Consumer Behavior and Business-to-Business Marketing

Course Administration and Administrative Procedures

  • Class Roster and Attendance Verification:

    • Attendance includes: Dean, Matthew Berry, Emily Brown, JP, Lucas Peroni, Katie Metherly, Alexandra Montero, Vera Moretti, Victor, Nathaniel Zeitler, Jennifer Gonzales, Kayla, Roberto Romero, Will Singh, Kristen Smith, Nicholas Soto, Daniel Zeitler, Austin, and Jack Bang.

  • Assignment Adjustments:

    • The consumer behavior assignment due date was pushed back to next week so that students could participate in class discussions before submitting their work.

  • Upcoming Examination Details:

    • Schedule: The first exam is scheduled for next week at 05:3005:30.

    • Location of Study Guide: Posted on Canvas under the Files tab in a subfolder titled study guides for exams.

    • Exam Structure & Expectations: Features very few direct definition questions. Questions are application-oriented, requiring students to demonstrate deep conceptual mechanics and problem-solving abilities.

Fundamentals of Consumer Behavior & Decision-Making

  • Interdisciplinary Foundations:

    • Consumer behavior heavily integrates principles from psychology, sociology, anthropology, and technology.

  • Distinguishing Needs vs. Wants:

    • Need: Defined in marketing as any perceived difference between a consumer's present state and a desired state.

    • Want: A learned response over time detailing the specific means or product used to satisfy a need (e.g., seeking specific tasty food when experiencing hunger).

  • Automotive Industry Case Study on Consumer Influence:

    • Women make the direct purchasing decision for the majority of new automobiles and influence 87%87\% of all auto purchasing decisions.

    • Key Decision Drivers for Female Auto Consumers:

      1. Sense of Styling: Exterior and interior aesthetic appeal.

      2. Need for Speed: Vehicle performance and responsiveness.

      3. Shopping Experience: Dealership interactions where consumers are treated with high prestige ("treated like the queen of the earth").

The Five-Step Consumer Purchase Decision Process

  1. Problem Recognition:

    • Occurs when a consumer perceives a difference between their actual situation (present state) and ideal situation (desired state).

    • Career Advancement Example: Transitioning from driving a "hooptie" (older vehicle) to purchasing a new car (e.g., Toyota, Honda, Kia, or Porsche) upon securing a professional job to reflect professional status.

  2. Information Search:

    • Internal Search: Scanning internal memory and personal experience to assess existing knowledge of potential solutions.

    • External Search: Gathering outside information when internal knowledge is insufficient.

      • Personal Sources: Trusted contacts, friends, and family.

      • Public Sources: Published reports, mass media, and product ratings.

      • Marketer-Dominated Sources: Advertising, sales personnel, and promotional materials.

    • Skydiving Case Study (Information Search in Practice):

      • Trigger: Social pressure/teasing from Navy peers.

      • Search Strategy: Partnered with a Navy colleague who served as a CP2 parachute rigger for 8 years8\text{ years} to evaluate options.

      • Evaluated Options:

        1. An operation using a rough, aged DC-3 cargo plane with poorly packed parachutes.

        2. A commercial facility featuring a modern, custom-rigged skydiving aircraft.

        3. The US Naval Air Station Marine Fleet Recreation program utilizing a C-130 aircraft (3 days3\text{ days} of instruction, static-line deployment, priced at $35\$35).

      • Decision Criteria: High perceived safety, low cost, and strong peer endorsement led to choosing the Marine C-130 option.

  3. Evaluation of Alternatives:

    • Comparing collected information across established evaluation criteria to rate competing brands.

    • Attribute Evaluation Matrix Example (Smartphones):

      • Evaluates attributes such as phone display, audio quality, text messaging, web capability, camera quality, and battery life across brands like Apple iPhone and Motorola.

      • Consumers apply different decision rules: some select the highest overall weighted score, while others prioritize a single critical attribute (e.g., camera quality).

    • Consideration Set: The group of acceptable brands or options identified during the search process, formed after immediately screening out unsatisfactory options.

  4. Purchase Decision:

    • Involves finalizing from whom to buy (influenced by seller atmosphere, return policies, and social image) and when to buy (influenced by sales timing, stock availability, and financing considerations).

  5. Post-Purchase Behavior:

    • Evaluating the product during and after consumption to determine satisfaction level.

    • Customer Advocacy & Dissatisfaction Mechanics:

      • A satisfied customer tells an average of 33 people about their positive experience.

      • A dissatisfied customer tells an average of 99 people about their negative experience.

    • Financial Impact of Customer Retention:

      • Increasing customer retention from 60%60\% to 80%80\% yields $100,000,000\$100,000,000 in net profit per percentage point increase.

      • Increasing overall customer retention by 5%5\% boosts overall business profitability by 70–80%70\text{--}80\%.

      • Strategic Budgeting: Professional marketers utilize post-purchase tracking to allocate marketing budgets toward retaining and serving high-value, satisfied customers rather than constantly spending to acquire new ones.

Variations in Consumer Involvement & Problem Solving

  • Involvement Definition: The personal, social, and financial risk associated with a purchase, which determines the level of mental energy and cognitive effort expended.

  • Extended Problem Solving:

    • High involvement; typical for expensive, high-risk, or complex purchases (e.g., buying automobiles).

    • Utilizes all five steps of the purchase decision process, evaluating numerous brands, seller locations, product attributes, and external information sources over an extended duration.

  • Limited Problem Solving:

    • Moderate involvement; consumers evaluate a modest number of brands and attributes using moderate mental energy.

  • Routine Problem Solving:

    • Low involvement; habitual purchases of low-cost, frequently bought items (e.g., milk, breakfast cereal).

    • Milk Purchasing Example: Dr. Case consumes a gallon of milk every two days, routinely purchasing it from the rear cooler at Publix. If Publix is closed, routinized drive leads to purchasing at 7-Eleven despite significantly higher prices.

    • Cereal Marketing Dynamics: Post and Kellogg's (headquartered in Battle Creek, Michigan) place health claims on packaging (e.g., "9 out of 10 doctors recommend shredded wheat to lower heart disease risk") to introduce new criteria during brief in-store evaluations. Legally, the FTC requires rigorous developmental clinical data proving LDL cholesterol reduction before such claims can be printed.

Psychological and Neurological Influences on Consumer Behavior

  • Maslow's Hierarchy of Needs:

    • Structure: A pyramid structure where broader base needs exert higher urgency when unmet. (Note: In his late peer-reviewed writings, Dr. Abraham Maslow clarified that he never personally drew the famous triangle diagram).

    • Hierarchy Levels & Marketing Applications:

      1. Physiological Needs: Basic survival requirements (food, water, shelter, oxygen).

      2. Safety Needs: Self-preservation and security (e.g., home security system advertisements depicting house break-ins to target security-conscious homeowners).

      3. Social Needs: Love, friendship, and belonging (e.g., Valentine's Day marketing dynamics where men make the purchases and women consume the goods/experiences to maintain relationship health).

      4. Personal/Esteem Needs: Status, respect, and prestige (e.g., an individual buying a Bentley and driving it around a modest gated community to manipulate public perception).

      5. Self-Actualization Needs: Personal fulfillment and achievement (e.g., pursuing a university degree to advance one's knowledge and career).

  • Neurological Processing & Dual-System Theory:

    • The human brain represents approximately 2%2\% of total body weight but consumes up to 25%25\% of the body's total energy supply.

    • System 1 (Nonconscious Processing): Handles the vast majority of daily sensory inputs automatically without conscious effort (e.g., driving a familiar route without remembering the drive details, or ignoring ambient indicator lights on classroom equipment).

    • System 2 (Conscious Processing): Active, cognitive mental engagement triggered when novel, complex, or hazardous situations arise (e.g., sudden braking when a pedestrian steps into traffic).

  • Perception & Subliminal Advertising Debunked:

    • Perception: The process by which an individual selects, organizes, and interprets information to create a meaningful picture of the world via selective exposure, selective comprehension, and selective retention.

    • Subliminal Advertising: The concept of inserting hidden nonconscious cues to manipulate consumer behavior. Originated in Wilson Bryan Key's 1957 book Subliminal Seduction (which claimed sexual imagery was embedded in ice cubes).

    • Efficacy & Legal Status: Subliminal advertising does not work. The FTC classifies subliminal messaging as deceptive (though not illegal), despite 2/32/3 of consumers believing it exists in ads and 1/21/2 believing it forces purchase behavior.

  • Learning Theories & Attitude Formation:

    • Behavioral Learning Theory: Learning through repeated experience and actions.

      • Process: Drive →\rightarrow Cues/Symbols →\rightarrow Response →\rightarrow Reinforcement (Positive or Negative).

      • Stimulus Generalization: Designing new product packaging to visually resemble established market leaders (e.g., packaging a new brand of orange juice in standard orange juice containers).

    • Cognitive Learning Theory: Learning through systematic problem-solving, observation, and mental processing without direct experience.

    • Attitudes: A learned predisposition to respond in a consistently favorable or unfavorable manner toward a given object or brand.

    • Values and Attitude Example: Dr. Case's graduate school experience (88 students admitted, 11 American, strict passing requirements, 5-day5\text{-day} comprehensive exams, oral exams, ABD status). Egyptian classmate Terry maintained deep religious values rooted in Islam prohibiting alcohol, directly determining his rigid attitude against alcohol consumption during celebration events.

Customer Journey Mapping & Touch Point Management

  • Touch Points: Any direct or indirect encounter where a customer interacts with a brand throughout the purchase decision process.

  • Apple Customer Journey Map:

    • Pre-Problem Recognition: Exposing potential customers to Apple branding via social media (e.g., TikTok tech reviewers), online device ratings, print media, and public billboards.

    • Information Search & Evaluation: Driving consumers to Apple's website, competitor comparison sites, and physical Apple retail stores.

    • Purchase & Post-Purchase: Engaging customers at the retail "Genius Bar" and utilizing customer education staff to assist with device setups and troubleshooting.

    • Strategic Purpose: Personal human interactions justify Apple's premium price point relative to generic hardware competitors and drive repeat purchases.

  • Apple Logo Trivia: Steve Jobs and Steve Wozniak approved a logo design featuring a distinct bite mark on the side specifically to prevent consumers from mistaking the apple for a cherry.

Business-to-Business (B2B) vs. Business-to-Consumer (B2C) Marketing

  • Key Differences: B2B transactions involve substantially larger dollar values, greater order quantities, fewer overall buyers, complex organizational buying centers, and technical purchasing processes.

  • JCPenney Catalog Example: During the 1990s, JCPenney published thick, glossy 4-color and 5-color catalog publications distributed nationwide, requiring over 100,000 tons100,000\text{ tons} of paper annually sourced across 1010 dedicated paper suppliers.

  • B2B Market Classifications:

    1. Industrial Markets: Companies that reprocess a product or service before selling it to the next buyer.

    2. Reseller Markets: Wholesalers and retailers that buy finished products and resell them without physical alteration.

    3. Government Markets: Federal, state, and local agencies that purchase goods and services for public operations (e.g., Florida Gulf Coast University purchasing classroom technology subject to state procurement guidelines).

  • Industry Identification: The North American Industry Classification System (NAICS) categorizes all commercial activity across North America using a 6-digit coding structure. Trade regulations are governed under the USMCA (United States-Mexico-Canada Agreement), which replaced NAFTA.

  • Derived Demand:

    • Demand for industrial products and services is directly driven by (derived from) demand for consumer products and services.

    • Grand Rapids, Michigan Case Study: Known historically for furniture manufacturing and automotive component production (e.g., plastic injection molding for vehicle radio knobs). The volume of radio knobs a factory can sell is governed entirely by consumer auto purchases from the "Big Three" automakers, requiring B2B marketers to monitor economic data like the Producer Price Index (PPI).

B2B Organizational Buying Criteria & Vendor Selection

  • Core Selection Criteria:

    1. Ability to Meet Quality Specifications: Delivering defect-free components that match precise technical blueprints.

    2. Delivery Schedule Reliability / Just-In-Time (JIT): Maintaining flawless delivery logistics to prevent factory shutdowns or retail stockouts (which result in permanent lost revenue).

    3. Production Capacity: Proving sufficient facility infrastructure to handle large volume swings (e.g., Walmart's core requirement before listing a new product).

    4. Technical Support and Service: Providing ongoing engineering and maintenance assistance.

    5. Price: Typically evaluated last after quality, reliability, and capacity specifications are satisfied.

  • Quality Inspection Innovation Case Study: Replacing traditional statistical sampling (evaluating a single gear per pallet and discarding the whole lot if defective) with automated optical inspection devices installed directly on assembly conveyor belts to optically verify 100%100\% of production units.

  • Harley-Davidson & Milsco Partnership: Milsco has supplied custom seats to Harley-Davidson for nearly 100 years100\text{ years}, producing over 200200 unique seating variations. The switching costs to change suppliers are so prohibitively high that the relationship operates like a "Coptic wedding" (an unbreakable life-long commitment).

  • Starbucks Ethical Sourcing Strategy: Starbucks pays coffee farmers across 2020 countries a living wage to ensure consistent, reliable, high-quality coffee bean harvests, protecting product consistency across retail stores.

Buying Classes & Electronic Marketplaces

  • Organizational Buying Classes:

    1. Straight Rebuy: Reordering existing products from established suppliers without modifications; highly automated, managed via computer-to-computer inventory monitoring or a single purchasing agent.

    2. Modified Rebuy: Purchasing items where specifications, prices, or suppliers are updated (e.g., FGCU purchasing updated desktop computers to replace obsolete models).

    3. New Purchase: Complex, high-risk initial purchases requiring an extensive buying center (e.g., a "Greenfield investment" where an organization purchases land to build a brand-new factory from scratch).

  • Electronic Marketplaces & Reverse Auctions:

    • B2B e-marketplaces (including commercial B2B sales on platforms like eBay) connect buyers and suppliers efficiently.

    • Reverse Auctions: Buyers post precise procurement requirements and invite suppliers to bid prices downward to win the business (e.g., historical airline seat procurement where Dr. Case secured round-trip flights from Norfolk, VA to Grand Rapids, MI for $150\$150).

Buying Center Dynamics & Strategic Negotiation Case Study

  • Buying Center Roles:

    • Users: Individuals within the organization who actually consume or operate the product/service.

    • Influencers: Personnel who help define technical specifications or establish evaluation criteria.

    • Buyers: Individuals with formal authority to select the supplier and arrange terms of purchase.

    • Deciders: Key leaders with formal or informal power to select or approve final suppliers.

    • Gatekeepers: Administrative staff who control the flow of information and physical access to decision-makers.

  • Managing Gatekeepers: Successful industrial sales representatives build strong personal relationships with executive administrative assistants (e.g., tracking birthdays, sending cards, and showing respect) to maintain access to executive decision-makers.

  • Dr. Case's $100,000,000 Account Pitch Case Study:

    • Context: Advertising agency account renewal pitch to retain an industrial client account billed at $20,000,000 per year\$20,000,000\text{ per year} over a 5-year5\text{-year} contract extension ($100,000,000\$100,000,000 total value).

    • Conference Table Strategy: Arrived at 06:3006:30 to physically rearrange table seating. Alternated Agency and Client personnel (Agency, Client, Agency, Client) around the table to break down the adversarial "us versus them" seating dynamic.

    • Key Participants & Internal Politics:

      • Guy: Company President (Role: Influencer; needed to remain silent to avoid derailing pitch).

      • Bill: Marketing Director (Role: Buyer and Decider; held signature authority; ambitious to replace Guy).

      • Brian: Product Manager (Role: Internal opponent; repeatedly attacked Bill's statements during the meeting to impress Guy).

      • Ed: Engineer (Role: Technical expert).

      • Executive Vice President: Parent umbrella corporation observer.

      • Agency Team: Dr. Case (Agency Lead / Peacemaker), Roger (Creative Director), Mike (Art Director), Kathy (Copywriter).

    • Negotiation Outcome: After an intense 11-hour11\text{-hour} meeting, the formal presentation concluded without a signed contract. Leveraging intelligence obtained from Bill's secretary regarding his personal preference for high-end wine, Dr. Case invited Bill to a private dinner via limousine. Dr. Case established a relaxed atmosphere, served the preferred wine, and successfully secured Bill's signature on the $100,000,000\$100,000,000 contract.

    • Expense Accounting: Standard B2B advertising agency practice dictated billing all pitch-related expenses (flights, limousine, luxury dining, and wine) directly back to the client account with a standard 15%15\% agency markup.