DIFFERENTIATE THE BUYING BEHAVIOR AND DECISION MAKING OF

INDIVIDUAL/HOUSEHOLD CUSTOMER VERSUS THE BUSINESS

(ORGANIZATIONAL) CUSTOMER

At the end of the lesson, you are expected to:

 Describe consumer and business markets; and

 Differentiate the buying behavior and decision making of individual/household customer
versus the business (organizational) customer.

LESSON PRESENTATION:

Consumer and Organizational Markets - Business offer products and services to both consumer and
organizational markets.

Consumer Markets

Consumer markets include individuals and/or households that purchase products and services
for personal consumption. Consumers normally make purchase in smaller quantities, due to their
tendency to consume products gradually over a period of time. Moreover, consumers tend to be more
emotional about their purchases. The purchases are at times impulsive or spontaneous.

Differentiate the buying Behavior and Decision Making of individual/household

customer versus the Business (organizational) customer

The customer buying process (also called a buying decision process) describes the journey your
customer goes through before they buy your product. Understanding your customer’s buying process is
not only very important for your salespeople, it will also enable you to align your sales strategy
accordingly.

The five stages framework remains a good way to evaluate the customer’s buying process. John Dewey
first introduced the following five stages in 1910:

1. Problem/need recognition
 This is often identified as the first and most important step in the customer’s decision process. A
purchase cannot take place without the recognition of the need. The need may have been triggered by
internal stimuli (such as hunger or thirst) or external stimuli (such as advertising or word of mouth).

2. Information search

Having recognized a problem or need, the next step a customer may take is the information
search stage, in order to find out what they feel is the best solution. This is the buyer’s effort to search
internal and external business environments, in order to identify and evaluate information sources
related to the central buying decision. Your customer may rely on print, visual, online media or word of
mouth for obtaining information.

3. Evaluation of alternatives

As you might expect, individuals will evaluate different products or brands at this stage on the
basis of alternative product attributes – those which have the ability to deliver the benefits the customer
is seeking. A factor that heavily influences this stage is the customer’s attitude. Involvement is another
factor that influences the evaluation process. For example, if the customer’s attitude is positive and
involvement is high, then they will evaluate a number of companies or brands; but if it is low, only one
company or brand will be evaluated.

4. Purchase decision

The penultimate stage is where the purchase takes place. Philip Kotler (2009) states that the final
purchase decision may be ‘disrupted’ by two factors: negative feedback from other customers and the
level of motivation to accept the feedback. For example, having gone through the previous three stages,
a customer chooses to buy a new telescope. However, because his very good friend, a keen astronomer,
gives him negative feedback, he will then be bound to change his preference. Furthermore, the decision
may be disrupted due to unforeseen situations such as a sudden job loss or relocation.

5. Post-purchase behavior

In brief, customers will compare products with their previous expectations and will be either
satisfied or dissatisfied. Therefore, these stages are critical in retaining customers. This can greatly affect
the decision process for similar purchases from the same company in the future, having a knock-on
effect at the information search stage and evaluation of alternatives stage. If your customer is satisfied,
this will result in brand loyalty, and the Information search and Evaluation of alternative stages will often
be fast-tracked or skipped altogether.

On the basis of being either satisfied or dissatisfied, it is common for customers to distribute
their positive or negative feedback about the product. This may be through reviews on website, social
media networks or word of mouth. Companies should be very careful to create positive post-purchase
communication, in order to engage customers and make the process as efficient as possible.
Consumer Buying Roles

There are five roles individuals may portray in a consumer buying decision:

 Initiator- person who initially suggests buying a particular product or service.

 Influencer- person who tries to convince others of the need for the product/service and
influences the purchase decision.
 Decider- the person who makes the final decision to purchase or makes the final decision on any
product/service components such as what to buy, how to buy, where you buy, etc.
 Buyer- the person who makes the actual purchase.
 User- the person who actually uses the products/service whether or not he/she was involved in
the buying decision.

As an example, the wife in a family may suggest to her husband that since their eldest son is about to
start working, it may be time for him to have his own car. In this case, the wife is the initiator. The
younger son agrees with the suggestion and informs his parents of make, model, and color. Both the
younger son and elder sister are influencers. The father may visit several car showrooms, until he
eventually decides on the purchase and pays for the car. The father is the both the decider and the
buyer. The eldest son receives the car and uses it as his personal vehicle. He is the user.

Consumer Markets and Buying Behavior

Consumers are of different genders and ages. They have varying income levels, live in different
regions of the country, and have various personalities and psychological profiles. This makes developing
a single way to sell to consumers difficult as they are influenced by different factors when buying goods
and services.

Consumers’ purchases are initiated by marketing stimuli. Marketing stimuli refer to the elements
of the marketing mix, oftentimes referred to as the 4P’s: Product, Price, Place, and Promotion.
Consumers are influenced by the products/services that they see, hear from mass media, the Internet,
and through word of mouth a Marketing organizations organize these four elements so marketing stimuli
can result in expected sales and brand loyalty.
 Buyer characteristics comprise of cultural, social, personal, and psychological factors. Cultural
characteristics, particularly, play a large role in consumer interest and eventual purchase. Products and
services must “fit” the cultural background of the potential buyer and not run contrary to it. An
individual’s personal culture is developed overtime. This includes his manner of upbringing, his
educational background, and the collective culture consciousness” or “ keeping up with the Joneses” will
favorably influence an individual’s attraction toward products and services with prestigious brand
reputations. A consumer, therefore, may be drawn to an advertisement of a high-end model but may
selectively ignore advertisements of a high-end model but may selectively ignore advertisements of
other lesser known brands that he perceives are relatively inferior or does not promote his culture of
brand consciousness.

Sub-cultural factors are minute parts of one’s culture that provide specific identification of its
members. This can include one’s nationality mix (e.g. Tsinoy, Mestizo, Fil-Am) or regional origins (e.g.
Ilocano, Batangueño, Ilonggo, or Manileño). These factors play a critical role in one’s buying behavior. For
example, Chinese-Filipinos are supposedly very practical in their spending habits, and Ilocanos have been
know to be thrifty.

This behavior may likewise be influenced by one’s social class. Social class is a status heirarchy in
which individuals and groups are classified through economic success and accumulation of wealth. The
four most common social classes are upper class, middle class, working class, and lower class.

Commonly, consumers belonging to a particular economic class (such as class A, the highest
economic class), purchase products and services consistent with their economic status. An income class
A senior corporate executive may therefore drive or be driven in an expensive car, wear branded clothes,
own a high-end smart phone, dine in the finest restaurants, and speak and act in a restrained, measured,
and socially eloquent manner. In cases of this nature, this person’s income classification is consistent
with his/her social class (income class A= upper social class).
 Consumers usually purchase products and services befitting what they perceive as “acceptable”
by their own social class. Purchases made outside this “acceptable” classification can lead to one being
openly or silently ostracized by other members of their social class.

Therefore, if this senior executive suddenly decides to purchase a 15-year old obviously
dilapidated car and decides to begin driving it personally to and from work, he may raise many of this
office mates and acquaintances eyebrows as “acting outside his social class” or may even be suspected
of having lost his previously enviable economic status.

Conversely, if one of this senior executive’s lowest ranking employees belonging to the lowest
income classes (classes D and E), invests all his pay, maximizes his credit, purchasing and coming to work
consistently in branded clothes, communicates with others higher ranking, substantially wealthier office-
mates and otherwise exhibits the purchasing his true economic standing will frown upon this behavior as
spending beyond one’s means, and may even brand him as a “social climber.”

Reference groups, likewise, exert a strong influence on buyer behavior. Reference groups include
individuals or groups that influence consumer opinions, beliefs, attitude, and behaviors. They often serve
as role models and inspiration. Many consumers belong to reference groups such as families, friends,
schoolmates, and co-workers. These are people whom they have extended and intimate contact with.
These groups exert continuous influence on an individual’s choice of products/services or brands to
purchase.

On the other hand, aspirational groups are groups that a person currently does not belong to but
wishes to belong to or to be associated with. What aspirational groups purchase also influences and
individual considerably, as he may feel that buying products/services and brands make him feel some
degree of belongingness to the aspirational group:

The challenge to marketers with reference and aspirational groups is to identify the leaders of
these groups and to shape their opinions that influence their followers in favor of a product or service.
Sometimes, product or service. Sometimes, products advertisers produce aspirational ads to appeal to
customers’ desire to be affiliated with a particular group.

An even stronger influence on buyer behavior is the family. This phenomenon is particularly true
among Filipinos. Because of the length of time one spends with his family, an individual adopts the
values, habits, and philosophical orientation of his family, i.e. self-worth, spending habits, and general
perspective and outlook towards life. This continues even after he has married. Spouses exert varying
levels of influence in the purchase of goods/services so marketers must be able to identify the decision-
maker in the relationship. In the Philippines, the wife is often the decision-maker in the purchase of daily
household items, while the husband exerts a greater influence in the purchase of large ticket items such
as durable and specialty goods.

Each individual performs a particular role in relation to his environment. This role is related to his
occupation or profession. His buying decisions shall befit the image or status that he projects. For
example, a vice-president of a company is expected to drive a luxury car and wear high-end clothing, and
to be seen frequenting prestigious commercial establishments.

An individual’s personal factors also play a sizeable influence in his buying behavior. People’s
need and wants change as one ages-- from toys in early childhood, to denim pants as teenager, to suits
and dress clothes as one joins the workforce. A very useful guide to buying prospensity was developed
by William D. Wells and George Gubar-- the nine stages of a family’s life cycle. The authors have
modified it to fit to the Philippine context.

Stage 1: Bachelor/bachelorette stage- They are highly dependent on their parents for finances
in the form of allowances. Some may be employed part-time in fast food chains or business out sourcing
companies. They spend primarily on entertainment, eating out, fashion, dating, and activities with
friends.

Stage 2: Young, newly married couple with no children- Most have dual income as both spouses
may be working. They may be renting a house or temporarily staying with parent/in-law. They buy
household appliances and audio and video equipment, and spend to make their living space
comfortable. If living with parent/in-law, they may share in household expenses.

Stage 3: Married couple, with eldest child below elementary school age- They may be renting
their living facility or still staying with parent/in-law. They spend their income on nursery and
kindergarten education, food, children’s clothes, juvenile furniture, toys, and trips to amusement parks.

Stage 4: Married couple, with youngest child six years old or over- They spend primarily on
school tuition, uniforms, books, and allowances. They usually live independently in an apartment or
condominium. They may join social and civic clubs and begin investing in insurance. They purchase
groceries and food items frequently and in larger quantities.
 Stage 5: Older married couple, family head still working, all children living on their own- They
have increased savings as a result of reduced financial requirements. Their expenditures include
vacations, some luxury items, health and fitness, vitamins and supplements. They initiate retirement
fund investments.

Stage 6: Widow/widower, in labor force - They have substantial savings. They may move out
from a conventional home to live in a small condominium unit. They spend on eating out, movies, other
forms of entertainment, health and fitness, and dietary supplement. Also, they spend a lot of free time
with friends who share similar lifestyles.

Stage 7: Widow/widower, retired - Pensioner. They may be asked to move in by one of their
adult children for better care. Substantial expenses are for ambulatory and healthcare, usually with host
child’s family.

An individual’s occupation also plays an important indicator in the products and services he/she
purchases. Lawyers are expected to buy a lot of dress shirts, neckties, suits or barong tagalogs. Blue
collar workers purchase work purchase work boots and denims, while students regularly buy school
supplies such as pens, paper, and notebooks.

Buyer behavior is also dictated by economic capability. It is evident that individuals need money
to purchase goods and services. The more money available, the greater the amount and quantity of
purchase.

Lifestyle is defined as a manner of living that reflects a person’s values and attitudes. One’s
lifestyle is independent of his/her occupation, social class, or status. Therefore, a person may occupy a
high position in a bank, and yet prefer to maintain a frugal lifestyle. In contrast, an entry-level teller in
the same bank may live an extravagant lifestyle: always eating out, buying branded clothes, and using
the latest communication gadget.

Personality refers to individual differences in characteristics patterns of thinking, feeling, and

behaving. Typical personality traits are dominance, deference, defensiveness, adaptability, autonomy,
sociability, and self-confidence. The individual personalities of consumers likewise influence their buying
behavior. Marketers can use personality as a means of enhancing product. For example, a car
manufacturer may discover that most buyers of its brand are self-confident and highly sociable. The car
company can then proceed to compose advertising copy or advertising messages that appeal to these
personality types in marketing its cars.

Similar to psychological factors, motivation addresses the issue of why a consumer buys a
product or what needs he is trying to satisfy. Most individuals purchase products and services in order to
satisfy one or more of the five need levels identified by Abraham Maslow.
 For example, three friends decide to meet and dine in a restaurant. One of the three may look
forward to the event because it will strengthen her relationship with her friends. She is satisfying her
social needs. Another may anticipate the event as she wants to take advantage of the occasion to make
an emergency loan from one of her friends. In this case, she is satisfying her safety or security needs. The
third may actually just want to attend the occasion because she has heard the food in the restaurant is
particularly good. She is attending the affair to satisfy her physiological needs.

Perception is the process by which people translate sensory impression into a coherent and
unified view of the world around them. Because of perception, consumers may view marketing stimuli in
different ways. Although a housewife may have been motivated to buy a pair of shoes for an important
occasion, she may have a negative perception of the level of service in a shoe store. She may judge the
efforts of an extremely motivated salesperson as being “too pushy.” She may just prefer to just ask for
assistance when necessary. Another consumer in another shoe store that gives shoppers “space” to
browse may perceive the store as totally lacking in customer service and concern.

Three perceptual processes guide an individual’s perception:

 Selective attention - because consumers are exposed to hundreds of commercial messages each
day, they tend to pay attention to only those that address a current need. This is the reason why
therefore meal time, consumers are selectively attracted to food commercials, but almost totally
ignore them when their hunger has been satisfied. This is also why companies develop
advertisements that’s stand out and are different from other firms. They may, for example, use
black and white as their medium to set their advertisement apart, or use extreme dramatization
in their messages.
 Selective distortion - pertains to the tendency of individuals to twist or “distort” information to
fit their existing mindset toward a brand. A first time customer in a restaurant with excellent
market reputation may, for example, “twist” or rationalize the unreasonably long time it takes
for his order to arrive. He may convince himself that the chef is taking extra care in selecting the
ingredients and preparing his order. In reality, however, the delay could simply have been caused
by the order being overlooked by the kitchen staff.
 Selective retention - means that consumers tend to remember only the positive things that
reinforce their attitudes and beliefs. Therefore, a shopper in a supermarket may only remember
the wide product selection, affordable prices, and relaxing shopping atmosphere and totally
“forget” the spill he had seen at the meat section, or the delay he encountered at the checkout
counter.

Learning is a relatively lasting change in behavior that is the result of experience. When a consumer
purchases a particular brand of product and is completely satisfied with it, his/her positive experience
with the brand is reinforced. This learning can easily be applied to another product of the same brand. If
a consumer purchases a particular brand of mayonnaise and is completely satisfied with it, he may
project the same positive experience to tomato sauce with the same brand. This is a strong argument for
building brand equity, so that consumers will view several, if not all, the products under the brand
favorably.

A belief is defined as confidence in the truth or existence of something not immediately susceptible
to rigorous proof. On the other hand, an attitude is a settled way of feeling about someone or
something, typically one that is reflected in a person’s behavior.

Consumers acquire both beliefs and attitudes through learning. Sometimes, consumers hold strong
beliefs about specific products or their qualities and attributes. Some of these beliefs may be correct,
some may be wrong. Correcting an erroneous belief can be expensive. This is also true with attitudes.

For these reasons, organizations must study and understand various consumer beliefs and attitudes
regarding their product. One way of discovering consumer attitudes is through the conduct of marketing
research, particularly a usage, attitude, and image survey.

What role do beliefs and attitudes play in consumer marketing? Many of those who are regularly do
their own laundry believe that detergents that produce a lot of suds clean clothes better. This has caused
many households to reject new detergents in the market that do not produce a lot of suds. A new
detergent manufacturer, therefore, must either tailor his product to fit this belief or engage in a massive
campaign to correct or alter consumer attitudes.

The study of consumer buyer behavior is already complex. Cultural, social, personal, and
psychological characteristics all come into play. Some of these factors are largely uncontrollable.