Chapter 5

Consumer and business behaviour

 LEARNING OBJECTIVES
1. Recognise the stages of the consumer decision-
making process.
2. Describe the level of involvement and types of
consumer problem-solving processes.
3. Explore situational, psychological and social factors
influencing consumer behaviour.
4. Recognise the various types of business markets.
5. Understand the characteristics of business buying
behaviour.
6. Recognise the stages of the business decision-
making process.
 CONSUMER BEHAVIOUR
• Consumer behaviour
– Behaviour of people who purchase products
for personal or household consumption and
not for business purposes
 UNDERSTANDING
CONSUMER BEHAVIOUR
• Understanding consumer needs so that a company
can deliver better options than a competitor
• Consumers responding to a company’s marketing
strategy have a great impact on its success
• Understanding what, where, when and how
consumers make consumption decisions helps in
creating a successful marketing mix
• Marketers can better understanding how consumers
will respond to marketing strategies
 CONSUMER BUYING DECISION
PROCESS AND POSSIBLE INFLUENCES
ON THE PROCESS
 PROBLEM RECOGNITION
• Occurs when a buyer becomes aware of a
difference between a desired state and an
actual condition.
– Speed of consumer problem recognition can be rapid
or slow.
– Some consumers are unaware of their problems or
needs.
– Marketers use sales personnel, advertising and
packaging to help trigger recognition of such needs or
problems.
 DISCUSSION QUESTION

• Give an example when a company intentionally

triggers recognition of a particular need through
its promotional campaign.
 INFORMATION SEARCH

Search for
information

Internal External
search search
 INFORMATION SEARCH
• Internal search
– Buyers search their memories for information
about products that might solve their problem.
– If they cannot retrieve information from
memory, they then perform an external
search.
INFORMATION SEARCH (CONT.)
• External search
‒ Buyers seek information from outside
sources (online and offline).
‒ They may focus on communication with
friends or relatives.
‒ It can involve comparison between brands.
‒ Independent sources such as Choice
magazine (http://www.choice.com.au) can be
used.
EVALUATION OF ALTERNATIVES
• Evoked set
− A group of brands that a buyer views as
alternatives for possible purchase
− Consumers assign a greater value to a brand
they have heard of than to one they have not
• Evaluative criteria
− Objective and subjective characteristics that are
important to a buyer (e.g. size, weight and
dimensions of a laptop computer)
 PURCHASE
• Buyer chooses the product or brand to be
bought.
• Buyer chooses the seller.
• Buyer negotiates the terms of the transaction.
• Buyer makes the purchase – or terminates the
process.
POST-PURCHASE EVALUATION
After purchase, the buyer evaluates the product:
• Does its actual performance meet expected
levels?
Cognitive dissonance:
• A buyer’s doubts shortly after a purchase about
whether the decision was the right one
• Also known as ‘post purchase dissonance’ and
‘buyer’s remorse’
 DISCUSSION QUESTION

• Give an example of a purchase for which you

experienced post-purchase cognitive
dissonance. Then explain how you overcame
the cognitive dissonance.
 INVOLVEMENT
• Level of involvement – degree of interest in a
product and the importance of the product for that
person
• High-involvement products – products that are
visible to others and/or are expensive
• Low-involvement products – products that tend to
be less expensive and have less associated social
risk
 DISCUSSION QUESTION

Which of the following are high-involvement

products? Which are low-involvement? Justify your
answers.
• A luxury watch, a new laptop, a loaf of bread, a
pair of jeans, a pre-loved dress
Do you think the level of involvement changes with
consumer income level for some products?
 THREE TYPES OF
PROBLEM SOLVING
• Routinised response behaviour – used when buying
frequently purchased, low-cost items that require little
search and decision making
• Limited problem solving – used when purchasing
products occasionally or when information is needed
about unfamiliar brands in familiar product categories
• Extended problem solving – used when purchasing
unfamiliar, expensive or infrequently purchased
products
CONSUMER PROBLEM-SOLVING
PROCESSES
 IMPULSE BUYING
• Purchase solely on impulse and not on the basis
of any of the three problem-solving processes
described earlier
• An unplanned buying behaviour resulting from a
powerful urge to buy something immediately
 MAJOR INFLUENCES ON THE
BUYING DECISION PROCESS

SITUATIONAL PSYCHOLOGICAL
INFLUENCES INFLUENCES

SOCIAL
INFLUENCES
 SITUATIONAL INFLUENCES
ON THE BUYING DECISION PROCESS
• Situational influences result from the circumstances,
time and location that affect the consumer buying
decision process.

Physical Social Time

surroundings surroundings dimension

Purchase Consumer
reason moods
 VIDEO

Curbing Unplanned Purchases (Consumer Behaviour)

Situational influences in retail environment that makes
consumers spend more.
 PSYCHOLOGICAL INFLUENCES ON
THE BUYING DECISION PROCESS
• Factors that in part determine people’s general
behaviour, thus influencing their behaviour as
consumers. They operate on buyers internally,
but are acted on by outside forces.

Perception Motives Learning

Attitudes Self-concept Lifestyle

 VIDEO

Are We in Control of Our Own Decisions?

Consumers perception and cognitive limitations as an
important determinant in behaviour.
 ABOUT PERCEPTION

Perception

●
The process of selecting, organising and interpreting information inputs to
produce meaning

Information inputs

●
Sensations received through the sense organs (sight, taste, hearing,
smell and touch)
 THREE-STEP PERCEPTION
PROCESS

• Remembering • Receiving
those inputs some inputs
3) Selective 1) Selective
that support Retention Exposure while ignoring
personal others
feelings and
beliefs and
forgetting those 2) Selective
that don’t Distortion

• Changing information when inconsistent

with personal feelings or beliefs
 MOTIVES
• Internal energising force that directs a
person’s behaviour toward satisfying needs
or achieving goals
– Thirst/hunger
– Cold/hot
– Fear
– Success
 LEARNING
• Learning
– Changes in an individual’s thought processes
and behaviour caused by information and
experience
• Sources of learning:
– behavioural consequences
– information processing
– experience.
 ATTITUDES
• An individual enduring evaluation of, feelings
about and behavioural tendencies toward an
object or idea
• Can be positive or negative
• Three major components:
– cognitive: knowledge and information
– affective: feelings and emotions
– behavioural: actions regarding the object or idea.
 DISCUSSION QUESTION

Why are marketers concerned about

consumer attitudes?
SELF-CONCEPT AND LIFESTYLES
• Self-concept
– View of one’s self
– Can be positive or negative
• Lifestyles
– Individual’s pattern of living expressed
through activities, interests and opinions
ROY MORGAN VALUES
SEGMENTSTM
ROY MORGAN VALUES
SEGMENTSTM
ROY MORGAN VALUES
SEGMENTSTM
ROY MORGAN VALUES
SEGMENTSTM
 SOCIAL INFLUENCES ON THE
BUYING DECISION PROCESS
• The forces other people exert on one’s buying
behaviour

Family Reference
Roles
influences groups

Opinion Digital Culture and

leaders networks subcultures
 SOCIAL INFLUENCES
• Roles
– Actions and activities that a person in a
particular position is supposed to perform based
on expectations of the individual and
surrounding persons
– Family role, work role, role in an organisation
• Family influences
– Consumer socialisation – the process through
which a person acquires the knowledge and
skills to function as a consumer
 SOCIAL INFLUENCES
• Reference group
• Any group that positively or negatively affects a
person’s values, attitudes or behaviour
• Types of reference groups
• Membership: an individual actually belongs
• Aspirational: an individual aspires to belong
• Disassociative: an individual does not want to belong
• Opinion leaders
• A reference group member who provides information
about a specific sphere that interests reference group
participants
 SOCIAL INFLUENCES
• Online social
networks –
digital
interfaces that
offer a digital
space for
consumers to
post and
share
information
 SOCIAL INFLUENCES

Culture

●
The accumulation of values, knowledge, beliefs, customs, objects and concepts that a
society uses to cope with its environment and passes on to future generations
●
Influences buying behaviour because it permeates our daily lives
●
Cultural changes affect product development, promotion, distribution and pricing
 SOCIAL INFLUENCES

Subculture

●
Groups of individuals whose characteristic values and behaviour patterns are similar, and
different from those of the surrounding culture
●
Youth subculture, based on a sense of belonging and a common purpose
●
Subcultures of consumption, based on common interests – e.g. Harley-Davidson owners
group (HOGs)
 DISCUSSION QUESTION

• Describe a situation where your purchase

decision was influenced by your culture or
subculture
– Identify the product purchase.
– Identify which culture/subculture affected
your final purchase decision.
 VIDEO

Shoppers Bare All: What Really Influences Retail Purchase

Decisions?
Factors influencing retail purchase decisions.
 BUSINESS MARKETS (B2B)
• Occur when an individual or group purchases a
specific kind of product for resale, direct use in
producing other products or use in general operations.

Business
markets

Producer Reseller Government Institutional

markets markets markets markets
 PRODUCER MARKETS
• Individuals or business organisations that
purchase products to make profits by using
them to produce other products or using them
in their operations.
– Includes buyers of raw materials, as well as
purchasers of semi-finished and finished items
used to produce other products.
– Manufacturers tend to be geographically
concentrated and can be served more
efficiently.
 PRODUCER MARKETS

Fellowes manufactures shredders. The

companies that sell raw materials,
equipment and component parts to
Fellowes and other manufacturers are
serving producer markets.
 RESELLER MARKETS
• Resellers
– Intermediaries who buy finished goods and resell
them for a profit
• Factors resellers consider:
– level of demand
– space required relative to potential profit
– ease of placing orders
– availability of technical assistance
– training programs from producers.
 GOVERNMENT MARKETS
• Federal, state, county or local governments
that buy goods and services to support their
internal operations and provide products to
their constituencies
 INSTITUTIONAL MARKETS
• Organisations with charitable, educational,
community or other non-business goals

This stained glass window

producer supplies products
mainly to churches which are
part of institutional markets
 DISCUSSION QUESTION

• Which type of business market do you think the

following organisations belong to?
– A university
– A tyre manufacturer
– A local council
– An Australian company exporting wool
overseas
 VIDEO

Vodafone Total Business Customers

Understanding the needs of B2B customers
BUSINESS BUYING BEHAVIOUR
• The purchase behaviour of producers,
resellers, government units and institutions
• Buying centre – the people within an
organisation, including users, influencers,
buyers, deciders and gatekeepers, who
make business purchase decisions
METHODS OF BUSINESS BUYING
DESCRIPTION
Used when products are
standardised, such as
agriculture products
SAMPLING
Used for homogeneous
products when examining the
entire lot is not feasible, such
as grain
INSPECTION
Used when products have
unique characteristics, such
as buildings or vehicles
NEGOTIATION
Used commonly for one-
time projects, such as
buildings or capital
equipment
 DISCUSSION QUESTION

• Indicate the method of buying (description,

inspection, sampling or negotiation) a company
would likely use for each of the following:
– wool for a clothing manufacturer
– a trip to Fiji for a company retreat, booked
through a travel agency
– light globes for a building contractor.
TYPES OF BUSINESS PURCHASES

• New task • Purchased item

purchase that is Modified- to be used to
New task
changed on rebuy
purchase perform a new job
subsequent purchase or solve a new
orders or when problem
straight-rebuy
requirements
Straight-rebuy
are modified purchase

• Routine purchase of same products

under approximately same terms
 DISCUSSION QUESTION

• Categorise the following purchases as new task,

modified rebuy or straight rebuy:
– For 25 years Bob has purchased white toothpicks
from Smith Restaurant Supply and recently placed
an order for yellow toothpicks.
– Reliance Insurance supplies its salespeople with
small personal computers to assist in their sales
efforts. Recently, the company agreed to supply
them with faster, more sophisticated models.
BUSINESS BUYING DECISION PROCESS
AND FACTORS THAT MAY INFLUENCE IT
STAGE 1: PROBLEM RECOGNITION
• One or more individuals recognise a problem/need exists:
– Could be individuals in the buying centre such as
users, influencers, or buyers who recognise the need
or problem
– Could be identified by external sources such as sales
representatives or advertisements
• May arise under a variety of circumstances:
– When machines malfunction
– When an existing product is modified
– When introducing new product
STAGE 2: PRODUCT SPECIFICATION
• The development of product specifications requires the
buying centre participants to assess the problem or
need and determine what is necessary to resolve or
satisfy it.
• Users and influencers often provide information and
advice.
• By assessing and describing needs, the organisation
should be able to establish product specifications.
STAGE 3: POTENTIAL PRODUCTS
• Searching for and evaluating potential products and
suppliers
• Searching may include contacting suppliers for
information, soliciting proposals and examining
websites, catalogues and trade publications
‒ Value analysis: evaluation of each component of the
potential purchase; examines quality, design,
materials etc
‒ Vendor analysis: a formal, systematic evaluation of
current and potential vendors; examines price,
product quality, delivery service, product availability
and overall reliability
 STAGE 4: SELECTION
• Selecting the product to be purchased and the supplier
or suppliers
– Multiple sourcing – when the buyer selects and uses
several suppliers
– Sole sourcing – when only one supplier is selected
• The actual purchase takes place and the following
details finalised: terms and credit arrangements;
delivery dates and methods; and technical assistance
arrangements.
 STAGE 5: EVALUATION
• The product’s performance is evaluated by comparing it
with the specifications.
– If the product meets specifications, but does not
work, specifications need adjusting.
– Supplier’s performance is also evaluated.
• These five steps are used primarily for new-task
purchases.
• Several stages, but not all, would be used for straight
and modified rebuy.
 VIDEO

Boeing Takes to the Cloud with a Solution to Market its

Best-Selling Plane
Understanding the needs of B2B customers
INFLUENCES ON THE BUSINESS
BUYING DECISION PROCESS
ENVIRONMENTAL
Competitive, political,
economical, sociocultural and
technological
INTERPERSONAL
Relationships among people in
the buying centre
ORGANISATIONAL
Company objectives, purchasing
policies and resources, the size
and composition of buying centre
INDIVIDUAL
Personal characteristics of
participants in the buying centre
such as age, education,
personality, tenure and position
in the company
INFLUENCES ON THE BUSINESS
BUYING DECISION PROCESS

Numerous business purchases

are influenced by environmental
forces. Energy savings result
in lower costs, which allow
organisations to be more
competitive.
 THE VALUE CHAIN IN
B2B MARKETING
• The supply chain as a whole process is actually
the value chain that gives the products more
added value than the individual sum of the
added values.
 THE VALUE CHAIN IN
B2B MARKETING (CONT.)
• Key considerations in the B2B value chain:
– The decision-making process is complex.
– B2B products and their applications are highly
technical.
– B2B marketers address a small number of
customers but they require larger product quantities.
– Personal relationships may have a critical impact.
– Businesses no longer compete one-on-one but value
chains do.
THE B2B VALUE CHAIN
 DISCUSSION QUESTION

• Compare and contrast the B2C and B2B

decision-making processes.
AFTER REVIEWING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Recognise the stages of the consumer decision-
making process.
2. Describe the level of involvement and types of
consumer problem-solving processes.
3. Explore situational, psychological and social factors
influencing consumer behaviour.
4. Recognise the various types of business markets.
5. Understand the characteristics of business buying
behaviour.
6. Recognise the stages of the business decision-
making process.
 KEY CONCEPTS
• Attitude
• Business buying behaviour
• Buying centre
• Cognitive dissonance
• Consumer behaviour
• Consumer decision-making
process
• Consumer momentary moods
• Consumer socialization
• Culture
• Evaluative criteria
• Evoked set
• Extended problem solving
• External search
• Internal search
• Learning
• Level of involvement
• Lifestyle
• Limited problem solving
• Modified rebuy purchase
• Motive
• Multiple sourcing
• New-task purchase
• Opinion leader
 KEY CONCEPTS (CONT.)
• Perception • Self-concept
• Physical surroundings • Situational influences
• Producer markets
• Social influences
• Psychological influences
• Social surroundings
• Purchase reason
• Sole sourcing
• Reference group
• Straight-rebuy purchase
• Reseller markets
• Role • Subcultures
• Routinised response behaviour • Subcultures of consumption
• Selective distortion • Time dimension
• Selective exposure • Value analysis
• Selective retention • Vendor analysis