Introduction to Business Management

Prof. Dr. Allard

Session 3
Van Riel
Session Agenda

 Introduction to Consumer Behaviour

 The Relevance of Understanding your
Customers
 Customer Types
 Buying Behaviour
 Value Exchange
 Buying Decision Making
 Conditioning
 Persuasion
 Business Purchasing Trends
Buying

 When we say ‘buying’ we may mean:

 Purchasing
 Rental
 Service Use
 Sharing
 Etc.
 Focus is on ‘Exchange’ of resources (money,
time, effort, competences, etc.) between
parties with the aim of mutual value
creation.
 Customer Types
Private Consumers Organizational Customers

Purchase: Purchase:

• For personal or household • For use in the operation of a

use business or organization.
• To manufacture other products
• For resale to others

CONSUMER ORGANIZATIONAL
PRODUCT PRODUCT

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Consumers vs. Customers

 What is a consumer?
 Traditionally, the ultimate user or consumer of
goods, ideas, and services. However, the term
also is used to imply the buyer or decision maker
as well as the ultimate consumer. A mother
buying cereal for consumption by a small child is
often called the consumer although she may not
be the ultimate user of the product. (Source:
AMA Online Marketing Dictionary)
 What is a customer?
 B2B,
 The purchaser, or the company that purchases.
Consumer Behaviour – Buying Behavior

 AMA Definition
 1. (consumer behaviour definition) The dynamic
interaction of affect and cognition, behaviour, and
the environment by which human beings conduct
the exchange aspects of their lives.
 2. The overt actions of consumers.
 3. (consumer behaviour definition) The behaviour
of the consumer or decision maker in the market
place of products and services. It often is used to
describe the interdisciplinary field of scientific
study that attempts to understand and describe
such behaviour.
Consumers or Users
 Buy or use Products (Goods)
 FMCG
 Luxury
 Durables
 Use Commercial Services
 Tourism, Travel
 Use Professional Services
 Lawyer, Consultant
 Use Public Services
 Education, Public Transportation
 Use Health Care Services
 Hospital, GP, Physical Therapist
 Use Social Services
 Unemployment, Pension
 Use Financial Services
 Bank, Insurance
 Etc.
Exchange… What are consumers (B2C) or customers (B2B) looking for?

 Value (-in-use, or –in-context):

 Problem-solving
 Monetary
 Convenience
 Enjoyment
 Time-saving
 Competence-enhancing
 Security
 Safety
 Status-enhancing
 Expression
 Thrill
 Etc.
 Understanding Buying Behaviour

How do they Who is What are

buy? important? their choice
criteria?

Customers

Where do When do
they buy? they buy?

The answers to these questions can be derived from personal contact with customers
and, increasingly, by employing marketing research.
 Who Buys?
The Buying Decision-making Process

Gatekeeper
Buyer Gatekeeper
organizational
Buyer organizational
Only
Decision Only

Maker

User Influencer
User Influencer
Initiator
Initiator
 Who Buys? The Buying Decision Making Process

1. Initiator: the person who begins the process of

considering a purchase. Information may be gathered
by this person to help the decision.
2. Influencer: the person who attempts to persuade
others in the group concerning the outcome of the
decision. Influencers typically gather information and
attempt to impose their choice criteria on the decision.
3. Decider: the individual with the power and/or financial
authority to make the ultimate choice regarding which
product to buy.
4. Buyer: the person who conducts the transaction. The
buyer calls the supplier, visits the store, makes the
payment and effects delivery.
5. User: the actual consumer/user of the product.
 Who Buys?

• ‘Flash’ all-purpose cleaners’

2018 TV advert challenges
traditional household roles.
It features a man using the
household cleaning product
rather than a woman, which
has normally been the case
in the past.

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 Who Buys? The Buying Decision Making Process

Most organizational buying tends to involve

more than one individual and is often in the
hands of a decision-making unit (DMU), or
buying centre, as it is sometimes called.
This is not necessarily a fixed entity and may
change as the decision-making process
continues.
The gatekeeper protects the decision-maker
from unwanted information and distraction.
How do they buy?
Understanding Consumer Behaviour

The dominant paradigm in consumer

behaviour is known as the information
processing approach and has its roots in
cognitive psychology. It sees consumption as
largely a rational process – the outcome of a
consumer recognizing a need and then
engaging in a series of activities to attempt to
fulfil that need.
 Understanding Consumer Behaviour

• In the competitive
world of cosmetics,
brand consumption is
heavily influenced by
perceptions of self
identity.

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How do they buy?
Understanding Consumer Behaviour

An alternative paradigm to understanding

consumer behavior has emerged in recent
years: Consumer culture theory (CCT).
It views consumption as a much less rational
or conscious activity. In it, consumption is
seen as a more sociocultural or experiential
activity that is laden with emotion.
How do they buy?
Understanding Consumer Behaviour

The main differences between the two modes

of thinking about consumer behaviour are
summarized below:
How do they buy?
Understanding Consumer Behaviour

Consumer decisions can be broken down

into four types:

Extended Habitual
problem problem
solving solving

Limited Variety
problem seeking
solving behaviour
 How do they buy?
The Consumer Decision-Making Process

Need recognition/problem awareness

Information search

Evaluation of alternatives

Purchase

Post-purchase evaluation
 How do they buy?
The Organizational Decision-Making Process

Recognition of a problem (need)

Determination of specification and quantity of needed item

Search for and qualification of potential sources

Acquisition and analysis of proposals

Evaluation of proposals and selection of supplier(s)

Selection of an order routine

Performance feedback and evaluation

Choice Criteria Used When Evaluating
Alternatives

Technical

Personal
Choice Economic
Criteria

Social

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 Choice Criteria Used When Evaluating
Alternatives (Value Dimensions)

Technical Economic Social Personal

Reliability Price Status Self-image
Durability Value for money Social belonging Risk reduction
Performance Running costs Convention Morals
Style/looks Residual value Fashion Emotions
Comfort Life cycle costs
Delivery
Convenience
Taste
Influences on consumer purchasing
behavior
 Behavioural Learning Theories
Classical conditioning Operant conditioning

Individuals respond to the

The process of using stimulus that offers the most
an established satisfactory rewards and
relationship between subsequently the behaviour
is repeated.
a stimulus and a
response to cause The more rewarding the
response, the higher the
learning. likelihood of a repeat
purchase.

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 Behavioural Theories and Marketing

Classical conditioning uses an established relationship between stimulus

and response to cause learning.

In advertising, humour is known to elicit a pleasant response and is

used in the belief that these pleasant feelings will be a condition of the
product.

Operant conditioning is reinforcement through rewards.

The use of free samples is based on these principles.

Classical conditioning (Pavlov’s Dog)
Pavlov and Coca Cola
Operant Conditioning
Operant conditioning & Facebook
Maslow’s five categories of motivation (Needs)

1. Physiological
2. Safety
3. Belongingness and love
4. Esteem and status
5. Self-actualization
 Influencer Marketing

Consumers’ brand
awareness

Influencer Marketing

Consumers’
Consumers’
purchase
attitudes
intentions

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 The Digital Consumer

Figure 3.6 The digital consumer

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 Social Media Influencers

YouTubers

Instagrammer
bloggers
s

Vloggers Viners

Snapchatters

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 Impact of Social Media Influencers

• Nespresso launched an Instagram

influencer campaign to make the
product known to millennials.
• Nespresso chose top influencers
Adam Gallagher, who is admired for
his classic and effortless style, and
Aimee Song, a top fashion blogger,
to post about the brand on
Instagram.
• Both influencers reached different
audiences, but their personas,
centered on elegance and good
taste, were an excellent fit for
Nespresso.

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Influences on Organizational Purchasing
Behaviour

MRO:
Maintenance,
Repair,
Operations
 Product Types in Organizational Buying:

Components Plant & equipment

Products & services* Materials

• Or complex combinations of both: Solutions

• Many products are ‘serviticed’
 Developments in Organizational
Purchasing Practice

 Just-in-time purchasing
 Online purchasing
 Centralized purchasing
 Relationship marketing
 Reverse marketing
 Leasing
Just in Time Purchasing
 Also called: Lean Purchasing
 Objectives:
 Minimize stock at the end of the chain
 Optimize availability given minimal stock
 Based on
 Partnerships with few nearby suppliers (need high
reliability)
 High quality information systems
 Advantages
 Cost savings high when stock is expensive
 Risk
 Stock-outs, Production interruptions
Online Purchasing

 Internet auctions (buying)

 Reverse auctions (asking for a proposal)
 For arms length relationships only
 Standardized products or parts
 Standardized quality
 Lowest price
Centralized Purchasing
Relationship Marketing

Van Riel, A.C.R., Pahud, C., Streukens, S. (2005) Marketing antecedents of industrial brand
equity: An empirical investigation in specialty chemicals, Industrial Marketing
Management, Vol. 34, Iss. 8, pp. 841-847
Reverse Marketing
Leasing

 Based on ‘servitization’ of goods

 ‘Use’ instead of ‘own’
 Optimize:
 TCO
 Free up Cash
 Upgrades
 Used for Goods
 Capital Intensive
 Speedy Developments
 Chapter Summary
1. Differences between consumer and organizational buying behavior: In the
latter, the buying decision process involves more stages, the input of more
parties, and greater levels of negotiation. Technical and economic choice
criteria tend to play a greater role in organizational buying.
2. Who buys – the five roles in the buying decision-making process: initiator,
influencer, decider, buyer, and user.
3. There are two main theories of consumer behavior: The information
processing approach which sees consumption as a rational and utilitarian
process, and consumer culture theory which sees consumption as a social
activity rooted in contexts.
4. The buying decision process involves the stages of need recognition, search for
alternatives, evaluation of alternatives, purchase, and post-purchase
evaluation. In the case of high-involvement purchases, consumers will typically
go through all these stages, whereas in a low-involvement situation, they may
move directly from need recognition to purchase.
 Chapter Summary
5. The main choice criteria used in making purchase decisions – namely, technical,
economic, social, and personal criteria. In consumer buyer behaviour, social and
personal criteria are quite important as consumers build their identities through
product and service selection.
6. The main influences on consumer buying behaviour: personal influences and
social influences. Deeply embedded emotional elements such as conditioning,
learning, attitudes, and personality are key drivers of consumption decisions.
7. The main influences on organizational buying behaviour: the buy class, the
product type and the importance of purchase.
8. The key features of organizational purchasing practice: just-in-time purchasing,
online purchasing, centralized purchasing, relationship marketing, reverse
marketing, and leasing