Buyer behaviour may be defined as the activities and decision processes involved in choosing between alternatives, procuring and using products or services. It is sometimes suggested that buyer behaviour is only of interest to marketers because they wish to influence and change it. Such a statement invariably raises the question as to whether marketing is an ethical profession. Intuitively, it seems wrong that any organisation should seek to manipulate people's behaviour. The truth is that marketing may promote a given product, service or practice but unless the target audience perceives that product, service or practice to be relevant to their needs then they will never try it. Moreover, unless their first time trial of the product, service or practice is positive, they will not try it a second time. The purpose of studying buyer behaviour is to better meet the needs of customers. Only by doing so will the marketing enterprise continually and consistently meet its own needs.
This chapter seeks to assist the reader in:
Developing an understanding of the internal and external influences which shape the behaviour of both consumer and organisational buyers
Identifying the discrete stages of the buying process undertaken by consumers and organisational buyers
Appreciating how an understanding of buyer behaviour can be used in market segmentation and target marketing and
Differentiating between types of organisational markets
The early part of the chapter explores the psychological and social influences which impinge upon buyer behaviour before describing a model of the consumer buying decision process. Each of the five steps of this model is explained in a little detail. This is followed by a discussion of one of the principal applications of buyer behaviour theory, i.e. the segmentation of markets and the selection of target markets. Consideration is then given to buying behaviour within organisations. Both the characteristics and the tasks of organisational buyers are described.
The behaviour of buyers is the product of two broad categories of influence; these are endogenous factors (i.e. those internal to the individual) and exogenous factors (i.e. those external to the individual). The most important of these two categories of factors are depicted in figure 5.1 and elaborated upon in the following sections of this chapter.
Figure 5.1 Endogenous and exogenous factors impinging upon buyer behaviour
Whilst these are variables that are largely outside the direct control of marketing managers, an understanding of them can be harnessed to great effect. The discussion that follows goes beyond merely describing the nature of the principal factors which shape behaviour to explain the relevance of each factor to marketing strategy.
Factors which are external to the individual but have a substantial impact upon his/her behaviour are social and cultural in nature. These include culture, social class or status, reference groups and family membership.
Culture is perhaps the most fundamental and most pervasive external influence on an individual's behaviour, including his/her buying behaviour. Culture has been defined as:
“…the complex of values, ideas, attitudes and other meaningful symbols created by people to shape human behaviour and the artifacts of that behaviour as they are transmitted from one generation to the next.”1
Three key aspects of culture are brought out by this definition. First, culture is created by people. The behavioural patterns, ideas, economic and social activities and artifacts of a people's forebears shapes the culture of today. Second, culture is enduring. It evolves over time but is stable in the short to medium term and is in fact passed, largely intact, fròm generation to generation. In particular, the values of the society tend to be enduring. Third, cultural influences have both tangible and intangible results. For instance, language and patterns of speech are products of culture and are observable. Basic beliefs and values are also the outcome of the cultural environment within which a person lives but these mental phenomena are intangible outcomes. Culture is the mechanism by which each society evolves its distinctive behavioural patterns and values and transmits these to subsequent generations.
Without a knowledge of the culture into which a product is being marketed mistakes can be made and opportunities missed. Nestlé's launch of Nescafé instant coffee, mentioned elsewhere in this chapter, is a case in point. The cultural norms of the day were rather different. The prevailing values dictated that good coffee took time to prepare and that shortcuts in the preparation of foods and beverages reflected laziness on the part of the user and carelessness with the household budget since convenience foods invariably cost more than ‘natural’ foods. With a better understanding of the culture of the day it is possible that Nestlé could have avoided the initial rejection of the product by a significant proportion of the target market.
Creative marketers who do have a knowledge of cultural norms and values can profit by aligning product benefits and characteristics with these social standards. Over the past ten to fifteen years people in Western Europe and North America have become increasingly concerned about the amount of fat in their diet and the adverse health effects resulting from high cholesterol levels. The message to reduce the fat content of meals has been widely accepted. It is no longer culturally acceptable to maintain a high fat diet. An individual's family doctor will disapprove, employers who provide health schemes disapprove, ‘good mothers’ don't allow their children to consume high fat foods in more than modest amounts. A person's friends, neighbours, colleagues and other personal acquaintances are likely to communicate their disapproval, in one way or another, if that individual is known to continue with a high fat diet. This has created a marketing opportunity for producers of low fat meats. The official grading systems for meats in Western Europe and North America financially penalise meat with a high fat content and low fat meat fetches a premium price in retail stores. This cultural change has also opened up market opportunities for ostrich producers in Australia, Namibia, South Africa, Swaziland and Zimbabwe. Ostrich meat is almost fat free and so enables those who are fond of meat in their diet to continue consuming meat without increasing their cholesterol levels. Such is the increase in demand for this type of meat that ostrich farming in the USA, where previously it was barely known, and in the United Kingdom, where it was not previously known at all, is growing fast.
Within any particular society the culture will comprise of a number of subcultures. That is, there will be various racial, ethnic and religious groups. Each, to some degree, will have distinct beliefs and values. Subcultures are of interest to marketers not least because it is a useful variable to be used in segmenting a market.
Social class or social status is a powerful tool for segmenting markets. Empirical research suggests that people from the same social group tend to have similar opportunities, live in similar types of housing, in the same areas, by similar products from the same types of outlets and generally conform to similar styles of living. At the same time, whilst people within the same social category exhibit close similarities to one another, there are usually considerable differences in consumption behaviour between social groups. The variables used to stratify a population into social classes or groups normally include income, occupation, education and lifestyle.
The importance of status, to marketers, is not confined to its potential as a basis for market segmentation. Bennett2 says that:
“Every status has its roles - a set of proper behaviors specified by culturally defined rules….. A group influences its members primarily through the roles and behavioral norms expected of them.”
Thus, the behaviour of an individual, on a given occasion, will relate to the social role which he/she is acting out. For instance, rural peoples sometimes defer to the judgement of the biggest landowner in the area and thereby ascribe a role of leadership to that person. This landowner will act and behave in accordance with the status of community leader when the occasion so requires. On other occasions the same individual will pursue his own interests and behave as a landowner. Moreover, each of the roles assumed by the landowner will be played in accordance with the norms established by the group which confers and sustains his leadership office. That is, the landowner will mould his behaviour to fit the expectations the local community (i.e. group) has of him as a community leader.
The marketer needs to know what role a person of a given status is playing and what is expected of that individual by the group which has conferred the status upon him/her. Such an understanding can significantly affect the marketing strategy employed with respect to that category of customer. Abdulsalami's3 experience of marketing herbicides to Nigerian maize growers is a case in point. The Ilorin Agricultural Development Project's (ADP) attempts to encourage farmers in its region to adopt herbicides only became successful when it targeted promotional efforts on tribal chiefs. The ADP appealed to the paternalistic role of the chiefs who were expected to discern what was in the best interests of their people. The promotional material sensitively reminded the chief of his paternalistic role and subtly connected this with the benefits to his people of herbicide application. No attempt was made to appeal to the chiefs in their own right as owners of substantial areas of land since the objective was to achieve widespread adoption of herbicides rather than to exploit the profit opportunities arising from successfully penetrating this wealthy market niche.
People are social animals who tend to live in groups. The group(s) to which a person belongs exerts an influence upon the behaviour, beliefs and attitudes of its members by communicating norms and expectations about the roles they are to assume. Thus, an individual will refer to others with respect to: ‘correct’ modes of dress and speech; the legitimacy of values, beliefs and attitudes; the appropriateness of certain forms of behaviour, and also on the social acceptability of the consumption of given products and services. These “others' constitute reference groups. Reference groups provide a standard of comparison against which an individual can judge his/her own attitudes, beliefs and behaviour.
An individual need not belong to a given group in order for that group to exert an influence upon his/her behaviour. Shibutani4 has identified three distinct reference groups:
a group to which an individual belongs (also known as a peer group)
a group to which an individual aspires, and
a group whose perspective has been adopted by the individual
A small scale miller will identify with other millers whose operations are similar in size and technology and will feel that he/she belongs to this group. He/she may have ambitions to become a larger scale operation employing more sophisticated milling technology and so aspires to membership of a group recognised as industrial millers. At the same time, the small scale miller may adopt the views and opinions of a grain trader's association since he/she believes that when this group voices an opinion about trends or proposed changes to the grain trade their arguments are well articulated, forceful and normally in the best interests of small scale millers as well as grain traders. The common factor between these three groups is that they each provide a frame of reference for the individual. As the example of the small scale miller illustrates, an individual can have several reference groups.
Reference groups can have a significant influence on patterns of product use and consumption. In China, the practice of purchasing fish whilst it is still alive is so deeply ingrained that the marketing of frozen fish has barely been established. Certain norms and values run so deep in a reference group that it is usually counter-productive to challenge them. In other instances, reference groups have only the weakest influence on buying behaviour. The key difference appears to be the extent to which a product is used or consumed publicly. That is, if the product or brand is evident to those within the reference group then that group's influence is likely to stronger with regard to purchasing behaviour.
Families as reference groups
The family is another group which influences the behaviour of individuals including buying behaviour. Two types of family may be distinguished from one another, the nuclear family and the extended family. The nuclear family is the basic family unit and describes the parents and immediate off-spring and/or their adopted children. The extended family includes all living relatives in addition to the parents and their children - grandparents, aunts, uncles, cousins, step-relatives and in-laws (i.e. relatives through marriage).
Families often form a Decision-Making Unit (DMU) with respect to household purchases, with each member performing a different role. For instance, the children may initiate the purchase by requesting a breakfast cereal in place of maize porridge, the male head of the household may decide whether a certain category of purchase may be made such as this more expensive type of breakfast food and the female head of the household may contribute to the decision to buy a processed breakfast food and decide which brand and from which retail outlet it is to be bought. Where the extended family becomes involved in a purchasing decision the DMU becomes larger and the roles of family members more diverse.
When marketing to families it is essential to know which members play a role in certain types of decision and what role they play. Thus, for instance, the cereals manufacturer may target mass media advertising at children since they trigger a purchase whilst in-store merchandising and promotion is designed to appeal to the housewives or other female heads of household because they make the brand choice.
Endogenous influences are those which are internal to the individual. These are psychological in nature and include needs and motives, perceptions, learning processes, attitudes, personality type and self-image.
Needs and motives
The terms needs and motivations are often viewed to be interchangeable. However, there is a difference between them. When an individual recognises that he/she has a need, this acts to trigger a motivated state. Need recognition occurs when the individual becomes aware of a discrepancy between his/her actual state and some perceived desired state. The housewife who buys polished rice, or roller milled maize meal (actual state), who is made aware of the vitamin deficiencies in these products and is anxious to be, and to be seen to be, a wife and/or mother who looks after the health of her family (desired state) could be motivated to purchase less highly refined rice or maize meal. More formally, a need is a perceived difference between an ideal state and some desired state which is sufficiently large and important to stimulate a behavioural reaction. Figure 5.2 provides additional examples of differences between an ideal and an actual state which could motivate behaviour intended to reduce or remove differences between the two states.
Figure 5.2 Desired and actual states
It will be seen from this diagram that a range of factors can be responsible for activating needs awareness. These may be emotional, physiological or sociological in nature. Once the need is recognised then the individual concerned will form a motive. A motive may be defined as an impulse to act in such a way as to bring about the meeting of a specific need.
Whereas motivation is a stimulus to action, how an individual perceives situations, products, promotional messages, and even the source of such messages, largely determines how an individual acts. A basic definition of perception would be ‘how people see things’. Berelson and Steiner5 have defined perception more formally as:
“…the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world.”
Individuals can have vastly differing interpretations of the same situation. Whilst all human beings receive information through the same five senses-vision, hearing, smell, taste and touch the extent to which they attend to a piece of information, how they organise that information and how information is interpreted tends to differ. It differs because perceptions are a product of three variables: the physical stimuli (e.g. the product), the relationship between the stimuli and the immediate environment (e.g. a gradually increasing disposable income) and the psychology of the individual (e.g. a desire to be seen as someone who had graduated from humble economic origins to a person of economic stature). Moreover, individuals can hold widely differing perceptions, or interpretations, of the same stimulus due to three perceptual processes, i.e. selective attention, selective distortion and selective retention.
Selective attention: All people are daily bombarded by stimuli, both commercial and non-commercial. People simply cannot pay attention to all these messages and therefore they develop mechanisms to reduce the amount of information that they actually process.
People pay attention to stimuli which meet an immediate need. Thus a farmer within whose district poultry have been reported as suffering from Newcastle disease will be especially attentive to messages relating to the prevention of this affliction in his/her ostrich flock.
Selective distortion: Incoming information is often distorted to fit existing beliefs, opinions and expectations. Thus a wine connoisseur finds it easy to believe that French growers can produce a high quality Chardonnay but find it difficult to believe that Tanzanian growers can supply a Chardonnay comparable in its characteristics. Such beliefs are based on perceptions rather than experiences.
Selective retention: People forget all too easily. The information retained is generally that which supports the decision maker's existing attitudes and beliefs. Thus a consumer who is strongly loyal to a particular brand of maize meal will easily recall the benefits claimed for that product in advertising campaigns but will forget the claims made for a competing product.
Much of human behaviour is learned. The evidence of learning is a change in a person's behaviour as a result of experience. Theory suggests that learning is the product of interactions between drives, stimuli, cues, responses and reinforcement. For instance, a farmer may have a strong drive towards increasing his/her productivity. A drive is a strong internal stimulus impelling action. Drive turns to motive when it focuses upon a particular drive-reducing stimulus object. A farmer may see the adoption of a newly available two-wheeled tractor as a way of increasing his/her productivity to the extent required. The farmer's response to the notion of buying a two-wheeled tractor is influenced by the surrounding cues. A cue is a lesser stimulus that can determine whether an individual responds and, if so, how he/she responds. The encouragement of the farmer's neighbours, and perhaps his/her village headman, seeing the same type of tractor operating successfully on a neighbouring farm, receiving visits from salesmen and reading promotion literature are all cues that can impinge upon the farmer's impulse to invest in a two-wheeled tractor.
If the farmer buys the two-wheeled tractor and if he/she finds that it works well and improves his/her productivity to the level required, then learning is positively reinforced. If the buyer's experience does not match expectations then he/she is likely to suffer cognitive dissonance. Cognitive consistency theories hold that individuals strive to maintain a consistent set of attitudes and beliefs. When attitudes and beliefs about a product or service are challenged, due to its performance falling short of expectations, then the buyer experiences an uncomfortable psychological state and becomes motivated to redress the balance between expectations and experience.
Figure 5.3 Cognitive dissonance
The more major the purchase the greater the degree of dissonance experienced and the greater the ramifications for the supplier of the product or service. Referring to the hypothetical example of ‘Pukka Pasta’ in figure 5.3, the purchase is not major with respect to the cost of the purchase but may be considered ‘major’ from the buyer's perspective if he/she perceived the occasion to have been an important social event.
Market oriented organisations have policies which seek to deal with cognitive dissonance. No matter how much care an organisations takes in the manufacture and distribution of its products it is unlikely to achieve ‘zero defects’ all of the time. Consequently, some buyers will be dissatisfied at some point in time. The fact that this happens is less important than how the company deals with dissatisfaction. Many companies operate a policy of giving buyers a choice of having their money back or accepting a replacement product. The company does not look closely at each and every case where a product is returned but operates a blanket policy of assuming that the customer is always right. Some organisations are nervous of operating such policies because they feel it might be abused and result in a high number of returns and high costs to the enterprise. Others reason that their marketing task is not to sell a product but to create a customer. They are willing to bear the costs of a liberal customer complaints policy in the belief that long term profitability comes from establishing long term relationships with buyers.
Fishbein and Ajzen6 put forward a definition of attitudes which has become widely accepted. Their definition is:
“…a learned predisposition to respond in a consistently favourable or unfavourable manner with respect to a given object.”
This definition draws attention to four fundamental characteristics of attitudes. First it suggests that attitudes are enduring. They may change over time but they tend to be reasonably stable in the short to medium term. Second, the definition stresses that attitudes are learned from the individual's own experience and/or from what they read or hear from others. Third, that attitudes precede and impact upon behaviour. Attitudes reflect an individual's predispositions towards another person, an event, product or other object. A person may be either favourably or unfavourably predisposed towards an object; or they may be indifferent towards that object and therefore fail to display any behavioural pattern with respect to the object. Fourth, the chief function of attitudes is to facilitate the evaluation of objects. Attitudes are a generalisation and therefore the individual does not have to go through a process of evaluation tailored to each and every object. A consumer may be unfavourably predisposed towards locally manufactured dairy products because of dissatisfaction in the past with the quality of a specific type of cheese and with the shelf-life of fresh milk from the country's Dairy Produce Board. The negative experience of the consumer, which relates to very specific products, is readily transferred to all other dairy products marketed by the Board and the consumer exhibits a preference for imported dairy products. A common marketing tactic of enterprises that find themselves operating in an environment hostile to locally manufactured merchandise is to promote certain products as “Export Quality”, and thereby infer that a level of quality control, above that applied to products for the local market, has been exercised.
Marketers have to work hard at creating positive attitudes towards the organisation, its products or services and any intermediaries it may channel these products/services through. Changing negative attitudes requires even more effort. In the 1980s, the Kano Tomato Grower's Association, in Northern Nigeria, carefully established a reputation for supplying superior produce. However, the reputation of the product was destroyed by the practice of unscrupulous members who intentionally concealed damaged tomatoes beneath top quality produce. The Association was never able to fully restore the reputation of its product to previous levels. It is generally more difficult, and expensive, to change a negative attitude than to cultivate a positive attitude at the outset. Indeed, it is usually more productive to make changes to the product's characteristics and/or image, to fit the existing attitudes of buyers, than to seek to change firmly entrenched attitudes.
Personality and self-concept
Individuals tend to perceive other human beings as ‘types of persons’. There are, for example, people perceived to be nervous types, ambitious types, self-confident types, introverts, extroverts, the timid, the bold, the self-deprecating, and so on. These are personality traits. Like attitudes, personality traits serve to bring about a consistency in the behaviour of an individual with respect to his/her environment. Thus, for example, a personality characterised by a high degree of self-confidence will consistently be outspoken with respect to his/her views on new ideas, products, processes and practices. Moreover, where there is an element of risk in adopting an innovative product the self-confident personality will be more often among the risk-takers than the risk-averse.
Although great hopes have been expressed by theorists that it would eventually be possible to equate buying and consumption patterns with personality types, this has yet to become a reality. Personality types have proven to overlap and whilst personality traits may serve to bring about a consistency in the behaviour of an individual with respect to his/her environment, there is no firm evidence that there is a similar level of consistency in respect of consumption patterns.
In practice, to marketing management, perhaps the most rewarding aspect of personality studies to date has been the concept of self-image. An individual's self-image is how he/she sees him/herself. Self-image is a fusion of how a person would ideally like to be, the way a person believes others see him/her and how a person actually is. The resulting self-image can be wholly inaccurate. People tend to exaggerate the extent to which they are in proximity to the ideal self and underestimate the extent to which others are aware of weaknesses in their character, and their real self can be quite different from either of the other two.
For the marketer the importance of self-images rests in the opportunities to relate product characteristics to these images. For instance, it may be possible to persuade those who see themselves as being in the emerging middle class of a developing country to trade up from coarsely ground maize meal, which the consumer has to collect in his/her own container, to more expensive roller milled maize meal, highly refined and sold in sophisticated packaging. The promotional campaign would focus on the congruence between the self-image and the product image, i.e. a sophisticated, more refined product for a sophisticated, more refined consumer.
Buying decisions may be made by individuals or a group such as a family or a committee within a commercial or industrial organisation. Where a group is involved, the term Decision-Making Unit (DMU) is commonly used. Marketers are interested in identifying all of the parties involved in the decision making process and are careful to distinguish between buyers and users. The farmer may make the final decision as to whether a given piece of agricultural equipment is purchased but his/her decision could well be influenced by the views, attitudes and amptitudes of the farm worker who will operate the machine. Moreover, the subsequent experience of the operator will play a major role in determining whether or not the decision to buy is positively reinforced. Similarly, the mother in the family may be the chief buyer of household foods but children may have a major influence on the purchase of those food items of which they are the main consumers.
Behaviouralists have used empirical evidence to develop models of the buying process. These models usually portray the buying decision as having several discrete stages. It should be emphasised that these models have been developed in the context of buying decisions in which there is a high level of involvement on the part of the potential buyer, that is, where the item under consideration is expensive and purchased infrequently. Typically, the buying decision models comprised five stages: problem recognition, information search, evaluation of alternatives, purchase decision and post-purchase behaviour. Such models underline the fact that the actual decision to purchase is but a single event in a process which begins sometime beforehand and continues after the item is bought. The marketer is encouraged to think about influencing a buying process rather than a buying decision.
Figure 5.4 A five-stage model of the buying process
Problem recognition: The buying process begins with a recognition on the part of an individual or organisation that they have a problem or need. The farmer recognises that he/she is approaching a new cultivation season and requires seed; a grain trading company realises that stocks are depleted but demand is rising and therefore wheat, rice and maize must be procured; a rural family is expecting an important guest who must be honoured by the slaughter and preparation of a goat for a feast.
Problems and needs can be triggered by either internal or external stimuli. A poor peasant family may purchase a goat, which they can ill-afford, either because they have an innate sense of hospitality (internal stimulus) or because social convention dictates that a goat be procured and prepared for special visitors (external stimulus).
Marketing research needs to identify the stimuli that trigger the recognition of particular problems and needs. Research should be directed towards establishing the needs/problems that arose, how these were brought about and how buyers arrived at the decision that a particular product was likely to meet their need or solve their problem. By so doing marketers can design products/services capable of meeting those needs/problems and develop marketing strategies that can trigger customer interest in those products or services.
Information search: Information gathering may be passive or active. Passive information gathering occurs when an individual or group simply becomes more attentive to a recognised solution to a given need. That is, he/she exhibits heightened attention. The potential buyer becomes more aware of advertisements or other messages concerning the product in question. In other circumstances the individual is proactive rather than reactive with respect to information. A trader who sees potential in a new vegetable which is being imported into the country will actively search out information about the product, sources of supply, prices and import regulations. He/she is likely to converse with other traders, request literature from potential suppliers, etc.
Marketers will be interested to establish what information sources tend to seek out. Kotler8 states that the information sources used will fall into four categories:
personal sources (family, friends, work colleagues, neighbours, acquaintances)
commercial sources (promotional materials, press releases, technical journals or consumer magazines, distributors, packaging)
public sources (mass media)
experiential (handling, using the product).
Kotler suggests that, in the case of consumers, these sources of information will play different roles. It is generally held that communications from commercial and other non-personal sources provide information whilst personal sources, such as family or friends, help in evaluating a product or in making choices between alternatives. The extent of information seeking will vary with the intensity of the drive to ‘solve’ the problem and the amount of information that the individual already possesses.
As an individual engages in information gathering he/she becomes more knowledgeable about the range of alternative products or brands available. In highly competitive markets where there is a large number of competing products or brands the customer rarely makes a choice from the entire set of alternatives available. Rather, the customer selects from a subset of the alternative products or brands that are actually available, termed ‘the evoked set’. Figure 5.5 illustrates the process involved in arriving at the evoked set, i.e. the set of products/brands from which the customer actually chooses.
Figure 5.5 The concept of an evoked set
Since a customer's information is likely to be imperfect he/she will be ignorant of the existence of a number of products/brands that are actually available on the market. This happens for a variety of reasons. The customer may only engage in limited information gathering, some products/brands may not be strongly promoted or some may be heavily promoted in distribution channels that a particular customer does not frequent. Thus, the customer is seldom in a position to choose products/brands from the total set. Rather, the customer is only aware of a subset of the total set. Some of these will fail to meet the customer's initial screening criteria. Some will lie outside the customer's price range (they may be either too expensive or too cheap), some will have too high or too low a specification, others might not have the basic level of technical service support in the country. Therefore, the set of products/brands of which the customer is aware is then reduced to a further subset of products/brands to which the customer gives serious consideration. However, as the prospective customer gathers more information the set of alternatives is further reduced until he/she arrives at an evoked set. This is the set of alternative products or brands from which a customer's actual choice is made.
The important implication of the evoked set theory for marketing managers is that they must know when their products are failing to get into the evoked set and should determine what criteria potential customers are using as a basis for including and excluding products/brands from their evoked sets. It is equally important, although not always easy, to establish what information sources customers are using and the roles and relative importance of alternative sources.
Evaluation of alternatives: The process of evaluating alternatives not only differs from customer to customer prospective customer but the individual will also adopt different processes in accordance with the situation. It is likely that when making judgments customers will focus on those product attributes and features that are most relevant to their needs at a given point in time. Here, the marketer can differentiate between those characteristics which a product must have before it is allowed to enter the customer's evoked set. Consider for instance a manufacturer of pasta products sourcing durum wheat. The manufacturer may have criteria he/she uses in deciding whether or not a prospective supplier's wheat ‘qualifies’ for entry to the evoked set, e.g. a maximum of 14% moisture content, a guarantee of a maximum of 1.5% material other than grain (MOG), and price within a given range. A quite different set of criteria might be used in deciding between alternative products and suppliers within the evoked set e.g. the period of credit given by the supplier, the ability of the supplier to deliver the total order in periodic batches and the reliability of the supplier in the past.
Purchase decision: At the evaluation stage the prospective customer will have arrived at a judgement about his/her preference among the evoked set and have formed a purchase intention. However, two factors can intervene between the intention and the purchase decision: the attitude of others and unanticipated events. If the attitude of other individuals or organisations who influence the prospective customer is strongly negative then the intention may not be converted to a firm commitment or decision. The case of the Swiss-Pakistan Agricultural Light Engineering Programme, which is outlined below, illustrates a situation where the attitudes of peers and reference groups frequently determine whether intentions ever become decisions. Unanticipated events can also intervene between intention and action. Whenever human beings form judgements or seek to make decisions they invariably make assumptions. These assumptions are often implicit rather than explicit. A farmer may state an intention to purchase a mechanical thresher within the next twelve months but when his/her implicit assumption of ‘a good harvest’ is not realised, due to drought, the purchase of the machine is postponed.
Figure 5.6 Factors intervening between intention and purchase
Postpurchase behaviour: The process of marketing is not concluded when a sale is made. Marketing continues into the postpurchase period. The aim of marketing is not to make a sale but to create a long term relationship with a customer. Organisations maintain profitability and growth through repeat purchases of their products and services by loyal customers.
Having procured the product the customer will experience either satisfaction or dissatisfaction with his/her purchase. The level of satisfaction or dissatisfaction is largely a function of the congruence between the buyer's expectations of the product and the product's perceived performance. Buyer expectations of a product are usually based upon promotional messages from the product's supplier, family, friends, work colleagues and, perhaps, professional advisors. In addition, the buyer's own perceptual processes influence expectations. If the product's perceived performance either matches or exceeds its expected performance then the buyer is likely to feel highly satisfied. It is in the best long term interests of commercial organisations not to oversell their products. That is, the claims made for products should faithfully reflect the product's actual performance capabilities. Even then, this will not prevent some buyers from holding unreasonable expectations of the product.
Another aspect of postpurchase behaviour that is of interest to marketers is how the buyer actually uses the product. It is common to find buyers using a product in a different way from that for which it was either designed or intended. Such deviations can present problems or opportunities to the product supplier. For instance, whilst maize meal is chiefly used as a foodstuff, consumers discovered that it makes an excellent cleansing agent for suede shoes and other items of clothing when these have become badly stained. This new use for the product could represent a marketing opportunity for a repackaged and repositioned product.
Buyers do not invariably pass through all five stages described here. Much depends upon the circumstances surrounding the purchase decision. In the case of less expensive and/or frequently purchased items there would probably be far less searching for information. If the prospective buyer is loyal to a particular brand then the evaluation of alternatives may not figure at all. The fact that some of the stages depicted in figure 5.4 may be skipped, in certain circumstances, does not invalidate the model. The five-stage model outlined here shows the complete sequence of possible events in the buying process. It can be modified to fit the particular circumstances surrounding a given buying decision.
One of the principal applications of buyer behaviour theory, in marketing, is market segmentation. Whether the customer is an individual consumer or commercial/industrial organisation, each differs in their particular needs, motivations, decision processes and buying behaviour. However, no enterprise can provide a different product or service for each and every customer. At the same time, if an enterprise attempts to provide a single standardised product then only a proportion of the target customer group is likely to be wholly satisfied and the remainder will suffer varying degrees of dissatisfaction and will actively seek alternatives. The needs of the dissatisfied are likely to be met by an existing or emerging competing organisation.
The technique of segmenting a market helps an enterprise decide how far it can go in tailoring its product or service to the needs of distinct groups of customers. Mumby9 defines market segmentation as:
“…the process of identifying and then separating a total market into parts so that different marketing strategies can be used for each part. This involves collecting information about the different segments that the company has identified.”
To clarify these points, consider the position of suppliers of agricultural inputs to arable farming enterprises (e.g. seed companies, fertilizer manufacturers, equipment manufacturers, etc.). Figure 5.7. illustrates some of the bases that might be used in segmenting the market.
Figure 5.7 Segmenting markets for agricultural inputs -an illustration
The variables used to segment markets may be demographic (e.g. age, sex, geographic location, occupation, education, race), psychographic (e.g. activities, interests, opinions, personality, lifestyle) or behavioural (e.g. product usage rate, degree of brand loyalty, occasions of product usage).
According to Engel et al. 10, the objective of market segmentation is to:
“…identify groups within the broader market that are sufficiently similar in characteristics and responses to warrant separate treatment.”
Thus, within a defined market segment customers should be very similar to one another whilst between distinct market segments the groups of customers should be very different from one another. As suggested by Mumby's definition of market segmentation, each market segment might require a quite different marketing mix. This would include having a quite distinct marketing mix for each market segment. Once the market has been segmented the enterprise must decide which of these segments it can profitably serve. The main strategic approaches which may be adopted in this regard are:
|Concentrated marketing||The enterprise concentrates on serving a single market segment. This is also known as niche marketing. This can be a high risk strategy since the organisation is vulnerable without some degree of diversification as niche markets can quickly disappear.|
|Differentiated marketing||Here the organisation elects to serve two or more of the market segments identified. A distinct marketing mix is employed for each market segment which the organisation is seeking to penetrate.|
|Undifferentiated marketing||This is the antithesis of market segmentation in that the enterprise seeks to attract as many buyers as possible with a single marketing mix. Some organisations have been very successful with this simple formula but it becomes increasingly difficult to sustain market position and share as the level of competition becomes more intense.|
Markets may be segmented a priori, where the basis of segmentation is chosen in advance, or post hoc, where segments are formed after the product has been developed, or even after it has been launched, on the basis of customer response to the product. When the Zimbabwean company Quality Dairies launched its drinking yoghurt it decided a priori that it would target the 4 – 10 year olds. Intuitively, the management felt that this segment represented a marketing opportunity. The pack size (250 ml), the pack design (bright colours and a cartoon character named “Slurpy”) and the flavours (chocolate and strawberry) were all predetermined and designed to appeal to this age group. Quality Dairies could equally well have taken a post hoc approach to market segment by placing samples in households and then through follow-up interviews determines who used the product, on what occasions, how it was used and with what result (liked it/did not like it). On the basis of this information the market for drinking yoghurt could have been segmented.
The process of segmenting a market is likely to produce a number of different possible customer groups. The enterprise then has to evaluate the relative attractiveness of the market segment identified and select the target segments(s) that it will seek to serve.
Figure 5.8 Target marketing
Of course, whilst some market segments may be attractive in terms of potential profitability, the enterprise will only be able to serve these if its resources match the needs of those segments. Thus, for instance, a small company marketing fungicides might see great opportunities in targeting grain traders but not having the necessary number of salesmen to adequately serve this segment.
Individuals who belong to the same subculture and hold the same status within a society may lead quite different lifestyles. For example, two young people coming from the same village, and from families with similar social standing within that village, can have progressed to the same educational level. Thereafter, their paths may diverge. One person follows his/her family's wishes and returns to the village to assist in operating the family's agricultural holding whilst the other pursues a career in the country's capital. Within a short time the two young people are leading very divergent lifestyles, having different interests, holding different opinions and engaging in different activities. Thus a person's lifestyle reflects how he/she interacts with the environment in which he/she lives.
A number of approaches to classifying people's lifestyles have been developed but perhaps the system most frequently cited is that of Plummer11. This approach involves presenting respondents with a lengthy questionnaire in an attempt to measure their activities, interests and opinions (AIO) as well as their demographics. Table 5.1 shows the principal dimensions used by Plummer to classify lifestyles.
Table 5.1 Lifestyle segmentation
|Sports||Achievements||Culture||Stage in life cycle|
Organisations like Oxfam have employed lifestyle segmentation very successfully. In addition to its UK high street shops, selling products made in developing countries, Oxfam produces a mail order catalogue. These catalogues show full colour photographs of products from developing countries and so are expensive to publish. Oxfam has to carefully target the households to which the catalogue is sent. Careful research and prudent investment in the establishment of a marketing information system has enabled Oxfam to build a picture of people who are likely to give and buy from charities like itself. Oxfam has a shrewd idea of the newspapers these prospective donors/buyers will read, the political party they will support, their probable stand on a wide range of social issues and even their favourite leisure activities. As a result Oxfam are able to employ what might be termed a rifle gun strategy and pinpoint specific targets rather than adopt the shotgun approach, blasting off in a general direction in the hope of hitting something.
Organisational buying behaviour
Organisational buying behaviour has been defined by Webster and Wind12 as
“…the decision-making process by which formal organizations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers.”
Organisational buying decisions are likely to be made by a group rather than wholly by an individual. Webster and Wind coined the term ‘decision making unit’ (DMU) to describe such groups. Members of DMUs may have different roles, including:
|Users||The individuals who are most likely to use the product often initiate the buying process by signalling a need for it and outlining its specifications, e.g. the production manager in a dairy factory might identify the need to buy a certain amount of milk for yoghurt production and will specify the butterfat content and total bacterial count acceptable in the milk.|
|Influencers||Others in an organisation may have an influence on the specifications and also provide information on alternatives, e.g. the quality control personnel in the dairy factory could amend the production manager's specification to reflect a range of acceptable butterfat content and provide an assessment of the prospects of substituting spray dried milk for fresh milk.|
|Decision-makers||Decision-makers ultimately have the power to reach conclusions on the product, product specifications and/or suppliers.|
|Approvers||There could be some person with authority to sanction the purchase specified by the decision-maker.|
|Buyers||Buyers have the formal responsibility for choosing suppliers and agreeing the terms and conditions attached to the contract of sale.|
|Gatekeepers||Access to members of the DMU may be controlled by secretaries, switchboard operators, personal assistants and the like. These individuals may also filter information intended for members of the DMU.|
When attempting to market to organisations it is imperative that information be gathered on the structure of the DMU within each target enterprise. Intelligence gathering should include attempts to understand the relative roles of each identified member of the DMU. It is also important to appreciate the status or authority of members of the DMU. For example, in some instances the term ‘buyer’ is used to describe individuals who simply perform the clerical duty of executing the buying decisions made by decision-makers, but in others the ‘buyer’ is the decision-maker. Moreover, in some organisations the ‘buyer’ is a member of middle management whereas in others he/she is a member of senior management. This can have implications for the structure and titles of the salesforce in a marketing organisation. Senior managers may be happy to deal with a Sales Manager but not a salesman. It is not simply the sales-person's title which might matter but the extent to which he/she is empowered to make decisions without reference back to a more senior person. Thus, when marketing to organisations it is important that the sales-person is able to deal with the professional buyer on an equal footing, i.e. similar status within their respective organisations, similar levels of responsibility and authority and, possibly, job titles that convey their equality.
Organisational markets fall into one of three categories: industrial markets, reseller markets and government markets.
Industrial buyers procure raw materials, components, semi-finished goods and services as input to the production of other goods and services. Thus industrial markets are characterised by derived demand. That is, the demand for industrial goods ultimately derives from the demand for consumer goods. Since this is the case marketers of industrial products must maintain an interest in patterns of consumer demand and the forces which shape that demand.
Most large industrial commercial organisations employ professionally trained buyers. The tasks of industrial buyers can be categorised as straight rebuys, modified rebuys and new tasks. Some of these tasks open more opportunities than others for enterprises not already supplying a particular organisation.
Straight rebuys: Where a buyer, or purchasing department, routinely reorders an item it is referred to as a straight rebuy. The buyer will either reorder from the same supplier as last time or from an approved list of past suppliers. Entry for a new supplier is difficult and will possibly only be achieved if a potential supplier can either innovate in the form of new products or marketing systems (e.g. improved methods of transportation or materials handling), or can offer terms and conditions which are substantially better than the organisation is receiving from existing suppliers. The difference has to be substantial since any change of supplier involves risks and the buying organisation is unlikely to make a switch to achieve marginal gains.
Modified rebuy: On occasion the buyer will want to modify the product specifications and/or the terms and conditions attached to a sale contract. Sometimes this opens up opportunities for enterprises which have not previously been suppliers to the buyer's organisation. New suppliers may be able to offer product specifications or terms that existing suppliers cannot match. Again, however, differences must be significant or buying organisations may not be sufficiently well motivated to accept the risks inherent in switching suppliers.
New buy task: Periodically buyers are faced with buying a product for the first time. The buyer's information search will almost certainly be more extensive. Since new buying tasks carry inherent risks, the buyer is likely to consult more widely with his/her colleagues and other advisers. This is where potential new suppliers, who are genuinely able to offer a better service, products and/or terms and conditions will find it easiest to gain access to buyers within the buying organisation.
Robinson et al. 13 proposed an eight stage model of the procurement process undertaken by industrial buyers and have related this to the buying tasks just described. The model is popularly known as the buygrid.
Figure 5.9 The buygrid
|New Task||Modified Rebuy||Straight Rebuy|
|Anticipation or recognition of a problem (need) and a general solution|
|Determination of characteristics 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|
As buyphases are completed, moving from phase 1 through phase 8, the process of “creeping commitment” occurs, and there is a diminishing likelihood of new vendors gaining access to the buying situation.
According to Webster and Wind12 the decisions of industrial buyers are influenced by four groups of factors: environmental, organisational, interpersonal and individual. These are explained a little by figure 5.10
Figure 5.10 Major influences on organisational buying decisions
In summary, industrial marketers require a clear understanding of the needs of their prospective clients, an awareness of who is involved in the DMU, a knowledge of the criteria used in making buying decisions and an appreciation of the buying procedures involved.
Wholesalers, traders, sales agents, retailers and the like procure goods and services to resell or rent them to others, at a profit. These individuals and organisations comprise the reseller market. Some vertically integrated agricultural organisations are both producers and resellers. For instance, multinational fruit companies such as United Fruit, Geest, and Del Monte own plantations as well as engaging in trading.
It is important that organisations wishing to market products and services into these markets understand that resellers act as purchasing agents on behalf of their customers and not as intermediaries for producers, manufacturers and other types of suppliers. The key to success in marketing to resellers is to seek to assist resellers in better meeting the needs of their customers.
Government markets have at least four levels. These are national, state, district and municipal. In most, if not all, countries the government is the largest single customer for goods and services. Government buys to fulfill mandated public objectives. Examples of the kinds of public objectives that involve the food and agriculture sectors are the maintenance of a strategic grain reserve, the procurement and distribution of staple foods to the poor and those suffering hardship due to drought, the management of nutrition intervention programmes for malnourished children, the provision of food for the country's armed forces and, sometimes, for schools, hospitals, prisons and other public institutions.
Government buying procedures usually take the form of either open bids or negotiated contracts. Open-bid buying involves a government agency in inviting tenders from pre-approved suppliers for carefully specified products, materials, works or services. In most cases, the government agency will also specify the terms and conditions attached to the contract. The normal practice is for the contract to be awarded to the lowest bidder able to meet the specifications. Prospective suppliers must decide both whether they can meet the specifications and if they are able to accept the terms and conditions laid down by the government agency.
Negotiated contract buying is rather different. Here the government agency identifies suppliers at an early stage and negotiates the specifications and terms and conditions directly with them. This type of buying is more common in capital investment projects where R & D investment can be high. development times are relatively long and the item is custom made. In China, for example, the government has decided to invest in centralised wholesale markets for fruit, vegetables and aquatic produce, to replace the myriad of smaller wholesale markets that tend to be dotted around the major cities. It is believed that the centralised wholesale markets will give rise to economies of scale and reduce traffic congestion. The building of these wholesale markets has been conducted on the basis of negotiated contracts between municipal authorities and private contractors.
Individuals who purchase products on behalf of an enterprise they either own or are employed by have two distinct sets of goals that they pursue: their own and those of the organisation. As an individual, the industrial buyer enjoys exercising authority, seeks job satisfaction, the approval and respect of both peers and superiors and other personal goals and avoids unnecessarily risky decisions. Industrial buyers are also motivated by the desire to achieve organisational goals such as cost control, improved efficiency of operations, reliable supplies of essential inputs, improved product performance and so on.
Figure 5.11 Motivations of organisational buyers
Those marketing to organisational buyers can use their understanding of these twin sets of motivations to great effect. Consider the task of marketing a new feed formulation to a buyer operating within a medium-large poultry producing company. An appropriate marketing campaign would attend to both the buyer's personal and organisational goals. The satisfaction of organisational goals might be addressed in the following way: the feed includes marigold leaves giving the client's finished product a golden colour attractive to consumers (Improved product performance), the principal ingredient by weight being cassava, is purchased from Thailand, the world's lowest-cost producer of this crop (cost control), the feed producer multi-sources all of the ingredients used in his product and places forward contracts of nine months with all suppliers (reliability of supply) and the poultry feed producer uses a high quality mill screen that ensures feed particles are consistent in size and will not clog the client's feed dispensing units (improved operational efficiency). The organisational buyer's personal goals might be met in the following way: a copy of an evaluation report on the new product by a respected scientific institution (reduces risks in the buying decision), the scientific advances incorporated in the poultry feed are explained in non-technical language in information sheets sent only to the buyer within the organisation (enables the buyer to articulate the benefits of the feed in a way calculated to enhance the esteem of the buyer amongst his/her colleagues) and the buyer is empowered, by the terms and conditions attached to the sale of the new feed, to cancel the shipments if his/her organisation does not feel that the product is not delivering the promised benefits (appealing to the buyer's enjoyment of the exercise of authority and power as well as further reducing the risks attached to a decision to buy).
Of course, the manufacturer of the new poultry feed mix would only know to include these particular arguments and propositions if the trouble had been taken to determine what motivates the buying decision.
The purpose of studying the social and psychological forces impinging upon customers is not to manipulate buyer behaviour but to be in a position to tailor the marketing mix so as to better meet the needs of prospective customers.
Buyer behaviour is shaped by social and psychological influences some of which are exogenous whilst others are endogenous. Exogenous influences, i.e. those arising from social interactions, are external to the individual, and include; culture, social status, reference groups, family membership and peer groups. Endogenous influences, i.e. those arising from the individual's own psyche and therefore internal, include needs and motives, perceptions, learning processes, attitudes and beliefs, personality and self-concept. It is only by understanding these sociological and psychological phenomena that an enterprise can really hope to develop a marketing mix that meets the needs of its target customers.
The typical model of the consumer buying decision process involves five discrete steps. These are: problem recognition, information search, the evaluation of the alternative problem solutions, the act of purchasing and postpurchase behaviour. Such models serve to emphasise that buying is a process rather than an event. The buying process is initiated long before any overt behaviour provides evidence that the process has begun and continues long after the product has been purchased and consumed.
Without a grasp of buying behaviour, theory market segmentation is virtually impossible. Market segmentation is the process of subdividing the total market into smaller parts according to shared characteristics and/or needs of the customers within a segment. The idea is for enterprises to more finely tune their marketing mix to the needs of market segments comprising customers whose behaviour, needs and motivations exhibit a high degree of homogeneity. Those market segments which a business seeks to serve are termed its target markets. Markets may be segmented using variables which are demographic (e.g. ethnic group, age, sex), psychographic (i.e. lifestyle) and/or behavioural (e.g. rate of product usage, brand loyalty). Once the market has been segmented, a decision has to be made as to which segment(s) to serve. This is known as target marketing and involves matching organisational resources to market opportunities.
Organisational markets are of three broad types: industrial, reseller and government. Buying decisions within larger organisations are more often made by decision making units (DMUs) than by individuals. This being the case, it is important to determine which individuals play a role in the buying decision and what role they play (e.g. users, approvers, specifiers, order placers). The buying task ranges from the very simple repurchase of an item which the organisation has been using for some time to the complex task of buying an item of substantial value and/or importance for the first time. The decisions of an organisational buyer will be affected by both personal and institutional goals and these too have to be understood. Personal goals are likely to include, for example, the need for self-esteem, the approval of others and the minimisation of risks. Corporate goals might include increased efficiency, improved product/service performance, reduced costs and/or securing reliable supplies of essential inputs. In making decisions organisational buyers are subject to four main categories of influences: environmental, organisational, interpersonal and individual.
|Buygrid||Differentiated marketing||Exogenous factors||Perceptions|
|Cognitive dissonance||Drives||Government markets||Personality|
|Concentrated marketing||Endogenous factors||Industrial markets||Reseller markets|
From your knowledge of the material in this chapter, give brief answers to the following questions:
Outline the stages of customer decision processes.
Explain the term ‘Endogenous factors’ and give 3 examples of such factors.
Are needs and motives one and the same thing?
What is cognitive inconsistency?
List the four fundamental characteristics of attitudes.
Name 2 forms of government contract.
How is the term ‘gatekeeper’ used in the context of organisational buying behaviour?
Name the 4 categories of influences on organisational buying decisions.
Name the 3 types of reference groups which influence individual behaviour.
How can it happen that two people viewing the same event can perceive it differently?
Define the term ‘evoked set’.
Name the three categories that can be used to segment markets.
What is the ‘buygrid’?
Explain the meaning of the term ‘differentiated marketing’.
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