dsbm 05- conusmer behavior [autosaved]

05.UNDERSTANDING CONSUMER

THARAKA DIASDirector – Essence BTC

MBA(USA), MBA(Aldersgate),BBA(USA), Dip in Mgt, ACIM(UK),

FAEA(Dip in AEA-UK), FinstSMM(UK), CPM(Asia), MSLIM, PM(Sri-

Lanka)

WHY DO WE NEED TO STUDY CONSUMER BEHAVIOR?

BECAUSE NO LONGER CAN WE TAKE THE CUSTOMER/CONSUMER FOR GRANTED.

FAILURE RATES OF NEW PRODUCTS INTRODUCED

Out of 11000 new products introduced by 77 companies, only 56% are present 5 years later.

Only 8% of new product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives.

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ALL MANAGERS MUST BECOME RESPECT ANALYSTS OF CONSUMER MOTIVATION AND BEHAVIOR

CAN MARKETING BE STANDARDIZED?

NO.

BECAUSE CROSS - CULTURAL STYLES, HABITS, TASTES, PREVENTS SUCH STANDARDIZATION.

UNLESS MANAGEMENTS ACT

THE MORE SUCCESSFUL A FIRM HAS BEEN IN THE PAST, THE MORE LIKELY IS IT TO FAIL IN THE FUTURE.

WHY?

BECAUSE PEOPLE TEND TO REPEAT BEHAVIOUR FOR WHICH THEY HAVE BEEN REWARDED.

LANGUAGE PROBLEMS

“Please leave your values at the desk” - Paris hotel

“Drop your trousers here for best results” - Bangkok laundry

“The manager has personally passed all water served here” - Acapulco restaurant

“Because of the impropriety of entertaining guests of the opposite sex in the bedroom, it is suggested that the lobby be used for the

purpose.” - Zurich hotel

Ladies are requested not to have children in the bar.”- Norway bar

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“COME ALIVE WITH PEPSI”

“Come alive out of the grave” - Germany

“Pepsi brings your ancestors back from the grave” - China

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BUYER BEHAVIOUR

4Ps Marketing

Environment

Buyer

Characteristics

Buyer

Decision Process

Buyer

Decision

Consumer

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MARKETING STIMULI

Product Price Place Promotion

4 Ps

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OTHER STIMULI

Economic Technological Political Cultural

Marketing

Environment

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Consumer Needs

Consumer Wants

Demand

Hierarchy of Needs

Customer and Consumer

CONSUMER NEEDS, WANTS AND DEMAND

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THIS IS A NEED

Needs - state of felt deprivation including physical, social, and individual needs (e.g., food)

THIS IS A WANTWants - form

that a human need takes as shaped by culture and individual personality (e.g., pastry)

Experiences Persons

Products

Anything that can be Offered to a Market to Satisfy a Need or Want

Places

Organizations IdeasActivities

WHAT WILL SATISFY CONSUMERS’ NEEDS & WANTS?

Services

Activity or Benefit Offered for Sale That is EssentiallyIntangible and Doesn’t Result in the Ownership of Anything

MASLOW’S HIERARCHY OF NEEDS

CONSUMER BUYING BEHAVIOR

Consumer Market - All the individuals and households who buy or acquire goods and services for personal consumption.

Consumer Buying Behavior

The buying behavior of final consumers – individuals and households who buy goods and service for personal or household consumption. (Philip Kotler)

Buying behavior is the decision process and actions of people involved in buying and using products.

BUYER’S DECISION PROCESS

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Consumption

Post purchase behavior

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ORGANIZATIONAL BUYING BEHAVIOR

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Consumer vs. Organizational buying behavior

Main types of buying situations in B2B

Stages of decision in B2B

Roles in B2B procurement

Influences on organizational behavior

Buying centres in summary

CONSUMER VS. ORGANIZATIONALBUYING BEHAVIOR

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Decisions made by consumers are quite simple

Organizational buying processes are more complicated, there are several phases and steps

Different buying behavior for different products andtarget groups

Simple consumer goods like food and beverages arebought very spontaneously – influenced by advertisingand product presentation

For premium consumer goods (expensive clothes, computers) – buying behavior is getting more rational –comparison

Private investment goods – price bargaining

B2B PRODUCTS – ORGANIZATIONALPROCUREMENT STARTS

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More than one person involved

Buying process follows certain rules

Price comparison, standardisation, tenders = Ausschreibungen)

B2B SYSTEMS

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involve more capabilities and greater workloads

From the buyer‘s and the supplier‘s side decision hasmore extensive consequences

B2B FACILITIES

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Industrial plants

Manufacturing installations

Office buildings

MAIN TYPES OF BUYING SITUATIONS IN B2B

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Straigtht rebuy – routine decision, repetitive process (energy, office supplies, raw materials, wood, cigarettes), componentsuppliers for the automotive industry – little or no newinformation

Modified rebuy – more complicated but less sophisticated: cars, trucks, computers, consulting – modified rebuys are oftentreated too uncautious

New task – calls for thorough research – industrial plant –highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, militaryequipment, infrastructure) – re-evaluation of alternatives andsearch for new information and new alternatives

BUYING PHASES

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Problem recognition

General need description

Product specification

Supplier search

Proposal solicitation

Supplier selection

Order routine specification

Performance review

STAGES OF DECISION IN B2B PROCUREMENT

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Backhaus developed a widely usable model todistinguish between 5 phases of procurement

Preliminary application (initiation phase)

Tender proposal

Negotiation

Processing of order

Warranty and services

PRELIMINARY APPLICATION

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Recognition of a problem (need) and a general solution

Released by top management = operating departmentor external consultants

Result request for an offer addressed to a number ofpotential suppliers

TENDER PREPARATION PHASE

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Determination of characteristics and quantity of needed items

Search for and qualification of potential sources

Supplier has to provide an offer

Tries to be incomparable with his competitors

Customer tries to make the offer best comparable

NEGOTIATION PHASE

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core selling process

Comprises acquisition and analysis of proposals, evaluation of proposals and selection ofsuppliers

PROCESSING PHASE/WARRANTY/ SERVICE PHASE

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Contains selection of an order routine

Realisation of the transaction along with the fixation ofafter sales service tasks

ROLES IN B2B PROCUREMENT –BUYING CENTER CONCEPT

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Group of people involved in the buying process – buyingcenter

Webster/Wind model shows 5 different roles – not institutionalised

This causes probleme in identifying and targeting theright people within the decision process

BUYING CENTER

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Role keepers have different tasks – not mandatory

Buyer

User

Initiator

Gatekeeper

Influencer

BUYER

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Formal authority to sign contracts

Member of purchasing department

Influences the vendor selection

Not in technical details

Main criteria: price + terms and conditions of thecontract

USER

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Person working with the product

Interested in benefits and unobstructed function of theproduct to buy

Large knowhow and preconceived opinion

INFLUENCER

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A person with high technical knowledge andpractical experience

definition of minimum requirements on technical or company standards

GATEKEEPER

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Controls the flow of information within thebuying center

Assistant of decision maker

Influence by preparing the decision and therelevant documents

DECIDER

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Right to say yes or no

Mightiest person

INITIATOR

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Person who brings new ideas and solutions intothe company

SPECIFIC MARKETING CONSIDERATIONSIN THE INDUSTRIAL FACILITIES BUSINESS

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Long decision taking process

High risk

Complex buying center

The specific competitive situation

PRODUCT POLICY

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Focuses on innovation

Has to care for high flexibility in research anddevelopment

And manufacturing and assembling

PRICE

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Strict bid and tender rules

High transparency

Add value with service offering to achieve a differentiating position

Another aspect: financing and sourcing models

DISTRIBUTION POLICY

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Focus on negotiation phase

Provide excellent people in the selling center

High technical knowledge

COMMUNICATION

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Problem solver!

Proving success with comparable tasks

Reference projects!

KEY CHARACTERISTICS OF ORGANISATIONAL/BUSINESS BUYING BEHAVIOUR

Fewer, larger Buyers

Geographically Concentrated

Derived demand

Close Supplier–customer Relationship

Professional Purchasing

Multiple Buying Influences

Direct Purchasing

Motives for purchase

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AOT - THARAKA DIAS 48diastharaka@gmail.com0773869007