Understanding Consumer and Business Buyer Behaviour

Understanding Consumer and Business Buyer Behaviour

Introduction to Marketing

This session, Week 3 Session 2, focuses on understanding how both consumers and businesses make purchasing decisions. It covers:

• Consumer buyer behaviour, including buyer characteristics and the decision process for existing and new products.

• Business buyer behaviour (B2B), explaining what it is, its significance, the habits of business buyers, and the business buying decision process.

Consumer Buyer Behaviour

What is Consumer Buyer Behaviour?

• Definition: "The buying behaviour of final consumers, individuals and households that buy goods and services for personal consumption."

• How consumers respond to marketing efforts designed to influence them varies significantly based on certain buyer characteristics.

Buyer Characteristics Influencing Consumer Behaviour

1. Cultural Factors:

   • Culture: Encompasses what a society values and its approach to the world.

     • Examples (UK): Officially, democracy, rule of law, individual liberty, mutual respect. Unofficially, queuing, dry/sarcastic humour, buying rounds in pubs, debating jam/cream on scones, and sunny holidays.

   • Subculture: A group of people with shared value systems stemming from common life experiences and situations.

     • Habitus (Pierre Bourdieu): Refers to the skills, habits, and social resources acquired throughout life, acting as an internal sense of what one "should" do.

       • Examples: Taking shoes off at someone's house, appropriate wedding attire.

     • Subcultural Capital (Sarah Thornton): A distinctive identity that stands apart from the 'mainstream,' characterized by knowledge of the scene, possession of relevant physical objects, style/appearance, and perceived commitment or longevity of identification.

       • Example: Different queer subcultures.

   • Social Class: Relatively permanent and ordered divisions in society whose members share similar values, interests, and behaviours, determined by:

     • Economic Capital: Wealth and income.

     • Social Capital: Contacts and connections that allow individuals to leverage their social networks.

     • Cultural Capital: The ability to appreciate and engage with cultural goods, often institutionalized through educational success.

2. Social Factors:

   • Groups: Reference groups that serve as points of comparison.

     • Opinion Leaders: Individuals who exert social influence over others (e.g., Steven Bartlett of 'Diary Of A CEO').

     • Influencers: Individuals with a significant online following who can sway purchasing decisions (e.g., Kardashians/Jenners).

     • Online Communities: Digital word-of-mouth platforms.

   • Family: Plays a significant role, with demographic and macro trends influencing buying patterns.

     • Examples: Men buying more groceries, women buying more tech, children's influence on household purchases.

   • Role/Status: An individual's position within groups and society influences their consumption choices (e.g., a single mum vs. a woman in a partnership).

3. Personal Factors:

   • Occupation: Different professions lead to different buying habits (e.g., construction worker vs. airline pilot).

   • Age/Life Stage: Life cycles influence needs and wants (e.g., a DINK (Dual Income No Kids) household vs. a single parent, or someone in their first full-time job vs. a parent of a college student).

   • Economic Situation: Financial standing heavily impacts purchasing power.

   • Lifestyle (Subcultural Interests): Measured by a combination of activities, interests, and opinions.

   • Key Point: Consumers don't merely buy products; they buy the values and lifestyles that products represent.

4. Psychological Factors:

   • Perception: How individuals select, organize, and interpret information to form a meaningful picture of the world.

     • Selective Attention: The tendency to filter out most of the information one is exposed to.

     • Selective Distortion: The tendency to interpret information in a way that supports existing beliefs.

     • Selective Retention: The tendency to remember good points about products one likes and forget bad points.

     • Subliminal Advertising: Largely considered ineffective and mostly nonsense.

Buyer Decision Process - Existing Products

This process describes the stages consumers go through when purchasing existing products:

1. Need Recognition: The buyer identifies a problem or need.

2. Information Search: The buyer seeks information related to the need.

3. Evaluation of Alternatives: The buyer compares different product options.

4. Purchase Decision: The buyer decides which product to purchase, though this can be influenced by others.

5. Post-Purchase Behaviour: The buyer assesses whether the product's performance matches their expectations.

• All these stages are profoundly influenced by cultural, subcultural, social class, social networks, psychological factors, and perceptions.

Buyer Decision Process - New Products

This process outlines the stages consumers go through in adopting a new product:

1. Awareness: The consumer hears about the product but lacks detailed information.

2. Interest: The consumer seeks out information about the new product.

3. Evaluation: The consumer considers whether the new product will work for them.

4. Trial: The consumer tries out the new product.

5. Adoption: The consumer decides to make full and regular use of the product.

• Similar to existing products, this process is also affected by cultural, subcultural, social class, social networks, psychological factors, and perceptions.

Consumers and Innovation

The social acceptability of a new product is shaped by several factors:

• Relative Advantage: Is the new product perceived as better than older versions?

• Compatibility: Does it align with the consumer's values and experiences?

• Complexity: Is it difficult to understand or use?

• Divisibility/Try-ability: How easy is it for the consumer to try out on a limited basis?

• Communicability: How easily can the benefits be described to others?

Innovation Adoption Curve

The adoption of innovations follows a characteristic curve, categorizing consumers based on their readiness to embrace new products:

• Innovators: 2.5\% of the population, venturesome individuals who are eager to try new ideas.

• Early Adopters: 13.5\% of the population, opinion leaders who adopt new ideas early but carefully.

• Early Majority: 34\% of the population, deliberative individuals who adopt an innovation after a varying period of time.

• Late Majority: 34\% of the population, skeptical individuals who adopt an innovation only after a majority of people have tried it.

• Laggards: 16\% of the population, tradition-bound individuals who are suspicious of changes and adopt innovations only when they have become something of a tradition themselves.

Brief Introduction to B2B (Business-to-Business)

What is B2B?

• Definition: A business exchange between one business and another.

• B2B Marketing: Marketing efforts that specifically target individual companies and their decision-makers as customers.

• B2B Buyer Behaviour: "The buying behaviour of organisations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others."

• Why is B2B important?

  • The global B2B e-commerce market is substantial, valued at 26.16 trillion USD. It is projected to reach 56.9 trillion USD by 2028, indicating significant career and job opportunities.

Three Key Differences Between B2B and B2C Markets

1. Market Structure and Demands:

   • Fewer but Larger Buyers: B2B markets typically have fewer buyers, but these buyers are much larger in terms of purchasing volume.

   • Inelastic and Fluctuating Demand: Demand for business goods is often less affected by price changes (inelastic) but can fluctuate more greatly than consumer demand due to derived demand.

   • Derived Demand: Business demand is ultimately derived from the demand for consumer goods. For example, demand for steel depends on demand for cars.

2. Nature of the Buying Unit:

   • More Professional Involvement: More individuals contribute to the purchase decision, often in formal roles.

   • Expert Knowledge: Purchasers in B2B settings are more likely to possess expert knowledge about the products or services they are acquiring.

3. Types of Decisions and the Decision Process:

   • Complexity and Duration: B2B decisions are generally more complex, take longer to finalize, and are more formalized.

   • Collaboration and Long-Term Relationships: Decisions can involve extensive collaboration and often lead to long-term relationships between buyers and sellers.

Key Types of Buying Situations

1. Straight Rebuy: The routine reordering of something without any modifications.

   • Example: A restaurant consistently ordering staples like milk and flour.

   • Success Strategy: Focus on maintaining high service quality.

2. Modified Rebuy: A situation where the buyer wants to modify product specifications, prices, terms, or suppliers.

   • Example: A chain of gyms switching from chlorine to a salt/chlorine combination for their pools.

   • Success Strategy: View this as an opportunity to improve your own product or service offering.

3. New Task: A business buying a product or service for the very first time.

   • Example: An old office undergoing renovation and seeking to hire a general contractor.

   • Success Strategy: If you can successfully attract a client once, focus on retaining them for future needs.

4. Systems/Solutions Selling: Buying a complete, all-in-one service package from a single seller.

   • Example: An HR services company that handles background checks, reference verification, and all employment details.

   • Success Strategy: Emphasize ease of use and comprehensive solutions for the client.

The Business Buying Process

1. The Buying Centre:

   • Definition: The decision-making unit within a business that encompasses all individuals and units participating in the B2B purchase decision.

   • Nature: It's not a fixed unit or job title, but rather a description of people with relevant job roles who influence the purchase.

   • Engaging the Buying Centre: To succeed, marketers must:

     • Identify the key decision-maker(s).

     • Understand the types of decisions they make.

     • Determine who holds the most influence.

     • Learn about the decision-makers' processes.

2. Major Influences on Business Buyers (from Macro to Micro):

   • Environmental Factors: Economy, supply chain, regulations, cultural context.

   • Organizational Factors: Company structure, procedures, policies, systems.

   • Interpersonal Factors: Office dynamics, varying levels of expertise among participants.

   • Individual Factors: Level of education/professional experience, personality traits of individual buyers.

3. Steps in the Business Buyer Decision Process:

   • Problem Recognition: Occurs from internal or external stimuli (e.g., equipment breakdown, new product opportunity).

   • General Need Description: Preparing a document outlining the general characteristics and quantity of the item needed.

   • Product Specification: A more technical and detailed version of the general need description.

   • Supplier Search: Actively looking for the best vendors, often utilizing online directories.

   • Proposal Solicitation: Asking qualified suppliers to submit formal proposals.

   • Supplier Selection: Reviewing proposals and making a definitive decision on the supplier.

   • Order-Routine Specification: Developing a document that contains final technical specifications, quantities, projected delivery times, return policies, and warranties.

   • Performance Review: Assessing the satisfaction of all parties, and identifying areas for change or re-negotiation.

Industry Changes and Trends in B2B

1. E-procurement and Online Purchasing:

   • Reverse Auctions: Buyers list requests online, allowing providers to bid for contracts.

   • Company Buying Sites: Centralized digital platforms for procurement management.

   • Benefits: Saves time and money, reduces paperwork.

   • Drawbacks: Can lead to suppliers being pitted against each other, potentially driving prices down to unsustainable levels.

2. Use of Digital and Social Media Marketing:

   • Encourages: Engagement, personalization, and constant connection with business clients.

   • Platform Example: LinkedIn is a crucial platform for B2B marketing.

Conclusion: Why Does It Matter?

• Key Concepts Reviewed: Consumer buyer behaviour (characteristics, decision process for existing/new products) and business buyer behaviour (B2B definition, habits, decision process).

• Importance: Understanding the underlying factors in consumer and business purchasing decisions is critical for guiding them effectively toward your products and services.