UNIT 2.

UNDERSTANDING THE MARKETPLACE: BUYER BEHAVIOR

EXPLAINING CONSUMER BEHAVIOR

CONSUMER BUYER BEHAVIOR refers to final consumers – individuals or households – that buy
goods and services for their personal consumption.

CONSUMER MARKETS are all the individuals and households that buy goods and services for
personal consumption.

But, where does the data come from?

1. Online interactions – browsing, purchases, social media… - digital trace

2. Mobile devices – location data, app use, biometric data, call records…
3. E-Commerce – purchase history, preferences, payment information.
4. IoT Devices – generate data about users habits and preferences.
5. Surveys and feedbacks – customer satisfaction, opinions and preferences.
6. Physical stores – loyalty programs, cameras and sensors, point-of-sale-systems.
7. Cookies and tracking – websites track online behavior (time spend, pages, items added…)
8. Third-party sources – demographics, income levels, psychographic data.

Data is collected, stored, processed, analyzed, visualized and taken to action. CRM platforms
integrate, analyze and apply data to gain a 360-degree view. Marketing Analytics is applied to
generate meaningful patterns and gain insights.

But, there are ethical considerations such as privacy, data security, data protection or misuse of
data.

THE MODEL OF BUYER BEHAVIOR:

CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR

 1. CULTURAL

a. Culture – is a set of basic values, perceptions, wants, and behaviors learned by a

member of society from family and other important institutions.
b. Subculture – a group of people with shared value systems based on common life
experiences and situations.
c. Social class – relatively permanent and ordered divisions in a society whose
members share similar values, interests and behaviors.

2. SOCIAL

a. Reference group – serves as a point of comparison or reference in shaping a

person’s behavior.
b. Opinion leader – A person who, because of special skills, knowledge, personality or
other characteristics, can socially influence others.
c. Word-of mouth influence – personal recommendations of trusted friends, family of
other consumers on buying behavior.
d. Influencer marketing – established influencers that spread (positive) information
about a brand.
e. Family – most important membership group.
f. Roles and status – a person’s position in a group can be defined by role and status.
A role consists of activities people are “expected” to perform and each role carries
a status.

3. PERSONAL

a. Occupation – affects the goods and services bought by consumers.

b. Age and Life Stage – affect tastes in food, clothes, furniture and recreation.
c. Economic situations – include trends in spending, personal income, savings,
interest rates.
d. Lifestyle – a person’s pattern of living as expressed in his or her psychographics.
e. Personality – refers to the unique psychological characteristics that distinguish a
person or group.

4. PSYCHOLOGICAL

a. Motivation - a need that is sufficiently pressing to direct the person to seed

satisfaction of the need.
b. Perception – is the process by which people select, organize and interpret
information to form a meaningful picture of the world.
c. Learning – is changes in an individual’s behavior arising from experiences.
d. Beliefs and attitudes – are difficult to change.

Based on this, consumers normally have three types of tendencies:

§ Selective Attention: is the tendency for consumers to screen out most of the information
they are exposed to.
§ Selective Distortion: the tendency of people to interpret information in a way that will
support what they already believe, or what they want to believe.
§ Selective Retention: Consumers will usually forget much of the stimuli they have been
exposed to, so selective retention allows them "remember" the good points they favor and
"forget" the negative points that have been made about other brands that they don't like.
TYPES OF BUYING DECISION BEHAVIOR

o Complex buying behavior: Consumer buying behavior in situations characterized by high

consumer involvement in a purchase and significant perceived differences among brands.
o Dissonance-reducing buying behavior: Consumer buying behavior in situations
characterized by high involvement but few perceived differences among brands.
o Habitual buying behavior: Consumer buying behavior in situations characterized by low
consumer involvement and few significant perceived brand differences.
o Variety-seeking buying behavior: Consumer buying behavior in situations characterized
by low consumer involvement but significant perceived brand differences.

BUYER DECI SI ON PROCESS

1. NEED RECOGNITION

Buyer recognizes a differences between the actual and desired state:

- Internal stimulus: needs that are important enough to make a person act.
- External stimulus: an image, a store, a smell…
 2. INFORMATION SEARCH

The buyer is motivated enough to gather information. The relative importance depends on the
product and the person.

- Personal sources: family, friends, neighbors…

- Commercial sources: ads, sellers, retailers, packaging…
- Public sources: mass media, social media…
- Own experience: examing and using the product.

3. EVALUATION OF ALTERNATIVES

The stage of the buyer decision process in which the consumer uses information to evaluate
alternative brands in the choice set. There is no single, simple evaluation process used by all
consumers or even by a single consumer in all purchasing decisions. The consumer sees each
product as a set of attributes with different capabilities to offer the desired benefits and satisfy their
needs. The marketer must measure the levels of importance that consumers attribute to the
different attributes they consider when purchasing a product and the consumer’s brand beliefs, this
is how the consumer values each of the brands in relation to each attribute.

4. PURCHASE DECISION

In the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally, the
consumer’s purchase decision will be to buy the most preferred brand, but two factors can come
between the purchase intention and the purchase decision:

a) Attitudes of others – if someone important to you thinks that you should buy the lowest-
priced car, then the chances of you buying a more expensive car are reduced
b) Unexpected situational factors – the consumer may form a purchase intention such as
expected income, expected price, and expected product benefits but unexpected events
may change the purchase intention.

5. POST-PURCHASE BEHAVIOR

THE ADOPTION PROCESS

Mental process that an individual goes through from when he first hears about an innovation until
he finally adopts it.
 • Relative advantage: degree to which the new product is better than the existing ones.
• Compatibility: degree to which the innovation fits the values of potential customers.
• Complexity: degree of difficulty in understanding or using the innovation.
• Divisibility: degree to which the innovation can be tested in a limited way.
• Communication capacity: degree to which the results of using the innovation can be
observed.

BUSINESS BUYER BEHAVIOR

BUSINESS BUYER BEHAVIOR refers to the buying behavior of the organizations that buy goods
and services for use in the production of other products and services that are sold, rented, or
supplied to others.

BUSINESS BUYING PROCESS is the process where business buyers determine which products and
services are needed to purchase, and then find, evaluate, and choose among alternative brands.

Market structure and demand:

- Fewer but larger buyers

- Derived demand
- Inelastic demand
- Fluctuating demand

Business buyers usually face more complex buying decisions than do consumer buyers. Compared
with consumer purchases, a business purchase usually involves: more decision participants, more
professional purchasing effort and more buyer and seller interaction.
MAJOR TYPES OF BUYING SITUATIONS

• STRAIGHT REBUY – is a buying situation in which the buyer routinely reorders

something without any modifications.
• MODIFIED rebuy – is a buying situation in which the buyer wants to modify product
specifications, prices, terms or suppliers.
• NEW TASK – is a buying situation in which the buyer purchases a product or service for
the first time.
• SYSTEMS SELLING – is buying a complete solution to a problem from a single seller.

PARTICIPANTS IN THE BUSINESS BUYING PROCESS

• USERS – are those that will use the product or service

• INFLUENCERS – help define specifications and provide information for evaluating
alternatives.
• BUYERS – have formal authority to select the supplier and arrange terms of purchase.
• DECIDERS – have formal or informal power to select and approve final suppliers.
• GATEKEEPERS – control the flow of information.

THE BUSINESS BUYER DECISION PROCESS

1. Problem recognition occurs when someone in the company recognizes a problem or need.
a. Internal stimuli – need for new product or production equipment.
b. External stimuli – idea from a trade show or advertising
2. General need description describes the characteristics and quantity of the needed item.
3. Product specification describes the technical criteria.
4. Value analysis is an approach to cost reduction where components are studied to determine
if they can be redesigned, standardized, or made with less costly methods of production.
5. Supplier search involves compiling a list of qualifies suppliers to find the best vendors.
 6. Proposal solicitation is the process of requesting proposals from qualified suppliers.
7. Supplier selection is when the buying center creates a list of desired supplier attributes and
negotiates with preferred suppliers for favorable terms and conditions.
8. Order-routine specifications includes the final order with the chosen supplier and lists all
of the specifications and terms of the purchase.
9. Performance review involves a critique of supplier performance to the order-routine
specifications.

INSTITUTIONAL AND GOVERNMENT MARKETS

INSTITUTIONAL MARKETS consists of schools, hospital, nursing homes and prisons that provide
goods and services to people in their care. They characterized by low budgets and captive patrons.

GOVERNMENT MARKETS consists of governmental units - federal, state, and local – that purchase
or rent goods and services for carrying out the main functions of the government.