CHAPTER 5

THE CONSUMER AND BUSINESS MARKET

In the previous chapter, you studied how marketers obtain, analyze, and use information
to identify marketing opportunities and assess marketing programs. In this chapter, you
will take a closer look at the most important element of the marketing environment, the
customers. The aim of marketing is to somehow affect how customers think about and
behave toward the organization and its marketing offers. To affect the whats, whens, and
hows of buying behavior, marketers must first understand the whys. Let us look first at
final consumer buying influences and processes and then the buying behavior of the
business customers. You will see that understanding buying behavior is an essential but
very difficult task.

CHAPTER OBJECTIVES

At the end of this chapter, you should be able to:

1. define consumer market and business market

2. differentiate consumer market iron business market

3. identify and describe consumer market and business market buyer behavior,
buyer decision process, and adoption of new product.

The Philippine market is huge to saturate. For instance, the use of mobile products has a big market
in the Philippines. All other countries are trying to enter the Philippines because we have free
enterprise. We can classify it to consumer market and industrial market.

INTRODUCTION

This chapter explores the dynamics of consumer and business buying behavior as well as the
consumer and business markets. Markets – and those which they serve – have to be understood
before marketing strategies can be developed. The consumer market buys goods and services for
personal consumption. The business market contains organizations that buy goods services for use
in the production of other products and services that are sold, rented, or supplied to others ( for
example, retailing and wholesaling firms).
THE CONSUMER MARKETS AND CONSUMER BUYER BEHAVIOR

Many different factors consumer buying behavior. Buying behavior is never simple. However,
understanding it is the essential task of marketing management.

Consumer Buying behavior refers to the buying behavior of final consumers individuals and households
who buy goods and services for personal consumption.

The consumer market is all the individuals and households that buy or acquire goods and services for
personal consumption.

1. The Filipino consumer market consists of about 90.46 million people as of 2008.
2. These people consume billions of pesos of goods and services each year.
3. The world consumer market consists of more than 6 billion people.
4. Consumer vary tremendously in age, income, education level, and taste.

FIGURE 5-1: CONSUMER BUYING BEHAVIOR (PEARSON TECHNOLOGY CENTRE,2004)

 Consumer buying behavior refers to the buying behavior of final consumers –

individuals and Households – who buy goods and services for personal
consumption
 These final consumers make up the consumer market
 The central question for market is:
“How do consumers respond to various marketing efforts the company might use?”

KOTLER’S MODEL OF CONSUMER BEHAVIOR

Consumer make many buying decisions every day

A model of consumer behavior helps managers answer question about what consumer buy, where
they buy, how and how much they buy, when they buy, and why they buy.

 Learning about the what, where, when, and how much is fairly easy.
 Learning about the why is much more difficult.

The central question for marketers is: How do consumers respond to various marketing efforts the
company might use?

The stimulus-response model of buyer behavior shows that marketing, which is made up of the four
Ps-product, price, place, and promotion-and other stimuli ( e.g., the economic, technological,
political and cultural environments) center on the consumer’s “black box” and produce certain
responses.
Marketers must figure out what is the consumer’s “Kotler’s black box.” The Kotler’s black box” black
box” has two parts:

1. The buyer’s characteristics influence how he or she perceives and reacts to stimuli.
2. The buyer’s decision process itself affects the buyer’s behavior.

FIGURE 5-2: MODEL OF BUYING BEHAVIOR (PEARSON TECHNOLOGY CENTRE, 2004)

Marketing and
Other stimuli Buyer’s Black box Buyer’s responses

Product Economic Buyer Product

S
choice

Price Technological Characteristics Brand choice

Place Political Buying Dealer

choice

Promotion Cultural decision Purchase

timing

Process Purchase
amount

CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR

Consumer purchases are strongly influenced by cultural, social, personal, and psychological
characteristics. For the most part the marketer cannot control them, but they must be taken into
account.
 FIGURE 5-3: FACTORS INFLUENCING CONSUMER BEHAVIOR (PEARSON TECHNOLOGY CENTRE,
2004)

Cultural Social Personal Psychological Buyer

•Culture •Reference •Age and life •motivation •buyer

•Subculture Group cycle stages •perception
•Social Class •Family •occupation •learning
•Roles and •economic •beliefs and
status situation attitues
•personality
and self-
concept

Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer
needs to understand the role played by the buyer’s culture, subculture, and social class.

Example of Filipino culture are:

1. The cellular phone craze was led by Filipino youth, who turned texting from a fad into a
national obsession during the People Power EDSA 2.
2. In the Philippines, people are passionate about three things – religion, politics and eating in
fact, food is so important that the first thing you are likely to hear on entering a Filipino
home is, “Kumain ka na ba”? (Have you eaten yet?)

Culture is the most basic cause of a person’s wants and behavior.

 Human behavior is largely learned.

 A Filipino child learns or is exposed to the following values:
a. Achievement and success
b. Activity and involvement
c. Efficiency and practicality
d. Progress
e. Material comfort
f. Individualism
g. Freedom
h. Humanitarianism
 i. Youthfulness
j. Fitness and health
 Marketers are always trying to spot cultural shifts in order to imagine new products that
might be wanted ( the fitness and health craze of the late 80s and 90s for example).

Each culture contains smaller subculture. A subculture is a group of people with shared value
systems based on common life experience and situations.

Subcultures might be nationality groups, religious groups, racial groups, or geographic area groups.
Many of these subcultures make up important market segments and often products are designed
for them

Examples of Filipino subculture are Filipino-American, Asian, and gray market consumers (50 and
older population), and the gay/lesbian consumers (third sex/homosexual).

Other examples of subcultural groups include:

1. Asian-American consumers. This group is the fastest-growing and most affluent segments.
Language and cultural tradition appear to be the largest barriers to the effective marketing
for this group. However, because of its rapid growth, this group will receive increased
attention from marketers.
2. Hispanic consumers. The group is very brand loyal and tends to favor companies that show
interest in them. Sears, for example, targets Hispanic consumers.
3. African-American consumers. This group has a tremendous purchasing power and it is
growing in affluence and sophistication . Some companies have developed special items,
packaging, and appeals for this group. This groups to be very price conscious, are motivated
by quality and selection, and emphasize brand name and loyalty.
4. Mature consumers. This group is another very attractive market considering the fact that
the Philippine population is aging. Seniors are better off financially, and they average twice
the disposable income of consumers in the under 35 age group. As the senior segment
grows in size and buying power, more marketers will develop aggressive policies for
attracting this market.

FIGURE 5-4; FACTORS AFFECTING CONSUMER BEHAVIOR CULTURE

(PEARSON TECHNOLOGY CENTRE, 2004)

SUBCULTURE

 Groups of people with shared value system based on

common life experiences
 Hispanic consumers
 African consumers
 Asian consumers
 Mature consumers
REFERENCE GROUP

A reference group is two or more people who interact to a accomplish individual or mutual goals.
Groups that have a direct influence and to which a person are called membership groups.
Reference groups expose a person to new behaviors and lifestyles, influence the person’s attitudes
and self concepts, and create pressures to conform that may affect the person’s product and brand
choices.

Reference groups serve as direct ( face-to-face ) or indirect points of comparison or reference in

forming a person’s attitudes or behavior.

An asp rational group is one to which the individual wishes to belong. Marketers try to identify the
reference groups of their target markets.

An opinion leader is a person within a reference group who – because of special skills, knowledge,
personality, or other characteristics-exerts influence on others.

FAMILY

Family members can strongly influence buyer behavior. The family is the most important consumer
buying organization in society, and it has been researched extensively. Marketers are interested in
the roles and influence of the husband, wife, and children on the purchase of different products.

ROLES AND STATUS

A person belongs to many groups-family, clubs, and organizations. The person’s position in each
group can be defined in terms of both role and status.

A role consists of the activities people are expected to perform according to the persons around
them.

Each role carries a status reflecting the general esteem given to it by society.

People often choose products that show their status in society.

Almost every society has some form of social class structure. Social class is the relatively permanent
and ordered divisions in a society whose members share similar values, interest, and behavior.

 Social class is not determined by a single factor, such as income, but is measured as a
combination of occupation, income, education,wealth and other variables.
 Social classes show distinct product and brand preference in areas such as clothing, home
furnishing, leisure activity and automobile.

A consumer’s behavior is influenced by social factors. These include small groups, family, and social
role and status.
A person’s behavior is influenced by many small groups. A group consists of two or more people
who interact to accomplish individual or mutual goals. There are several specialized group
formations within the larger configuration:

1. Membership groups are groups that have a direct influence on a person’s behavior. These
are groups to which a person belongs.
2. Reference groups are groups that have a direct (face-to-face) or indirect influence on the
person’s attitudes or behavior. People are often influenced by reference groups to which
they do not belong.
a. An aspirational group is a group to which an individual wishes to belong.
b. Reference groups expose person to new behaviors and lifestyles.
c. Influence the person’s attitudes and self-concept.
d. They also create pressures to conform that may affect the person’s product and brand
choices.
e. An opinion leader is a person within a reference group who – because of special skills,
knowledge, personality, or other characteristics – exerts influence on others.

Groups
Membership reference

Family
Most important consumer
Buying organization

buy

bu
Role and Status

Figure 5-5 Factors Affecting Consumer Behavior: Social

(Pearson Technology Centre, 2004)

Let us look into the following reports made by Dr. Mahar Mangahas (2000) as to the Filipino socio-
economic classes.

1. For 20 years or more, private practitioners in politics and business have been accustomed to
analyzing Philippine society in terms of socio economic classes labeled as A, B, C, D, and E.
2. In business, there are consumer products which obviously cater to the ABC market; others
are intended for the DE market, and also those which are used by all classes in equal
measure.
3. The companies that produce and distribute such products will make use of the types of
advertising and the types of media that are appropriate to their markets. So the companies
as well as their advertising companies and media companies are quite at home with the
“ABCDE” terminology for Filipino socio-economic classes.
4. The ABCDE classification system is indigenous because the Philippine private research sector
has developed its own rules for defining Filipino households as upper, middle, or lower class,
or any other grades in between.

A consumer’s purchases are also influenced by family members. The influence can be very strong
since the family is the most important consumer-buying organization in society. It has been
extensively researched.

Marketers are interested in the role and influence of the husband, wife, and children in the
purchase of different products and services. Buying roles change with involving lifestyles such as
more females working outside the home.

A person belongs to many groups and the person’s position within each group can be defined in
terms of both his or her role and status. A role consists of the activities a person is expected to
perform according to the people around him or her. Status is the general esteem given to a role by
society. People often choose products that show their status in society.

Figure 5-6 Factors Affecting Consumer Behavior: Culture

(Pearson Technology Centre, 2004)

Social Class

Society’s relatively permanent

& ordered division whose
members are similar values,
interest, and behaviors
measured by a combination of
occupation, income,
education, wealth and other
variables.
PERSONAL FACTORS

A buyer’s decisions can be also influenced by personal characteristics such the buyer’s age and life-
cycle stage, occupation, economic situation, lifestyles, and personality and self concept.

People variate the goods and services that they buy over their lifetimes. Part of these changes are
shaped by the family life cycle, stages throughout which families might pass as they mature over
time. The traditional life-cycle stages are being modified as people form new lifestyles such single
parenting.

A person’s occupation affects the goods and services bought ( e.g.,software bought by accountants,
lawyers, and doctors).

The economic level of the buyer is very important in purchase consideration. If a person fears losing
his or her job, their purchasing habits generally change. If the person perceives that his or her
economic situation is going to improve, he or she might consider making a major purchase.

People from the same social strata can have very different lifestyles. A lifestyles is a person pattern
of living as expressed in his or her psychographics. It involves measuring major AIO dimensions,
activities, interests, and opinions. Lifestyles profiles a person’s whole pattern of acting and
interacting in the world. It is more than just the person’s social class or personality.

1. Examples include:
a. Activities (work, hobbies, shopping, etc.)
b. Interests ( food, fashion, recreation, etc.)
c. Opinions ( about themselves, social issues, business, etc.)

Figure 5-7 Factors Affecting Consumer Behavior: Personal

(Pearson Technology Centre, 2004)

Personal Influences

Age and Life Occupation Economic Personality &

Cycle Stages Situation Self-Concept
 Personal Influences

Activities Interest Opinions

An individual’s personality and self-concepts will influence his or her buying behavior. Personality is
a person’s unique psychological characteristics that lead to relatively consistent and lasting
responses to his or her own environment. Personality is usually described in terms of traits such as
self-confidence, dominance, or sociability. Personality can be useful for analyzing consumer
behavior for certain brand or product choices.

The self-concept describe the self-image. The basic idea is that people’s possessions contribute to
ans reflect their identities.

PSYCHOLOGICAL FACTORS

A buyer’s choices are influenced by four major psychological factors:

1. A motive (drive) is a need that is sufficiently pressing to direct the person to seek
satisfaction of the need. A person has many needs at any given time and these can be
biological or psychological. Several theories of motivation include:
a. Freud’s theory assumes that people are largely unconscious about the real psychological
forces shaping their behavior. Accordingly, a person does not fully understand his or her
motivation.

Figure 5-8 Factors Affecting Consumer Behavior: Psychological

(Pearson Technology Centre, 2004)

Motivation

Psychological Facot
Beliefs and Attitudes affecting buyers choices Perception

Learning
Maslow’s theory of motivation seeks to explain why people are driven by particular times. He
believed that needs are arranged in a hierarchy, beginning with psychological needs and then
continuing with safety, social, esteem, and self- actualization needs. Under this idea, a person
would try to satisfy the most important needs first. The needs include:

1. Physiological needs
2. Safety needs
3. Social needs
4. Esteem needs
5. Self-actualization needs

FIGURE 5-9. MASLOWS HIERARCHY OF NEEDS (PEARSON TECHNOLOGY CENTRE, 2004)

Self- Actualization ,
needs, self-
development

Esteem Needs, Self-

esteem, recognition,
status

Social Needs, sense of belonging, love

Safety Needs, security, protection

Psychological needs, hunger , thirst

Perception as the process by which people select, organize, and interpret information to form a
meaningful picture of the world. The marketer must remember that two people with the same
motivation and in the same situation may act differently because they perceive the situations
differently. These differences in perception can be accounted for by three perceptual processes.
 a. Selective attention is the tendency of people to screen out most of the information to which
they are exposed.
b. Selective distortion is the tendency of people to interpret information in a way that will
support what they already believe.
c. Selective retention is the tendency of people to retain only part of the information to which
they are exposed, usually information that supports their attitudes and beliefs. An
interesting side bar is the concept of subliminal advertising where some researchers
attempted to appeal to consumers below the conscious thinking and perception level. Most
agree that no link has been found between this somewhat devious technique and consumer
behavior.

Learning is described as changes in an individual’s behavior arising from experience. Learning occurs
through the interplay of:

a. A drive, which is a strong internal stimulus that calls for action.

b. A drive becoming a motive when it is directed toward a particular stimulus object
c. Cues, which are minor stimuli that determine when, where, and how the person responds
d. Cues can influence a buyer’s response to an impulse.
e. If the experience is rewarding, then the response is reinforced.
f. The practical significance of the learning theory for marketers is that they can build up
demand for a product by associating it with strong drives, using motivation cues, and
providing positive reinforcement.

A person’s beliefs and attitudes are acquired through acting and learning. A belief is a descriptive
though that a person has about something.

a. A belief may be based on real knowledge, opinion, or faith.

b. Beliefs may or may not carry an emotional charge.
c. Because beliefs make up product and brand images, they are important to marketers.
People tend to act on their beliefs.

An attitude is a person’s consistently favorable or unfavorable evaluation, feelings, and tendencies

toward an object or idea.

a. Attitudes put people into a frame of mind of liking or disliking things, moving toward or
away from them.
b. Attitudes are difficult to change.
c. A person’s attitudes fit into a pattern and changing one attitude may require changing
onthers.
d. A company should try to fit its products into existing attitudes rather than try to change
them.

THE BUYER DECISION PROCESS

The buyer decision process examines how consumers make buying decisions. There are five stages
within the process: need recognition, information search, evaluation of alternatives, purchase
decision, and post-purchase behavior. The model seems to imply that consumers pass through all
five stages with every purchase. However, in more routine purchases, a person might skip or
reverse some of the stages.

FIGURE 5-10: BUYER DECISION PROCESS (PEARSON TECHNOLOGY CENTRE, 2004)

Evaluation Post-
Need Information Purchase
of purchase
Recognition Search decision
Alternatives behavior

Need recognition is the first stage of the buyer decision process in which the consumer recognizes a
problem or need.

1. The need can be triggered by internal stimuli when one of the person’s normal needs rises
to a level high enough to become a drive.
2. A need can also be triggered by external stimuli, for example, an advertisement.
3. At this stage, the marketer needs to determine the factors and situations that usually trigger
consumer-need recognition.
 FIGURE 5-12 BUYER DECISION PROCESS: STEP 1. NEED RECOGNITION (PEARSON TECHNOLOGY
CENTRE, 2004)

Buyer recognizes
External Stimuli -
Internal Stimuli - hunger a problem or a
Friends
need arising from

Information search is the stage of buyer decision process in which the consumer is aroused to
search for more information; the consumer may simply have heightened attention or may go into
active information search. Information can be obtained from several sources:

1. Personal sources such as family and friends.

2. Commercial sources such as advertising and salespeople.
3. Public sources such as the mass media and consumer-rating organizations.
4. Experiential sources such as handling, examining, or using the product.

The relative influence of these information sources varies with the product and the buyer.

 Generally, the consumer receives the most information about a product from commercial
sources.
 Yet, the most effective sources tend to be personal. Personal sources legitimize or evaluate
products for the buyer.
 As more information is obtained, the consumer’s awareness and knowledge of available
brands and features increase.
 Marketers should carefully understand consumer’s sources of information and the
importance of each source.
FIGURE 5-12: BUYER DECISION PROCESS: STEP 2. INFORMATION SEARCH (PEARSON TECHNOLOGY
CENTRE, 2004)

Personal •family, friends, neighbors

Sources •most effective sources of information

Commercial •advertising: salesperson

Sources •recieves most information from these sources

•mass media
Public Sources •consumer-rating gruops

Experimaental •handling the product

•examining the product
Sources •using the product

Alternative evaluation is the stage of the buyer decision process in which the consumer uses
information to evaluate alternative brands choices. Several basic concepts help to explain the
consumer-evaluation process:

1. The consumer arrives at attitudes toward different brands through some evaluation
procedure.
2. In some cases, consumers use careful calculations and logical thinking.
3. In other instances, consumers buy on impulse and rely on intuition.
4. Sometimes consumers make buying decisions on their own. At other times, they ask
friends, buying or consumer guides, or salespeople for advice.
5. Marketers should study buyers to find out how they actually evaluate brand alternatives.
 FIGURE 5-13: BUYER DECISION PROCESS: STEP 4. EVALUATION OF ALTERNATIVES (PEARSON
TECHNOLOGY CENTRE, 2004)

Consumer may use careful

calculations and logical thinking

Consumer may buy on impulse and

rely on intuition

Consumer may make buying

decisions on their own

Consumer may make buying

decisions after consulting others

The purchase decision is the stage of the buyer-decision process in which the consumer actually
buys the product. Generally, the consumer’s purchase decision will be to buy the most preferred
brand; however, two factors can come between purchase intention and the purchase decision. They
are:

1. Other people’s attitude. How much another person’s attitudes will affect individual choices
depends both on the strength of the other person’s attitudes toward the buying decision
and the individual’s motivation to comply with that person’s wishes.
2. Unexpected situational factors. If expected arise as the consumer is about to act the
purchase intention may be affected.
FIGURE 5-14: BUYER DECISION PROCESS: STEP 5. PURCHASE DECISION (PEARSON TECHNOLOGY
CENTRE, 2004)

Purchase Intention
Desire to buy the most preferred brand

Attitudes Unexpected
Situational
of others
factors

Purchase Decision

Post-purchase behavior is the stage of the buyer-decision process in which consumers take further
action after purchase based on their satisfaction or dissatisfaction. Determinates are:

1. The relationship between the consumer’s expectations and the products perceived
performance. The larger the gap between expectations and performance, the greater the
consumers dissatisfaction.
2. Some sellers might even understate performance level to boost consumer satisfaction with
the product.

Cognitive dissonance is buyer discomfort caused by post-purchased conflict and it is very common.

It is very important to satisfy customers because a company’s sales come from two basic groups:
new customer and retained customers.

 Since it is more costly to attract new customers than to retain current one’s it is important
to keep current customers happy.
 A satisfied customer also tells others about their experience.
 FIGURE 5-15: BUYER-DECISION PROCESS: STEP 6. POST PURCHASED BEHAVIOR (PEARSON
TECHNOLOGY CENTRE, 2004)

Satisfied Customer
C
O
G
N
A
T
I
V
E
Consumer’s expectations of product’s performance
D
Product’s perceived performance I
S
S
O
N
A
N
C
E

Dissatisfied Customer

FIGURE 5-16: INTERACTIVE STUDENT ASSIGNMENTS (PEARSON TECHNOLOGY CENTRE, 2004)

 Pair with the student on your right. Using the information found in Figure 6-4, trace a
recent purchase each of you have made. Be sure to examine each of the five stages of
the buyer-decision process and detail your experience in each stage.
 What could the seller have done to make you buying experience better? Explain.

THE BUYER DECISION PROCESS FOR NEW PRODUCTS

A new product is a good, service, or idea that is perceived by some potential customers as new. The
product may have been around for a while, but marketers are interested in how customers learn
about products for the first time and make decisions on whether to adopt them.
The adoption process is the mental course through which an individual passes from first hearing
about an innovation to final adoption. Adoption is defined as the decision by an individual to
become a regular user of the product.

FIGURE 5-17: STAGES IN THE ADOPTION PROCESS (PEARSON TECHNOLOGY CENTRE, 2004)

 Awareness: Consumer becomes aware of the new product, but lacks information about it
 Interest: Consumer seeks information about new product
 Evaluation: Consumer considers whether trying the new product make sense
 Trial: Consumer tries new product on a small scale to improve his or her estimate of its
value.
 Adoption: consumer decides to make full and regular use of the new product.

The five stages of the adoption process are:

1. Awareness – the consumer becomes aware of the new product, but lacks information
about it.
2. Interest – the consumer is stimulated to seek information about the new product.
3. Evaluation – the consumer considers whether trying the new product makes sense.
4. Trial – the consumer tries the new product on a small scale to improve his or her estimate of
its value
5. Adoption – the consumer decides to make full and regular use of the product.

People differ in their innovativeness or readiness to try new products. Five different adoption
categories can be identified as:

1. Innovators are venture some and they try new ideas at some risk (2.5 percent)
2. Early adopters are guided by respect. They are opinion leaders in their communities and
adopt new ideas early but carefully (13.5 percent).
3. The early majority are deliberate. Although rarely leaders, they adopt new ideas before the
average person (34 percent)
4. The late majority are skeptical. They adopt an innovation only after a majority of people
have tried it (34 percent)
5. Laggards are tradition bound. They are suspicious of changes and adopt the innovation only
when it has become something of a tradition itself (16 percent)

The new products characteristics will also influence the rate of adoption. Five characteristics that
are especially important to consider are:

1. The innovation’s relative advantage or the degree to which it appears superior to existing
products.
 2. The innovation’s compatibility or degree to which it fit the values and experiences of
potential customers
3. The innovation’s complexity or the degree to which it is difficult to understand or use.
4. The innovation’s divisibility or the degree to which it may be tried on a limited basis.
5. The innovation’s communicability or the degree to which the results can be observed or
described to others.

Other characteristics such as initial and ongoing costs, risk and uncertainty, and social approval also
affect the rate of adoption.

FIGURE 5-19: INFLUENCE OF PRODUCT CHARACTERISTICS ON RATE OF ADOPTION (PEARSON

TECHNOLOGY CENTRE, 2004)

COMMUNICABILITY
Can results be easily
observed or describe
to others?

RELATIVE
DIVISIBILITY Can the ADVANTAGE
innovation be used Is the innovation
on a limited basis? superior to exsisting
products?

COMPATIBILITY does
COMPLEXITY is the the innovation fit the
innovation difficult to values and the
understand or use? experience of target
market?

BUSINESS MARKETS AND BUSINESS BUYER BEHAVIOR

a. The business buyer behavior refers to the buying behavior of all the organizations that buy
goods and services to us in the production of other products and services that are rented, or
supplied to others.
b. This includes retailers and wholesalers.
 FIGURE 5-20: CHARACTERISTICS OF BUSINESS MARKETS (PEARSON TECHNOLOGY CENTRE, 2004)

 Market structure and Demand Nature of the Buying Unit

- Contain far fewer but larger
buyers
Customers more geographically
Concentrated
- Business demand derived from
Final consumer
- Business purchases involve
more buyers
- Business buying involves a more
professional purchasing effort

BUSINESS MARKETS

The business market is huge. In the United States alone, it consists of organizations that buy trillions
of dollars worth of goods each year. For each consumer purchase, like buying a car, many business
purchases preceded that event.

Business markets also have their own characteristics. In some ways, they are similar to consumer
markets, but on other ways they are very different.. The main differences include:

1. Market structure and demand

a. They typically deal with far fewer but far larger buyers.
b. They are more geographically concentrated.
c. They are derived demand, which means that business demand ultimately comes from or
derives from the demand for consumer goods.
2. Nature of the buying unit
a. Business purchases involve more decision participants.
b. Business buying involves a more professional purchasing effort.
3. Types of decisions and the decision process
a. Business buyers face more complex buying decisions.
b. The process is more formalized.
c. In business buying, buyers and sellers work more closely together and work to build
close and long term relationship. They are more dependent on each other.
FIGURE 5-21: CHARACTERISTICS OF BUSINESS MARKETS: TYPES OF DECISIONS AND THE DECISION
PROCESS (PEARSON TECHNOLOGY CENTRE, 2004)

Business buyers
usually face more Business buying
complex buying process is more Buyers and sellers
decision formalized are more dependent
on each other

Build Long-Term Partnership

BUSINESS BUYER BEHAVIOR

At the most basic level, marketers want to know how business buyers will respond to various
marketing stimuli.

As in the consumer buying model, marketing and other stimuli affect the buying organization and
produce certain buyer responses.

Marketing stimuli center around the four Ps-product, price, place, and promotion.

Other stimuli include major forces in the environment, economy, technology, politics, culture, and
competition.

These stimuli enter the organization and are turned into buyer responses: product or service
choices, supplier choice; order quantities; delivery, service, and payment terms. In order to design a
sound marketing program for this market, the marketer must understand how the stimuli are
converted int6o responses.

In the organization, buying activity consists of two major parts: the buying center, which is made up
of people involved in the buying decision, and the buying decision process.

The model that describe the buying center and the buying decision process shows that influences
come from internal organizational, interpersonal, and individual factors as well as external
environmental forces.
 FIGURE5-22:MODEL OF BUSINESS BUYER BEHAVIOR (PEARSON TECHNOLOGY CENTRE, 2004)

The Buying Organization Buyer

The The Buying Centre
Responses

Enviroment Buying
Product or
service choice

Supplier’s
Decision
choice

Other Stimuli Processes Order

Marketing quantities
economic, (interpersonal and
Stimuli
technological, individual influences)
Delivery terms
product,
political,
price, place, Service Terms
cultural,
promotion
competitive Payment

The business buying-behavior model suggests that there are four major question about business
buyer behavior. They are:

Major Types of Buying Situations (What buying decisions do business buyers make?) There are three
major types of buying situations:

1. The straight rebuy situation is a fairly routine decision. A buyer routinely reorders
something without any modifications in this situation.
2. The modified rebuy is a situation in which the buyer wants to modify products
specifications, prices, terms, or supplies.
3. The new task is an industrial buying situation in which the buyer purchases a product or
service for the first time.
FIGURE 5-23: MAJOR TYPES OF BUYING SITUATIONS (PEARSON TECHNOLOGY CENTRE, 2004)

Involved Modified Rebuy

Decision

Making Straight Rebuy

Many business buyers prefer to buy a packaged solution to a problem from a single seller. This is
called systems selling. The sale often goes to the firm that provides the most complete system
meeting the customer’s needs.

PARTICIPANTS IN THE BUSINESS BUYING PROCESS

(Who participates in the buying process?)

The decision-making unit of a buying organization is called its buying center (all those individuals
and groups that participate in the business buying-decision process). These parties share some
common goals and risks arising from the decisions.

The buying center is not a fixed and formally identified unit within the buying organization. It is a
set of buying roles assumed by different people for different purchases. The size and make up of
the buying center will vary for different products and for different buying situations.

The major challenges of the buying center concept for the marketer is to find out:

1. Who is part of the decision?

2. What decisions they influence?
3. Their relative degree of influence?
4. What evaluation criteria each decision participant uses?

FIGURE 5-24: PARTICIPANTS IN THE BUSINESS BUYING PROCESS (PEARSON TECHNOLOGY CENTRE,
2004)

 Decision-making unit of a buying
organization is called its buying center.
 It is not a fixed and formally
Identified unit.
 It will very for differproduct
Major challenges for the market to find out
- Who is part of the decision
-What decisions do they influence
-What is their relative degree of influence
-What evaluated criteria each decision
 And buying situations. participant uses

MAJOR INFLUENCES ON BUSINESS BUYERS

(What are the major influence on buyers?)
Of the many factors that can affect business buying behavior, economic and personal factors have
been found to be the most important.

Influences (factors) can be grouped as:

1. Environmental. These factors include such things as shortage of raw materials (specifically)
on technology, political, competitive, culture, and customs (generally).
2. Organizational. Every buying organization has its own set of objectives, policies, procedures
structure, and systems.
3. Interpersonal. The industrial marketer must try to understand the interpersonal factors and
group dynamics as they affect the buying process. Knowing your customer well is a
beginning. These factors are often very subtle and require research.
4. Personal. These are affected by age, income, education, professional identification,
personality, and attitudes toward risk. The different styles of buyers must be taken into
account.

FIGURE 5-25: MAJOR INFLUENCE ON BUSINESS BUYER BEHAVIOR (PEARSON TECHNOLOGY

CENTRE, 2004)

Enviromental Organizational Interpersonal Individual Buyers

•economic •objectives •authority •age •buyers

development •policies •status •income
•supply •organizational •emphasis •education
conditions structure •persuasiveness •job position
•technological •system •personality
changes
•risk attitues
•political and
regulatory
developments
•competitive
developments
•culture and
cutsoms
THE BUSINESS BUYING PROCESS
(How do business buyers make their buying decision?)
There are eight stages in the business buying process. Buyers who face a new task buying situation
usually go through all the stages. Buyers making a modified or straight rebuy will skip some of the
stages. The stages are:

1. The buying process begins with problem recognition. In this stage, the company recognizes
a problem or need that can be met by acquiring a good service.
2. The next stage is general need description, where the company describes the general
characteristics and quantity of a needed item.
3. Product specification is the stage where the buying organization decides on and specifies
the best technical products characteristics for a needed item.
a. A value analysis engineering team develops the item’s specifications.
b. Value analysis is an approach to cost reduction in which components are carefully
studied to determine if they can be redesigned, standardized or made by cheaper
methods of production.
4. Next, a supplier search is conducted to help the buyer find the best vendors.
a. Sources of information include trade directories, computer search, or asking other
companies for recommendations.
b. The buyer compiles a small list of qualified suppliers.
5. In proposal solicitation, the buyer invites qualified suppliers to submit proposals.
6. The supplier selection process is important because this is where the buyer reviews
proposals and selects a supplier or suppliers. Factors that influence this process are:
a. Quality product and services
b. On-time delivery
c. Ethical corporate behavior
d. Honest communication
e. Competitive prices
f. repair and servicing capabilities
g. Technical aid and advice
h. Geographic location
i. Performance history
j. Reputation
7. The next stage is called the order routine specification. Here, the buyer writes the final
order with the chosen supplier(s), list the technical specifications, quantity needed,
expected time of delivery, return policies, warranties, and so on.
a. A blanket contract creates a long-term relationship in which the supplier promises to re-
supply the buyer as needed at agreed prices for a set time period.
b. Blanket contracting leads to more single source buying and more items from that
source.
8. The final stage is performance review. The buyer rates his or her satisfaction with suppliers
 Deciding whether to continue, modify, or drop them.

The seller’s job is to monitor the same factors that the buyer is using, then the seller can make sure
that is giving the expected satisfaction to the buyer.

Each organization buys in its own way and each buying situation has its own requirements.

FIGURE 5-26: THE BUSINESS BUYING PROCESS (PEARSON TECHNOLOGY CENTRE, 2004)

problem general need product supplier proposal supplier order-routine performance

recognition description specification search solicitation selection specification review

BUSINESS BUYING ON THE INTERNET

During the past few year’s advances in information technology have changed the face of the
business to business marketing process.

 E-Procurement is now common.

 New connection with the buyer’s are being formed with two-way flow of information.
 Most purchases steer toward MRO (maintenance, repair, and operations) materials.
 Some firms buy all of their general operating and industrial supplies online.
 Many benefits have accrued:
a. It shaves transaction costs and results in more efficient purchasing for both buyers and
suppliers.
b. Time is reduced between order and delivery.
 Problems are also present. A few of these are:
a. Purchasing jobs have been cut.
b. Order processing jobs have been cut.
c. Customer relationship cab be eroded.
d. Security can be a problem.

FIGURE 5-27: BUSINESS BUYING ON THE INTERNET (PEARSON TECHNOLOGY CENTRE, 2004)

 Business buying may purchase electronically by:

 -electronic data interchange links (EDI)
-the internet
 E-procurement yields benefits:
-eliminates paperwork
-reduce time between order and delivery
 E-procurement has problems
-eliminate some jobs
-can erode customer-supplier relationship
-can create security disasters

CHAPTER SUMMARY
With respect to the individuals in the consumer market, the behavior of the consumer is influenced
by the buyer’s decision process. Buyer characteristics include four major factors: cultural, social,
personal, and psychological. Each of these factors is explored in detail and relationships are drawn
between them and their subparts and the consumption purchases made by consumers. Since many
of these factors are deep and long-lasting in their effect, the marketing manager should pay special
attention to acquiring information about them with respect to the organization’s target markets.
Several examples are presented to illustrate how this might be done.

After the chapter examines the influences that affect buyers, a section is devoted to the
examination of how consumers make the actual buying decision. A simple model (consisting of five
stages – need recognition, information search, evaluation of alternatives, purchase decision, and
post purchase behavior) ties together material about the buying decision process.

For new products, special situations affect the consumer choice decision. It has been found that
consumers respond at different rates ( depending on consumer and product characteristics), gain
knowledge about the products in different ways, and become aware of newness” with varying rates
of consideration. Factors that speed the rate of adoption of new products are covered and
explained.

The second major topic of the chapter is the business market. The business market is huge. In fact,
business markets involve far more dollars and items than do the consumer markets. In many ways
business markets are like consumer markets, but in many other ways, they are much different.
Points of comparison can be in areas of market structure and demand, the nature of the buying unit,
and the types of decisions and the decision process involved.

It can be observed that business markets usually have fewer but larger (volume) buyers who are
more geographically concentrated and use more rational methods for making their purchasing
decisions. In addition, they are usually more individuals involved in the business buying decision (for
example, purchasing by committee). These professional buyers are also usually better trained and
skilled at negotiation than their counterpart consumer buyers. Difficulties arise because business-
buying decision are often very complex, lengthier, and more formal in nature. The seller must
accommodate and adjust to these characteristics if success in this market is to be obtained.

ASSIGNMENT/DISCUSSION PROBLEMS

1. List several factors that you could add to the model-buying behavior to make it a more
complete description of consumer behavior. Explain your ideas and reasoning.
2. In designing the advertising for a soft drink, which would you find more helpful, information
about consumer demographics or information about consumer lifestyles? Select a new soft
on the market and give examples of how you would use each type of information.
3. Which of the major types of business buying situations is represented by each of the
following?
(a) Toyota,s purchase of computers that go in cars and adjust engine performance to
changing driving conditions.
(b) Volkswagen’s purchase of spark plug for its line of vans.
(c) Honda’s purchase of light bulbs for a new Acura model.
4. Increasingly, business buyers are purchasing all kinds of products and services
electronically, either through electronic data interchange (EDI) links or on the Internet. List
the benefits of “cyberpurchasing” and “e-procurement” Illustrate your view with an
example from the Internet.

STUDENT PROJECTS

1. PICK (5) products of your choice and show how culture, subculture, social class, and
lifestyles might alter the way that you should market the product. Be sure to detail which
groups ( or specific segments) you are discussing. Write your findings, ideas, and
differences.
2. Take the buyer decision process and interview five (5) students about how they purchased a
common product (say an automobile or a computer) and compare how they went through
the buyer behavior model. How did they acquire information, pick alternatives, make
choices, and evaluate and success of their purchase? Be sure to chart each of your subjects
with respect to the model. Be creative in how you compare the subjects. This project can
be considered a longer term project.
3. With each passing day, more products and services are being bought via the internet. If
traditional consumer behavior models were developed with respect to personal contact
with the consumer, how could a consumer behavior model need to be altered (if at all) so it
will work with the new form of electronic commerce that is emerging? Describe your model
and the thought process you went through to develop and model. Give an application
example. This can be considered to be a longer project.
4. Interview a purchasing agent from a company. The company can be a business or a non
profit organization. Detail what they do, how they buy ( do they follow the model that is
 presented in the text), does a buying center exist, and what are their toughest problems a
purchasing agent? Write up your findings.
5. Go on scouting expedition. Sit in a fast-food restaurant and count how many straws,
napkins, salt and pepper, ketchup or sauces, cups, ice, and cup lids are used in 30 minutes to
an hour. Interview the manager about their purchasing responsibilities. How much waste
did you observe? What do think can be done to avoid this? How do these items affect the
cost structure of the product that is sold?

Point of Issue: Adapting to Consumer Lifestyles – For Discussion

1. List the ways in which UFC Banana Ketchup has adapted its new products to the lifestyles of
kids. How will UFC persuade adults to buy the products for the kids?
2. After examining the buyer decision process shows in Figure 5-11, discuss how this new
product can be adapted to the process. How could UFC Banana Ketchup overcome
difficulties with an adult market?
3. How can UFC Banana Ketchup use the packaging features to its advantage? How can UFc
Banana Ketchup turn the short-term sales and market share gain into a long-term
advantage? What does the company need to know about lifestyles in its various markets to
increase sales in the future.
4. Would you buy green or purple ketchup? Why or why not? If you answered “no” construct a
strategy that might change your mind. Consider the sections in the text on attitudes and
beliefs as you construct your strategy.