Marketing Principles Session 2 – Factors That Influence Customer Behaviour

Learning Outcomes At the end of this session students should be able to: Compare and contrast customer needs and wants Outline the consumer buying process Identify the influences on the consumer decision making process Describe the differences between consumer and business buyer behaviour Syllabus references: 2.1, 2.2, 2.3, 2.4 2

Customers needs Customers can be split into two main categories Consumers –who are buying for their own personal consumption Organisational buyers –Focus on the purchase of products and services for use in organisation’s activities

Customer needs To survive, human beings have a basic need for food, drink and shelter. However, in modern societies these needs are satisfied quite easily for most people, so they start looking around for deeper fulfilment. Untapped customer needs present an opportunity for marketers. For example, mobile phones are simply a tool to meet the fundamental need that human beings have to communicate with one another; in the future it is possible that marketers will come up with another solution to meet that need.

Types of customers needs Functional need — Low prices to keep to shopping budget Emotional need — To keep my family safe and healthy Physiological need — Provide food for my family Social and cultural needs Will my family and friends approve? Luxury or necessity Do I need it to survive?

Hierarchy of Needs Maslow’s Hierarchy of Needs Self actualisation Ego Love/belonging Safety Basic Physiological Maslow, 1943, Cited in Brassington and Pettitt, 2006

Maslow’s hierarchy of needs explained Physiological needs —I can’t do more house hunting until I have had a rest and a drink Safety needs —I need to know if it is next to a busy road. Social needs —Is it close enough to homes of my family and friends? Esteem needs - Is it is a “nice” area; will my friends approve of it? Self-fulfilment - Is it my dream house – what I have been waiting for?

Consumer buying decision-making process (DMP) 8 Problem Recognition Information Search Alternative Evaluation Purchase Decision Post-Purchase Evaluation (Blythe, 2012)

Consumer decision-making unit Initiator —For example, a child pesters a parent for a new bike Influencer —Perhaps one parent considers the child’s request and thinks it’s a good idea Decider —The first parent puts it to the second parent who agrees Purchaser The parents buy the bike User The child uses the bike

Influences on Consumer Decision- Making Psychological factors –elements of the consumer mental processes Personal factors –features of the consumer Social factors –influences from family and friends (Blythe, 2012) 10

Psychological factors Perception The way that we view the world Motives The internal force that encourages a person to do something Ability and knowledge Pre-existing position of the consumer 11

Psychological factors Attitude Has three components: cognition, affect, conation Personality Traits and behaviours that make each person unique 12

Personal factors Demographic Age, gender, ethnic origin, income, family life cycle and occupation Situational Changes in consumer’s circumstances, i.e. pay rise, redundancy Level of involvement Degree of importance consumer attaches to decision 13

Social factors Reference groups Roles Culture Opinion formers Opinion leaders 14

Social factors Pressure exerted on individual to conform and comply Need for psychological association with a particular group Need to seek information from a group about product/service being considered 15

Types of reference groups Primary groups Secondary groups Aspirational groups Dissociative groups Formal groups Informal groups Automatic groups Virtual groups 16

Opinion formers and opinion leaders Opinion formers –Individuals who exert personal influence because of authority, education or status associated with the object of communication process –Formal experts in a specific area such as journalists, analysts, critics etc. Opinion leaders –Provide information and experiences to others seeking information –Are not formal experts and do not provide advice, but other buyers are influenced by them 17

Business buyer behaviour Business buyers go through similar stages as consumers do when they buy The main difference in the business to business market is that the process can take much longer and be much more formalised, with lots of people from the decision-making unit getting involved

How businesses buy Focus on economic benefits Formalised, lengthy purchasing processes Many people involved in the decision process Bigger order values Negotiation and reciprocating deals Fewer buyers and fewer sales New task, straight re-buy, modified re-buy

Organisational Buying Processes New Buy – long decision-making times, high involvement by participants, high risk, compare to extensive decision making. Modified Rebuy – subsequent purchase involving a re-examination of products and suppliers, compare to limited decision making. Straight Rebuy – routine basis, from approved or sole suppliers, compare to routine response. 20

Organisational Decision-Making Process 21 Recognise problem Develop product specifications to solve problem Search for products and suppliers Evaluate products and suppliers relative to specifications Select and order most appropriate products and supplies Evaluate product and supplier performance Feedback Can be more formalised than Consumer Decision-Making Process Brassington and Pettitt, 2006

Decision-making units in organisational markets User –These are the people who will use the end product –For instance, the office staff who will use the photocopier Influencer –These are the people whose opinion is sought in the purchase of the new product –For instance, the office supervisor may have an opinion on what the photocopier should be able to do Decider –This is the person who makes the decision which photocopier to buy –This person is likely to be a senior manager

Decision-making units in organisational markets Buyer –This is the person who looks for the most suitable products and handles meetings with suppliers. Gatekeeper –This may be the receptionist ofrthe secretary to the decider or influencer –Gatekeepers are powerful because they are often the people who answer the phone or who open the mail on behalf of senior managers, and they can decide which suppliers reach the decision-maker.

Quiz Place these five stages of the consumer buying decision making process in the correct order: 1.Information search 2.Problem recognition 3.Purchase decision 4.Alternative evaluation 5.Post purchase evaluation 24

Quiz Place these five stages of the consumer buying decision making process in the correct order: 1.Problem recognition 2.Information search 3.Alternative evaluation 4.Purchase decision 5.Post purchase evaluation 25

Quiz Are these influences on the consumer decision- making process psychological, personal or social? 1.Motives 2.Income 3.Culture 4.Perception 5.Reference groups 26

Quiz Are these influences on the consumer decision- making process psychological, personal or social? 1.Motives - psychological 2.Income - personal 3.Culture - social 4.Perception - psychological 5.Reference groups - social 27

Quiz Which of these statements is incorrect? 1.Business buyers go through similar stages when buying as consumers 2.A new buy decision has high involvement from decision making unit (DMU) 3.Businesses use negotiation and reciprocating deals 4.Organisation buying decisions focus on emotional benefits 28

Quiz Which of these statements is incorrect? 4.Organisation buying decisions focus on emotional benefits 29

Test Your Understanding Think back to your last significant purchase as a consumer. It may have been for a car, house, or holiday. –Look at the consumer decision making unit. Who fulfilled each of the roles? –Identify and explain three social factors that influenced your purchase decision. –Identify and explain two personal factors that influenced your purchase decision –Identify and explain one personal factor that influenced your purchase decision 30

Session Reading Core text –Blythe, J. (2012). Essentials of Marketing. 5 th edition. Harlow. Prentice Hall. Chapter 3. Additional reading –Brassington, F. and Pettitt, S. (2007). Essentials of Marketing. Harlow, Prentice Hall. Chapter 3. –Wood, M.N. (2004). Marketing Planning: Principles into Practice. Harlow. Pearson Education. Chapter 3, (p.73-81) 31