Organizational and Household

Decision Making

Chapter 12

12-2

Organizational Decision Making

• Collective decision making• Organizational buyers buy from B2B

marketers– Decisions become very important due to great

responsibility for others– Buyer’s perception of purchase situation is

affected by expectations of supplier, organizational climate of own company, and buyer’s assessment of own performance

– Organization’s members share information and develop “organizational memory”

12-3

Organizational vs. Consumer Decision Making

• Organizational buying is different…– Involves many people– Precise, technical specifications (require a lot

of product knowledge)– Past experience and careful weighing of

alternatives (impulse buying is rare)– Decisions are often risky (to one’s career)– Substantial dollar volume– More emphasis on personal selling

12-4

Organizational vs. Consumer Decision Making

• Similarities– Emotions do guide

decisions– Brand loyalty– Long-term relationships– Aesthetic concerns– Branding and product

image• “Intel Inside”

12-5

How Do Organizational Buyers Operate?

• Organizational buyers are influenced by:– Internal stimuli

• Buyer’s psychological characteristics

– External stimuli• Nature of buyer’s organization• Overall economic/technological environment of

industry

– Cultural factors• Different norms for doing business in different

countries

12-6

Type of Purchase

• The more complex, novel, or risky the decision, the more effort the buyer will devote to information search/evaluating alternatives

• Fixed set of suppliers for routine purchases reduces information search in evaluating alternatives

12-7

The Buyclass Framework

• Buyclass theory of purchasing dimensions– Level of information gathered prior to decision– Seriousness of evaluation of alternatives– Buyer familiarity with purchase

Buying Situation Extent of Effort Risk Buyers Involved

Straight rebuy Habitual decision making

Low Automatic reorder

Modified rebuy Limited problem solving

Low to moderate One or a few

New task Extensive problem solving

High Many

Table 12.1: Corporate Buying Strategies

12-8

Decision Roles

• In collective decisions, one may play any (or all) of the following roles:– Initiator– Gatekeeper– Influencer– Buyer– User

12-9

B2B E-Commerce

• Internet interactions between two or more businesses– Exchanges of information, products, services, or

payments– Internet provides online catalog of products and

services– Roughly half of B2B e-commerce consists of auctions,

bids, and exchanges among numerous suppliers/purchasers

DELL COMPUTERS

12-10

The Family

• As traditional family living arrangements have waned, siblings, close friends, other relatives, and “intentional families” continue to provide support– Consuming homemade food is symbolic of

family structure and expressing affection

• Discussion: Is the family unit dead?

12-11

Defining the Modern Family• Extended family and nuclear

family• Just what is a household?

– Family household contains at least two people related by blood/marriage

– Divorces and separations are accepted in our culture…marital breakups are ever-present theme in books, music, and movies

– Adult females are staying home with family/children more (especially among best-educated/highest achieving women)

12-12

Discussion

• In identifying and targeting newly divorced couples, do you think marketers are exploiting these couples’ situations?– Are there instances in which you think

marketers may actually be helpful to them?– Support your answers with examples

12-13

Family Size

• Depends on educational level, availability of birth control, and religion

• Marketers keep an eye on fertility rate and birth rate

• Worldwide, women want smaller families (especially in industrialized countries)– Contraception/abortion are more readily available– Divorce is common– Older people now pursue non-grandchildren activities– Some countries want people to have more children

12-14

Nontraditional Family Structures• Any occupied housing unit

is a household• Same-sex households are

increasingly common: marketers target them as unit– POSSLQ living arrangement

• Rise of single-person households– Singles spend more on rent,

alcohol, reading materials, health care, and tobacco/smoking GAYWEDDINGS.COM

AND BABY MAGAZINE

12-15

Nontraditional Family Structures (Cont’d)

• Voluntarily childless women and childless couples are attractive market segments– Discuss the pros and cons of the

voluntarily childless movement. Are followers of this philosophy selfish?

• Two-income couples without children are better educated and have more professional/managerial occupations

CHILDFREE.NET

12-16

Who’s Living at Home?

• Traditional extended family is alive and well• “Sandwich generation”

– Many adults are caring for parents as well as children

• Boomerang kids– Living with parents longer or are moving back in– Spend less on housing/staples and more on

entertainment

12-17

Nonhuman Family Members• We often treat companion

animals as family members• Spending on pets has doubled

in the last decade• Pet-smart marketing

strategies:– Name-brand pet products– Designer water for dogs– Lavish kennel clubs, pet

classes/clothiers– Pet accessories in cars– Perma-pets– Neopets Inc.

NEOPETS INC.

12-18

The Family Life Cycle

• Factors that determine how a couple spends time/money:– Whether they have children– Whether the woman works

• Using FLC concept to segment households– As we age, our preferences/needs for products and

activities tend to change– Pivotal events alter role relationships and trigger

new stages of life that alter our priorities

12-19

FLC Models

• Useful models take into account the following variables in describing longitudinal changes in priorities and demand for product categories:– Age– (“Relaxed”) marital status– Presence/absence of children in home– Ages of children

• Such factors allow use to identify categories of family-situation types (e.g., “Full Nest I” vs. “Delayed Full Nest”)

12-20

Life-Cycle Effects on Buying

• FLC model categories show marked differences in consumption patterns– Young bachelors and newlyweds are most likely to

exercise, go to bars/concerts/movies– Those in early 20s: apparel, electronics, gas– Families with young children: health foods– Single parents/older children: junk foods– Newlyweds: appliances (e.g., toaster ovens)– Older couples/bachelors: home maintenance services

12-21

Household Decisions

• In every living situation, group members seem to take on different roles similar to those within a company

• Consensus purchase decision vs. accommodative purchase decision

• Factors determining family decision conflict:– Interpersonal need– Product involvement and utility– Responsibility– Power

12-22

Sex Roles and Decision-making Responsibilities

• Autonomic decision vs. syncretic decisions– Wives tend to have most say buying groceries, toys,

clothes, and medicines– Both make decisions for cars, vacations, homes,

appliances, furniture, home electronics, interior design, and long distance phone services

– As education increases, so does syncretic decision making

– Even after death, spouses seem to still consider the one who has died when making household decisions

12-23

Identifying the Decision Maker

• Family financial officer (FFO)– In traditional families, the man makes the

money and the woman spends it– If spouses adhere to more modern sex-role

norms, there is shared participation in family maintenance activities

• Women seem to be gaining ground in almost all areas of decision making– Women often struggle with the “juggling

lifestyle”

12-24

LeoShe Mother Types

Figure 12.2

12-25

Identifying the Decision Maker (Cont’d)

• Cultural background plays a big role in determining whether husbands or wives are dominant in the family unit– Coca-Cola’s campaign to Latin American women

(“Mom knows everything”)– Butterfly contraception program in India

• Four factors in joint vs. sole decision making:– Sex-role stereotypes– Spousal resources– Experience– Socioeconomic status

12-26

Identifying the Decision Maker (Cont’d)

• As women work outside the home, men are participating more in housekeeping activities

• Women are still primarily responsible for the continuation of the family’s kin-network system

12-27

Heuristics in Joint Decision Making

• Synoptic ideal vs. “muddling through”

• Heuristics– Salient, objective dimensions– Task specialization– Concessions based on intensity of each

spouse’s preferences

12-28

Children as Decision Makers

• Boom in Helsinki phone market among little kids– “Mobile parenting”

• Children make up three distinct markets:– Primary market– Influence market

• Parental yielding

– Future market

12-29

Consumer Socialization

• The process by which young people acquire skills, knowledge, and attitudes relevant to their functioning in the marketplace

• Sources of knowledge include friends, teachers, family, and the media

12-30

Influence of Parents

• Direct and indirect parental influences– Deliberate attempt to instill own consumption values– Determine exposure to informational sources (TV,

salespeople, peers)– Cultural expectations regarding involvement of

children in purchase decisions• Grown-ups as models for observational learning

– Passing down of brand loyalty• Steps involved in turning kids into consumers

(see Figure 12.3)• Parental styles that affect socialization:

“authoritarian,” “neglecting,” and “indulgent”

12-31

Television: “The Electric Babysitter”

• Advertising’s influence begins at early age– Many marketers start to push their

products on kids to encourage them to build a habit at an early age

• Kids are also exposed to idealized images of what it is like to be an adult

• Discussion: Are marketers robbing kids of their childhood?

12-32

Sex-Role Socialization

• Children pick up on gender identity at an early age– Toy companies perpetuate gender

stereotypes

• Children rehearse adulthood roles via toys as props– Toys “R” Us Girls’ World & Boys’ World– “Male and female play patterns”– Smartees’ line of dolls and Working

Woman Barbie

12-33

Cognitive Development

• Stage of cognitive development– Ability to comprehend concepts of increasing

complexity– Very young children are thought to be able

to learn consumption-related information surprisingly well

• Piaget’s stages of cognitive development

12-34

Cognitive Development (Cont’d)

• An alternative approach identifies three segments of information-processing capability:– Limited, cued, and strategic– Children do not think in “adult” ways--they cannot be

expected to use information the same way– Children do not form the same “adult” conclusions

when presented with product information– Multiple-intelligence theory

• Children’s understanding of brand names evolves as they age– Brand names as simple perceptual cues vs.

conceptual/symbolic brand meanings

12-35

Marketing Research and Children

• Relatively little real data on children’s preferences/influences on spending patterns is available– Kids tend to:

• Be undependable reporters of own behavior• Have poor recall• Not understand abstract questions

• Product testing• Message comprehension

– Children may not understand persuasive intent of ads– FTC action to protect children (1990 Children’s Television Act)

• Discussion: Do you think market research should be performed with children? Why or why not?