Chapter 4

The buying situation

- Business buyers spend more time and effort on some purchases than on others. Straight Rebuy= A buying situation in which business buyers make routine purchases that require minimal decision making Modified Rebuy= A buying situation classification used by business buyers to categorise a previously made purchase that involves some change and that requires limited decision making. - e.g. changing printers. New-Task Buy= A new business to business that is complex or risky and that requires extensive decision making.

Step 5. Post Purchase Evaluation

- Consumer evaluates just how good their product choice (and their decision making) was. - The evaluation of product results in a level of consumer satisfaction/dissatisfaction= the overall feelings or attitude a person has about a product after purchasing it. - That is why marketers create accurate expectations of their product in advertising.

Step 4. Product Choice

- Consumer now makes the decision and then act on this choice. - Heuristics= A mental rule of thumb that leads to a speedy decision by simplifying the process. (e.g. price= quality) - Or a common heuristic is brand loyalty= a pattern of repeat product purchases , accompanied by an underlying positive attitude towards the brand.

Characteristics that make a difference in business markets.

- Multiple buyers= more than just satisfy an individuals needs. - Size of purchases= Larger for businesses and higher risk - Geographic concentration= business customers are generally more concentrated into distinctive geographic locations rather than be spread out across the country.

Group Membership (Social Influences)

- People act differently in groups then they do on their own. Group members often show a greater willingness to consider riskier alternatives. - Reference group= An actual or imaginary individual or group that has a significant effect on an individuals evaluations, aspirations and behaviour. (what they wear, where they go ) - Conformity= A change in beliefs or actions as a reaction to real or imagined group pressure.

The Physical Environment (Situational Influences)

- Peoples moods and behaviours are strongly influenced by their physical surroundings. The store environment influences many purchases. think of arousal, please and plesantness

The nature of Business buying

- The buying situation - The professional Buyer - The buying centre

Step 4: Product and Supplier selection

- suppliers ability to make deliveries on time is a critical factor. Just in Time (JIT)= inventory management and purchasing processes that manufacturers and resellers use to reduce inventory to very low levels and ensure that deliveries from suppliers arrive only when needed. - Single sourcing= business practise of buying a particular product from only one supplier. - Multiple Sourcing= Business practise of buying a particular product from many suppliers.- often keep prices competitive and if one falls through easy to fall back onto another one. - Reciprocity= A trading partnership in which two companies agree to buy from one another. (e.g. company that buys truck parts that company will then buy trucks off them.) - Outsourcing= The business buying process of obtaining outside vendors to provide goods or services that otherwise might be supplied in house. (e.g. telephone customer service outsourced to a professional call center. - Reverse Marketing= A business practice in which a buyer firm attempts to identify suppliers who will produce products according to the buyer firms specifications.

Business to Business Demand

-Derived demand= demand for business or organisational products derived from demand for consumer goods or services. e.g forest products such as paper to text books to education. - Inelastic Demand= Demand situations where changes in price have little or no effect on the amount demanded. e.g. McDonalds ordering pickles- still same amount due to consumer demand. - Fluctuating Demand= A products life expectancy is another reason for fluctuation demand, may only need to be replaced every so often. Joint Demand= Demand for two or more goods that are used together to create a product. e.g. BMW needs tyres, batteries and sparkplugs to make a certain car if one of these parts decrease the number in production will also go down.

Six Major Categories of Perceived Risk

1. Functional Risk- product will not perform as expected 2. Physical Risk- risk to individual consumers that the product might impose 3. Financial Risk- product will not be with its cost. 4. Social Risk- Poor product choice may result in social embarrassment 5. Psychological risk- poop product choice might result in a bruised ego or reduced self esteem. 6. Timer Risk- the time spent searching for a product will be a waste of time.

Influences on Consumer Decision Making

1. Internal influences - Perception - Motivation - Learning - Attitudes - Personality - Age Groups - Lifestyle 2. Social Influences - Cultural - Subcultural - Social Class - Group Membership 3. Situational Influences - Physical Environment - Time

Steps in business Buying process

1. Problem Recognition - purchase requisition or request made - Buying Centre formed if needed 2. Information Search - Product Specefications Developed - Potential suppliers identified - Proposals and Quotations obtained 3. Evaluations of Alternatives - Proposals evaluated - Samples obtained and evaluated 4. Product and Supplier selection - purchase order issued 5. Post-Purchase evaluation - Users surveyed - Performance documented.

The Consumer Decision Making Process (high-involvement)

1. Problem Recognition 2. Information Search 3. Evaluation of Alternatives 4. Product Choice 5. Post Purchase Evaluation

Subcultures (Social Influences)

A group within society whose members share a distinctive set of values, attitudes and beliefs. characteristics such as language, religion, shared interests.

Attitude (Internal influence)

A learned predisposition to respond favourably or unfavourably to stimuli on the basis of relatively enduring evaluations of people, objects and issues. - An attitude has three components. -Affect (feeling component of attitudes. overall emotional response a person has to a product) - Cognition (the knowing component. belief or knowledge a person has about a product) - Behaviour (consumers intention to do something, such as purchase or use a certain product.)

Consumer Market

A market that consists of all the individuals and households who buy or acquire goods and services for personal consumption.

Opinion Leader

A person who is frequently able to influence others' attitudes or behaviours by virtue of his or her active interest and expertise in one or more product categories.

Age Group (Internal influence)

A persons age is another internal influence on purchasing behaviour. - purchase of goods and services can also depend on consumers current positions in the family life cycle= a means of characterising consumers within a family structure on the basis of the different stages through which people pass as they grow older.

Personality (Internal influence) SELF CONCEPT

A persons self concept is an individuals self image, which is composed of a mixture of beliefs, observations and feelings about personal attributes. - Five types of self-concept. - Actual Self= how consumers actually see themselves - Ideal Self= How consumers would like to see themselves - Social Self= How consumers feel others see them - Ideal social self= how consumers would like others to see them - Expected self- how consumers expect to see themselves at some future time.

Learning (Internal influence)

A relatively permanent change in behaviour caused by information or experience. - Behavioural learning= theory assume that learning takes place as a result of connections that form between events that we percieve. -classic conditioning= learning that occurs as a result of association between two stimuli (rolly dog and toilet paper.) - Operant Conditioning= Learning that occurs as a result of rewards or punishment. (learning by results) -The associations and results learned in classical and operant conditioning also have a tendancy to transfer to other similar things = stimulus generalisation. - Cognitive Learning= theory of learning that stresses the importance of internal mental processes and that views people as problem solvers who actively use information from the world around them to master their environment.

Step 2:Info Search- Developing Product Specifications

A written description of the quality, size, weight and so on of a product required.

Motivation (Internal influence)

An internal state that drives us to satisfy needs by activating goal-orientated behaviour. - Hierarchy of needs is an approach that catagorises motives according to five levels of importance, the mor basic needs being at the bottom and the higher needs at the top of hierarchy. -Self-fufilment, enriching experiences - Prestige, Status, Accomplishment - Love, Friendship, Acceptance by others - Security, Shelter, protection - Water, Sleep, Food

Business to Business Markets: How and why organisations buy.

Business to business marketing refers to the group of customers that includes manufacturers, wholesalers, retailers and other organisations.

3. Evaluation of Alternatives

Evaluative criteria- the dimensions used by consumers to compare competing product alternatives. (pros and cons). Marketers also play a role in educating customers and which characteristics they should use in evaluative criteria. They emphasize the dimensions in which their product excels.

The Buying Centre

Group of people in an organisation who participate in a purchasing decision. - Initiator begins the buying process by first recognising the companys needs to purchase - The user is the memeber of the buying centre who actually needs and will use the product. - The gatekeeper is the person who controls the flow of information to other members. - An influencer affects the buying decision by dispensing advice or sharing expertise. - The decider is a memeber of the buying centre who makes the final decision - The buyer is the person who is responsible in executing the purchase.

Consumer Behavior

Is the behaviour consumers undertake in seeking, purchasing, using, evaluating and disposing of products. - Buying behaviour is subject to internal influences (psychological and personal), external influences (social and cultural), situation influences (occur at the time and place of being there.)

Time (Situational Influences)

Many consumers believe they are pressed for time than ever before. This sense of time poverty makes consumers responsive to marketing innovations that allow them to save time- drive through fast food, pay at gas pump.

The professional Buyer

Marketers must understand who handles the buying for its business customers. Professional buyers focus on economic factors beyond the initial price of the product, evaluating transportaion costs, accessory products or supplies, maintenance etc.

Perception (Internal influence)

Process by which people select, orgainse and interpret information from the outside world. We receive information in form of sensations/ our 5 senses. - The perceptual process involved three stages 1. Exposure= The marketing stimulus must be within range of peoples sensory receptors to be noticed. 2. Attention= is the extent to which mental processing activity is devoted to a particular stimulus. Characteristics of a stimulus also make a differnce e.g. unexpected tv ads. 3. Interpretation= consumers assign meaning to the stimulus influenced by prior associations they have learned and assumptions they make.

Types of Business to Business Markets

Producers= The individuals or organisations that purchase products for use in the production of their goods and services. Resellers= The individuals or organisations that buy the finished goods for the purpose of reselling, renting or leasing to others to make a profit. Organisations (government and not for profit)= Government Markets the national and local governments that buy goods and services to carry out public objectives and to support their operations.

Social Class (Social Influences)

The overall rank or social standing of groups of people within society according to the value assigned to such factors as education, income, occupation. e.g. luxury goods often serve as status symbols.

Lifestyles (Internal influence)

The pattern of living that determines how people choose to spend their time, money and energy, and that reflects their values, tastes and preferences. consumers often choose goods, services and activities that are associated to their lifestyle. - Psychographics= the use of psychological, sociological and anthropological factors to construct market segments. Categorises individuals in terms of their activities, interests and opinions.

The Consumer Decision Making Process

The process of selecting from several choices, products, brands or ideas.

Step 1. Problem Recognition

The process that occurs whenever the consumer sees a significant difference between his or her current state of affairs and some desired or ideal state; this recognition initiates the decision making process. (e.g. laptop breaking down)

2. Information Search

The process whereby a consumer searches for appropriate information to make a reasonable decision. (such as personal sources, commercial sources, public sources/ internet.)

Personality (Internal influence)

The psychological characteristics that consistently influence the way a person responds to situations in his or her environment. (e.g. a customer may be happiest in familiar surroundings using the same brands over and over.) - Personality traits - Innovativeness (degree to which a person likes to try new things) - Materialism (amount of emphasis placed on owning products) - Self-confidence ( degree to which a person has a positive evaluation of his or her abilities) - Sociability (degree to which a person enjoys social interaction) - Need for cognition (degree to which a person likes to think about things and is willing to make an effort to process things)

Consumer

The ultimate user of goods, ideas and services.

Culture (Social Influences)

The values, beliefs, customs, rituals and tastes valued by a group of people. Cultural values are deeply held beliefs about right and wrong ways to live.

High involvement risks

the consumer is likely to carefully process a lot of available information and think a great deal about the decision so marketers seek to reduce the perceived risk by educating the consumer about about their products well in advance of the time that the consumer is ready to make a decision.

Consumer Involvement and steps in the Consumer Decision-Making Process

the effort put into their buying decisions depends on their level of involvement- the relative importance of perceived consequences of the purchase to consumers. We are more involved in the decision making process for products that have higher levels of perceived risk- the degree of uncertainty perceived by an individual consumer as to the consequences or outcomes of a specific purchase. There are six major categories of perceived risk