rigorously
vetted prior to a first order being placed, and it is not uncommon for
purchasing and other executives to visit the supplying company beforehand, in
order to ascertain whether or not the supplying company measures up to quality,
financial and other reliability criteria. The purchase routine specification
will instruct the supplying company in relation to quantities to be delivered
at specific dates through a delivery schedule if the entire order is not all
needed at once.
Performance review
Figure 8 The organisational purchasing decision
process
Having said
that organisational purchasing is more ‘scientific’ than consumer goods
purchasing, individual organisational purchasers are of course subjected to the
marketing actions and efforts of their current and potential suppliers. Reference groups also exist within
organisational situations, and there can be influences from outside of the
purchasing department, which is dealt with later in this chapter. It should also be noted that individual
buyers have discrete psychological attributes which can also influence decision
making.
Figure 9 shows
a more refined model that was developed by Yoram Wind in 1978.
He contended
that it is critical for marketers to locate powerful buyers, because they tend
to have more direct say in purchasing decisions at the negotiation stage. This does not ultimately mean those who are
most important within the organisation at which the marketing approach is being
directed. Buyers of relatively low
status may be able to impede a purchase for a variety of reasons. Five power bases have been identified in this
respect:
1. Reward Ability to provide monetary,
social, political, or psychological rewards to others for compliance.
2. Coercive Ability
to withhold monetary payments or other punishments for non-compliance.
3. Attraction Ability to elicit compliance from others because they like you.
4. Expert Ability to elicit compliance because of actual or reputed technical
expertise.
5. Status Compliance from the ability derived from a legitimate position of
power in a company.
Post-purchase evaluation
Figure 9 Wind’s organisational purchasing model
5.2 Organisational
and consumer purchasing compared
How do
purchasers in organisational buying situations differ from consumer buyers in
their purchasing decision making processes?
·
Rationality of purchasing
motives
·
Derived demand especially in
industrial buying situations, where demand is dependent upon purchases further
down the supply chain and this creates demand further up the chain
·
Small numbers of individual
buyers
·
Large number of influences on
individual buyers
·
Often multi-person purchasing
decision-making unit
·
Suppliers are sometimes in
active competition with each other
·
Industrial customers may have
more power
·
Many products are pre-specified
by the buyer’s organisation
·
Commercial relationships
between buyers and sellers is often long term
·
Unequal purchasing power of
customers
·
Distribution is more direct
·
Higher value of purchases
·
There is sometimes a
geographical concentration of purchasers
·
Company policies, for instance
in relation to suppliers being ‘listed’ for a particular quality standard, may
act as a constraint on the buyer
·
Possible ‘reciprocal’
purchasing arrangements, in that certain markets may be closed off because of a
mutual trading agreement
·
A sale is often preceded by
lengthy negotiation
·
Relationships between buyers
and sellers tend to be more long term, rather than depending on a single
commercial transaction
5.3 The structured nature of organisational purchasing
Each time a
consumer makes a purchase from a retailer, a derived demand is created for a
series of materials and components which make up the final product. Added to this is an elaborate chain of supply
from companies who buy and sell ancillary products like packaging materials,
machinery and maintenance equipment. So
that companies can control this steady flow of goods and services, they must
organise their purchasing activities so that they have:
1. A constant supply of goods and services of the requisite quality as
and when required
2. A system which monitors supplier performance in terms of the above
3. A system of review of existing suppliers and potential suppliers
The larger the
organisation, the more structured the methods of buying should be. There should be an established procedure for
each of the steps outlined in Figure 8.
Purchasing will tend to be more critical in flow production situations
than in a jobbing works. Even a minor
delivery or quality problem could cause substantial losses in terms of lost
production and loss of customer goodwill.
Organisational purchasers tend to be far more demanding than consumer
purchasers because of the implications just outlined, so the notion of
‘customer care’, which is dealt with in more detail later in the text, has
profound significance in modern marketing.
5.4 Organisational buying situations
Three major
types of organisational buying situation have been identified, together with
the problems surrounding each, as shown in Figure 10:
ž continuing or recurrent
item or commodity
ž involves little purchasing effort
ž routinely dealt with within current purchasing arrangements
ž suppliers are already known
ž represents much of purchasing activity in many companies
ž past experience has established a reliable supply pattern
ž difficult for new suppliers to enter the market
ž involves little purchasing effort
ž routinely dealt with within current purchasing arrangements
ž suppliers are already known
ž represents much of purchasing activity in many companies
ž past experience has established a reliable supply pattern
ž difficult for new suppliers to enter the market
Figure 10(a)
ž continuing need but at an
expanded (or decreased) level
ž minor changes to product specification needing additional
information
ž change of regular supplier for some reason
ž possibly due to some outside event (e.g. shortage of material)
ž companies who are not already supplying sometimes attempt
to convert straight rebuy into modified rebuy
ž internal circumstances (e.g. new buyer) might want to look for
cost reductions or better service or better quality
ž sometimes develops from new buy or new task
ž minor changes to product specification needing additional
information
ž change of regular supplier for some reason
ž possibly due to some outside event (e.g. shortage of material)
ž companies who are not already supplying sometimes attempt
to convert straight rebuy into modified rebuy
ž internal circumstances (e.g. new buyer) might want to look for
cost reductions or better service or better quality
ž sometimes develops from new buy or new task
Figure 10(b)
ž unfamiliar or new product or new specification
ž extensive need description
ž supplier search
ž challenging purchasing task as no past experience to draw
upon
ž infrequent occurrence
ž sets the pattern for more routine straight rebuy and modified
rebuy situations later
ž creative marketers will anticipate this event and will make
appropriate marketing appeals
ž extensive need description
ž supplier search
ž challenging purchasing task as no past experience to draw
upon
ž infrequent occurrence
ž sets the pattern for more routine straight rebuy and modified
rebuy situations later
ž creative marketers will anticipate this event and will make
appropriate marketing appeals
Figure 10(c)
Figure 10 Organisational Buying Situations
From the
viewpoint of suppliers’ marketing departments, each of these purchasing
situations suggests a different marketing mix.
This is in order to fit the particular circumstances, depending upon
whether the company is an ‘in’ supplier currently supplying, or an ‘out’
supplier seeking to become an ‘in’ supplier.
5.5 The Decision Making Unit (DMU)
The scope and
roles of organisational buyers vary widely according to the type of service or
commodity being purchased and whether purchasing is a centralised or
decentralised function. Large retail
chains now tend to centralise their purchasing in order to employ specialist
buyers who can negotiate keen terms and conditions. Some companies employ buyers
who have only superficial knowledge of the products offered and handle only the
commercial aspects of the sale. Whatever
the buying structure, organisational salespersons know that the buyer is not
always the final decision-maker.
The
predominant difference between consumer and organisational buying is that
organisational buying often involves
group decision-making. In 1972 Frederick
E Webster (Jr) proposed that there were distinct roles in the purchasing process,
sometimes taken up by different individuals, and sometimes the same individuals
combining some of these roles as shown in Figure 11. He termed this idea the notion of the ‘buying
centre’ or the decision making unit (DMU).
Gatekeepers control the flow of
information to and from the people who buy (e.g. the buyer’s secretary or an
assistant buyer).
Users are individuals who work with, or use the product. Depending upon how purchasing decisions are made,
they are sometimes involved in product specification.
Deciders are people who
make the buying decision. In many cases
this is the buyer, but on some
occasions it can be the specifier or in a tightly budgeted situation the accountant.
Buyers have
authority to sign orders and make the purchase.
They may also help to shape the
specification, but their principal role is in supplier negotiation and
selection.
Influencers can affect the
buying decision in different ways (e.g. technical people may have helped in a major
or minor way to develop the product specification).
Figure 11 The Decision Making Unit (DMU) or Buying Centre
5.6 Future
developments in organisational purchasing
Nowadays
manufacturing companies (especially those operating flow line production) are
moving towards holding less stocks of components and raw materials. In some manufacturing situations,
stockholding is theoretically non-existent.
This is termed ‘just-in-time’
management, or ‘lean manufacturing’.
It requires delivery and of goods exactly when required with zero defects. Should defects occur, the company’s
production will soon be stopped, so reliability of supply is of prime
importance. In such situations,
relationships tend to be long term and it is just as common for buyers to visit
sellers as it is for sellers to visit buyers (the traditional pattern). The idea of buyers sourcing sellers is termed
‘reverse marketing’ (as opposed to ‘traditional marketing’ when the seller
meets buyers). The term used to describe
these longer term relationships is ‘relationship
marketing’.
It is
important to recognise that just as consumer goods’ buyers are responsive to
the actions of sellers, industrial buyers are individuals who possess
personalities. The personal impression
that the buyer or a member of the DMU has of a company’s image, as well as the
personal accord that the salesperson can achieve, can profoundly influence the
purchasing decision. This human factor
also extends to individual relationships which the buyer might have with
colleagues within the selling organisation.
As we move towards longer term relationships, so this trend will increase
and the notion of ‘customer care’ will
become increasingly important. Companies have ‘personalities’ which is an
amalgam of attitudes and policies reflected in the way outside people view the
organisation.
6 Summary
Although
factors have been identified that are common to consumer and organisational
buying behaviour, it is emphasised that the two markets should be approached
differently. The requirements of
consumers are established and the marketing response is communicated mainly
through the mass media and direct response marketing methods like
‘individualised personal mailings’ from a mailing list. In organisational markets, buyers and sellers
also communicate through the mass media, but to a lesser extent as they also
rely upon personal interaction.
Organisational buyers tend to work to obtain satisfaction in relation to
the company’s commercial needs. Much consumer behaviour has a psychological
foundation. Although organisational purchasers have an explicit rationale for
their actions, this does not imply that they are inflexible to receiving
psychological influences. Marketers
should not overlook the psychological factors that drive industrial
customers. Nowhere is this more
important than in a market where products or services on offer are broadly
similar. It is here that organisational
marketers must attempt to modify their marketing advances to serve specific
idiosyncratic needs and requirements.
