LO4: Consumer and Buyer Behaviour

Consumer behavior is the behavior displayed by consumers when searching, buying, using,
evaluating and disposing goods and services.

Differences between Organisational and Personal buying decisions:

1. Organisations buy to meet/obtain wider organizational objectives eg. customer

satisfaction. Individuals buy to satisfy personal needs.
2. More people are involved in organisation buying.
3. The organisational decision buying process is longer.
4. Most times organisations buy a complex total offering, that is, a package eg. when a
company buys computers it also negotiates/buys support, training, maintenance and
repairs etc.
5. Organisational buying has shorter distribution channels – with company might go straight
from Producer to Consumer. With individual they often go from Producer to Wholesaler
to Retailer to Consumer.
6. Most times organisations employ buying experts in the process.

Four type of buying behaviour s

High involvement Low involvement

Significant Complex buying Variety seeking

differences between behavior (motor cycle ) behavior (washing detergent)
brands

Few differences Dissonance buying Habitual buying

between brands behavior (floor tiles) behavior (toothpaste)

High involvement:- the term means when the consumer is highly involved while buying a
product. Generally this situation happens in case of expensive or luxuries goods. Like while
buying a diamond necklace a consumer is highly involved.
Low involvement:- this term means when the consumer is not highly involved while buying a
product. It happens in case of low price goods. Like while buying toothpaste a consumer is not
highly involved.
Significant differences between brands:- it means when there are significant differences
between brands.
Few differences between brands:- it means when there are very little differences between
brands.

Habitual Buying
This is repetitive buying which takes little thinking about. Few differences are apparent between
products and brands and the customer allocates little or low importance to the purchase. It may
be that the customer has in the past considered alternatives and has found "the ideal". The
customer is happy to stick with their decision and has, in fact, become loyal to the product or
brand.
Variety Seeking
This type of purchase will still involve relatively low importance in the mind of the purchaser, but
there will be lots of choice and variety, e.g. biscuits, sweets, newspapers, magazines. If a
product is tried and found to be lacking in some aspect, the buyer will simply try another one the
next time they buy, or they may actively decide to keep trying different brands to see which is
best, e.g. people who drink beer often try different types just as an experiment.
Dissonance Reducing
Dissonance-reducing purchasing is the kind of purchasing which is designed to reduce post-
purchase "doubt". Because the degree of involvement is high, usually because of value and the
item being something which is only bought rarely (e.g. an electric bed), the buyer may have no
previous experience to use as a base for comparison in the search process.
Complex Buying
High product involvement and lots of choice make this an extremely hazardous type of purchase
for a buyer. If we take buying a computer for home use as an example, you can understand the
problems. You may have already had one make of computer and been quite happy with it, but
now you have outgrown your machine and need another. It is going to be expensive so you
have to make sure you get good value for money.

Stages of consumer buying decision process

The marketer is responsible for selling the goods in the market so he must have the knowledge
how the consumers actually make their buying decisions. For this he must study the consumer
buying decision process or model. It involves five stages.
1.) Need recognition:- consumer buying decision process starts with need recognition. The
marketer must recognize the needs of the consumer as well as how these needs can be
satisfied. For example if a person is hungry then food is desired or if it is a matter of thirst than
water is desirable.

2.) Information search:– in consumer buying decision process information search comes at
second number. In this stage consumer searches the information about the product either from
family, friends, neighborhood, advertisements, whole seller, retailers, dealers, or by examining
or using the product.

3.) Evaluation of alternatives:– after getting the required knowledge about the product the
consumer evaluate the various alternatives on the basis of it’s want satisfying power, quality and
it’s features.

4.) Purchase decision:– after evaluating the alternatives the buyer buys the suitable product.
But there are also the chances to postpone the purchase decision due to some reasons. In that
case the marketer must try to find out the reasons and try to remove them either by providing
sufficient information to the consumers or by giving them guarantee regarding the product to the
consumer.

5.) Post purchase behavior:– after buying the product consumer will either be satisfied or
dissatisfied. If the consumer is not satisfied in that case he will be disappointed otherwise If he
is satisfied than he will be delighted. It is usually said that a satisfied consumer tell about the
product to 3 people and a dissatisfied consumer tell about the product to 11 people. Therefore it
is the duty of the marketer to satisfy the consumer.

Important factors that influence consumer behaviour

Cultural factors
Culture plays a very vital role in the determining consumer behaviour it is sub divided in
 Culture
Culture is a very complex belief of human behaviour it includes the human society, the
roles that the society plays, the behaviour of the society, its values customs and
traditions. Culture needs to be examined as it is a very important factor that influences
consumer behaviour.
 Sub-Culture
Sub-culture is the group of people who share the same values, customs and traditions.
You can define them as the nation, the religion, racial groups and also groups of people
sharing the same geographic location
 Social Class
Society possesses social class; in fact every society possesses one. It is important to
know what social class is being targeted as normally the buying behaviour of a social
class is quite similar. Remember not just the income but even other factors describe
social class of a group of consumers.

Social Factors
Social factors are also subdivided into the following
 Reference groups
Under social factors reference groups have a great potential of influencing consumer
behaviour. Of course its impact varies across products and brands. This group often
includes an opinion leader.
 Family
The behaviour of a consumer is not only influenced by their motivations and
personalities but also their families and family members who can two or more people
living together either because of blood relationship or marriage.
 Role and status
People who belong to different organizations, groups or club members, families play
roles and have a status to maintain. These roles and status that they have to maintain
also influences consumer behaviour as they decide to spend accordingly.

Personal factors
A number of personal factors also influence the consumer behaviour. In fact this is one major
factor that influences consumer behaviour. The sub factors under personal factor are listed
below.
 Age and life cycle stage
Age of a consumer and his life cycle are two most important sub factors under personal
factors. With the age and the life cycle the consumers purchase options and the motive
of purchase changes, with his decisions of buying products change. Hence this stage
does affect consumer behaviour.
 Occupation
Occupation of a consumer is affects the goods and services a consumer buys. The
occupations group has above average interest in buying different products and services
offered by organizations. In fact organizations produce separate products for different
occupational groups.
 Financial or economic situations
Everything can be bought and sold with the help of money. If the economic situation of a
consumer is not good or stable it will affect his purchase power, in fact if the consumers
 or the economy of a nation is suffering a loss it defiantly affects the consumers purchase
or spending decisions.
 Life style
People originating from different cultures, sub cultures, occupations and even social
class have different styles of living. Life style can confirm the interest, opinions and
activities of people. Different life styles affect the purchase pattern of consumers.
 Self concept and personality
Every individual is different and have different and distinct personalities. Their distinct
personalities and distinct physiology effects their buying decisions. Hence purchase of
products and services defers from person to person.

Psychological factors
4 psychological factors affect consumer behaviour very strongly. Let’s look at them in detail.
 Motivation
Motivation is activating the internal needs and requirements of the consumer. It can also
be described as goals and needs of the consumers. Motivation arouses and directs the
consumers towards certain goals. These needs can be psychological needs, needs of
security, social needs, esteem needs and also self actualizing needs.
 Perception
Perception is sensing the world and the situations around and then taking a decision
accordingly. Every individual look as the world and the situations differently. The judging
ability and capacity of every individual is different and hence the look at the world
differently. This is what separates the decision taking abilities.
 Learning and experience
Learning is the research of products and services before the consumer takes the
decision of buying a product. Learning and self educating these days is done online and
also in groups. Experience is taking a lesson from the past experiences of a product and
service. Learning and experience both again play an important role in influencing the
consumer’s behaviour as it influences their purchase decision.
 Attitude and beliefs
Attitude is a consumer’s favorable and unfavorable emotional condition or emotional
feeling, also its tendency of reaction to certain actions and behaviours. Beliefs of people
that are the belief that people assume the products to be as make the specifications of
the products. Hence attitude and beliefs are also important and need to be taken into
consideration while studying human behaviour.

Decision Making Unit (DMU)

The decision Making Unit is a team unit which participates in a buyer decision process. this
decision process is the purchasing behavior of a business.
The roles have been identified as follows:
• the initiator: the person who comes up with the idea of buying an item
• the influencer: the person, or people, who will shape the outcome of the decision
• the decider: the person with the power or authority to make the decision
• the buyer: the person who makes the actual purchase
• the user: the person who will eventually use the product
• the gatekeeper: the person who can prevent the decision from being made or make it
more difficult, e.g. a receptionist who prevents a salesperson from seeing a buyer, or a
friend who tells someone that a product is a waste of money –simply because they do
not see the need for it themselves.

Organisational Buying Situations

The new task is a business buying situation in which the buyer purchases a product or service
for the first time.
The modified re-buy is defined as a business buying situation in which the buyer wants to
modify product specifications, prices, terms, or suppliers.
Straight re-buy is a buying situation in which the buyer routinely reorders something without
any modifications.

Important factors that influence industrial buying behavior

Environmental factors
The institutional factors of buying decisions are directly or indirectly affected by the
environmental factors. This includes economic, technological, political and legal social
responsibilities etc.
1. Economic Factors:
It includes the level of demand, economic condition, competition, change in technology,
trade cycle, etc. The change in the general economic conditions of a market affects the
demand for organizational products which is related to the demand for consumer
products. So, any change in the economic condition of a country affecting consumer
demand is likely to influence the demand for organizational products.
2. Technological factors:
Technological factors such as the development of e-commerce, development of
 information, development of the internet have brought changes in institutional buying
and inventory management, production process, distribution management, etc.
3. Political and legal factors:
Institutions may be affected by political and legal factors. Every organization has to
operate their activities according to the rules and regulation of the nation so while buying
goods and services organization should study about the political system, political
situation, political ideology, government policies etc.
4. Social responsibilities:
Social responsibility also affects the organizational buying behavior . Institutions have to
consider the things like protect the environment and meet community needs. While
buying goods and services, the organization has to consider about the social well-being.

Organizational Factors
Organizational factors also affect the institutional buying behavior. This includes the buying
objective, policies, process, and organization have major influences on the organizational
buying.
1. Buying objective:
The different organization has different buying objectives. Some organizations give
priority to the low price than high quality and some organization gives priority to the high
quality than the low price.
2. Buying policies:
Some organizations have adopted centralized purchase policy and other organizations
have adopted decentralized purchase policy. Organization"s buying policies favoring
reciprocity principle will narrow down the range of suppliers.
3. Buying process:
Buying process in the organizational market varies across organizations. The
government market requires sealed bids and tenders for every large purchase. Most
business buying is based on past relationships with the suppliers.
4. Buying organizations:
Due to centralized buying and decentralized buying systems, the organizational buying
can differ to a large extent .If large purchase committees are involved then the buying
will become complex.

Interpersonal factors
Different people are involved in the organizational buying process. They affect the buying
process as the different persons are involved in the buying process. An interpersonal factor
includes authority, interest, and status.
1. Authority:
The staffs of the organization have different authority. Due to style and process of using
authority by the staff involved in the organization, it affects the buying process and
makes easy, quick or slow and complicated.
2. Interest:
There are differences between the interest of the people involved in the organizational
buying process .The production manager may be interested in quality and consistency of
the supply of the production input while the finance manager may be interested in lower
price.
3. Status:
The buying group may be represented by personnel working at different levels of
organizational hierarchy. The person who gives order and the person who purchases
goods may not be same in the organization. Due to this, the selection of goods and
services can be affected.
Personal factors
An individual factor such as age, education, job position, risk-taking, and personality also affect
the organizational buying behavior.
1. Age:
Age of an individual directly affects organization's buying. Young buyers tend to favor
building a relationship with new suppliers whereas older buyers tend to maintain a
relationship with established suppliers.
2. Education:
The educated buyer is able to evaluate the existing options and give continuity to the
buying. But the uneducated buyer is not able to select the supplier carefully. Therefore,
the education of buyer also affects the organizational buying.
3. Job position:
The position of the individual in the organizational hierarchy determines to what extent
the individual is likely to influence the selection of suppliers. Buyers involved in the
purchase may have a high-level or low-level position.
4. Risk-taking:
Every person has different risk attitudes. In this case, low-risk takers tend to favor doing
business with established suppliers while high-risk takers constantly search new sources
supply.
5. Personality:
The personality of the buyers determines the level of influence in buying decisions. The
one having tough personality are expected to change their brand according to the time.
And some of the buyers have much brand loyalty.

LO4: SEGMENTATION TARGETING AND POSITIONING (STP PROCESS)

Market Segmentation:

It is the division or a total market into sub-groups in such a way that the customers of each sub-
group are similar with respect to the factors that affect demand.

Requirements for effective segmentation:

1. Measureability. Can the market be measured eg. personality characteristics of buyers.
2. Accessibility. Can you effectively focus on the chosen group? It is difficult for eg. to access
people earning P70 000 per month and above.
3. Profitability. Is the market large enough to be profitable?
4. Stability
5. Different
 NOTE: Segmentation does not emphasise similarities, but rather the differences in the market
place.

Basis for Market Segmentation: (examiners love this one!)

(also called Segmentation variables / factors)
1. Geographic - this is segmentation using any of the following:
a. Location eg. cities versus rural areas.
b. Topography i.e. the earth’s surface – is it sandy, muddy, snowy.
c. Climate eg. hot or cold, arid, humid.
2. Demographic – demography is the statistical study of human population and its distribution.
Key demographic variables are:
a. Age (people with babies, 0-2 yrs, teens etc).
b. Gender – line is narrowing as many products are unisex, however you still have
exclusively male or female products.
c. Social Economic Groups – A class, B class, C class etc.
d. Religion – eg. halaal etc.
e. Education – the more educated probably more enlightened.
f. Occupation – eg. banker will most likely wear a tie, however, if a trucker not much
chance of wearing a tie.
3. Psychographic – This is classifying people according to their values, opinions, personality,
characteristics and culture. It is often called Lifestyle Segmentation.
4. Benefit Segmention – This is segmenting a market on the basis of the benefits consumers
desire from a product eg. toothpaste manufacturer may segment his market on the basis of
cavity protectivity, sensitivity, whitening etc.

Targeting Market segments:

After a market has been segmented an organisation has to decide which sub-markets it wants
to reach out to with its marketing mix elements (4 P’s). Those sub-markets chosen become the
organisations target markets.
In choosing a target market three options are available:
a. Undifferentiated Marketing (combiners). Such Organisations ignore segmentation
entirely eg. sugar & salt.
b. Concentration Marketing (single segmentation). This is where a manufacturer picks only
one of the numerous sub-markets eg. Rolls Royce.
c. Differentiated Marketing (multiple segmentation). In this case a marketer selects two or
more sub-groups and creates a set of 4 P’s for each sub-group eg. Toyota.

What determines what strategy to adopt?

a. Are your products/markets homogeneous (similar)?
b. Does your company have enough money?
c. Are the segments large enough to be profitable?

Benefits of Segmentation/Target Marketing:

1. An organisation may identify a new market opportunity eg. Mercedes Benz and the middle
class (the Mercedes C class). Needs are thus better satisfied.
2. Efficient and Effective utilisation of company resources.
3. A company can fine-tune its product according to customer needs- Product differentiation.
4. It gives competitive advantage (edge) eg. Mascom has Internet linkage, Orange does not –
Mascom therefore has an advantage over Orange.

Positioning Products & Brands: (positioning has nothing to do with location).

Positioning is developing an image that a product would project in relation to competing

products and the company’s other products. Brands can be positioned against others by
looking at how buyers perceive key characteristics.
Some of these characteristics are:
a. Specific product feautures.
b. Benefits / Solutions.
c. Specific usage occasions.
d. User category eg. age, sex etc.
e. Competitors eg. Hertz & Avis – “We are no. 2, but we try harder.”
f. Product class dissociation eg. Coke-light.