Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)

THE BUYING PROCESS Why do we need to understand the buying process of customers?

THE BUYING PROCESS Why do we need to understand the buying process of customers? As marketers we need to understand the process fully so that we can help the buyer through every stage. If we can do this, we are more likely to get a successful sale and the buyer is more likely to be satisfied at the eventual outcome.

A Rational Decision-making Model

A Rational Decision-making Model The buying process will be the same, whether it is for an expensive item or for something which costs very little money. What can vary is: the value of the item being bought who is involved in the buying process who will use the item being bought the after-sales confidence of the buyer and the user.

A Rational Decision-making Model For example, for a high-value purchase it is likely that more time will be spent in the searching stage. The level of reassurance necessary after the sale will also be greater. It is also possible that more than one person will be involved in the process. This brings us, as marketers, to a very important question who is buying?

Who Buys? Difference between User and Buyer

Who Buys? Difference between User and Buyer User Consumer Buyer Customer

The Decision-making Unit What is Decision Making Unit (DMU)?

The Decision-making Unit What is Decision Making Unit (DMU)? Buying can be done by an individual or by a group of people. The people which involved in buying decision we called as DMU.

The Decision-making Unit When more than one person is involved, the individuals may have a definite role to play in the process. The roles have been identified as follows: the initiator: the person who comes up with the idea of buying an item the influencer: the person, or people, who will shape the outcome of the decision

The Decision-making Unit the decider: the person with the power or authority to make the decision the buyer: the person who makes the actual purchase the user: the person who will eventually use the product

Types of Purchasing New-buy Decisions Your new-buy decisions may be for items of small value, such as changing your toothpaste or choosing a different food; they involve small amounts of money, so the risk of being dissatisfied is there but the outcome is not disastrous.

Types of Purchasing New-buy Decisions (cont ) Some new buys are more serious because they involve products which cost more money and would not be thrown away so easily. You might think of clothing, then kitchen equipment, furniture, a car, a holiday; for some of us, a house is the most expensive new-buy item.

Types of Purchasing Repeat-buy Decisions When you buy something you have used previously you have the benefit of experience to help you, so you have less difficulty in choosing the product.

Types of Purchasing However this is a rather simplistic analysis for marketing purposes, and more light is shed by using a model which was originally introduced by Assael (1987).

Types of Purchasing

Types of Purchasing Habitual Buying This is repetitive buying which takes little thinking about. Few differences are apparent between products and brands and the customer allocates little or low importance to the purchase. The customer is happy to stick with their decision and has, in fact, become loyal to the product or brand.

Types of Purchasing Variety Seeking This type of purchase will still involve relatively low importance in the mind of the purchaser, but there will be lots of choice and variety, e.g. biscuits, sweets, newspapers, magazines.

Types of Purchasing Dissonance Reducing Dissonance-reducing purchasing is the kind of purchasing which is designed to reduce post-purchase "doubt". Because the degree of involvement is high, usually because of value and the item being something which is only bought rarely (e.g. an electric bed), the buyer may have no previous experience to use as a base for comparison in the search process.

Types of Purchasing Complex Buying High product involvement and lots of choice make this an extremely hazardous type of purchase for a buyer. If we take buying a computer for home use as an example, you can understand the problems. You may have already had one make of computer and been quite happy with it, but now you have outgrown your machine and need another. It is going to be expensive so you have to make sure you get good value for money.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Every manufacturer's dream is to produce products that every buyer in the world wanted to buy, but we know that is impossible simply because buyers are people, and people differ in many ways. Marketers therefore have to understand what makes people different from one another, if they want to help the customers to satisfy their needs.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR These differences are caused by various influencing factors:

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Cultural The influences under this heading can be subdivided into three sections:

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Culture It summarises the learned values and attitudes of a society as a whole. It is while we are growing up that we acquire expectations and standards that fit with the society in which we live, and these acquired values and expectations generally stay with us throughout our lives. For example, the different standards between the Muslim and Christian religions impose different levels of acceptance on certain behaviour and, therefore, on purchasing habits.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Subculture Cultures of all kinds will contain smaller groups or subsections. The differences may be based on lifestyle, religion or on belief in some ideal.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Social Class Despite the claims for classless societies which we hear from politicians, class systems still exist around the world. Social classes are the divisions which a society accepts and they may be based on status, money or education. In the UK the social class system (A, B, C1, C2, D and E).

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Social Influences can come from family and friends or other reference groups, such as clubs and interest societies. The individual role and status of the buyer is also another influence how we want other people to see us! For example, if your father has always bought Ford cars, you may be influenced into buying a Ford when you make your first car purchase.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Personal Personal factors relate to the individual, e.g. age, lifestyle, occupation, wealth and character. age who enjoys the theatre. A lady of 45 will want different clothes from a lady of 25.

INFLUENCES ON INDIVIDUAL BUYING BEHAVIOUR Psychological Wilson, Gilligan and Pearson (in Strategic Marketing Management, 1992) identify four psychological characteristics as being important: motivation; perception; learning; and beliefs and attitudes.

CLASSIFICATIONS OF CONSUMERS Socio-economic Groupings (Class) Perhaps one of the oldest and most recognised ways of splitting people into categories is based on perceived social and economic status class. Every country in the world has upper and lower classes.

CLASSIFICATIONS OF CONSUMERS Socio-economic Groupings (Class) In the UK, the following social classes are recognised: A Upper middle class: higher managerial or professional levels B Middle class: middle to senior management, rising professionals

CLASSIFICATIONS OF CONSUMERS Socio-economic Groupings (Class) C1 Lower middle class: junior and supervisory managers, clerical grades C2 Skilled working class: manual trades involving individual skills D Working class: semi and unskilled workers E Benefit takers: pensioners, widows, anyone using state benefits.

CLASSIFICATIONS OF CONSUMERS The Family Life Cycle The family is arguably the most important purchasing unit in any particular country because of the total value of sales which are generated in the domestic markets.

CLASSIFICATIONS OF CONSUMERS The Family Life Cycle

CLASSIFICATIONS OF CONSUMERS Sagacity The model uses life cycle as its main base and suggests four stages of life: dependent, pre-family, family and late.

CLASSIFICATIONS OF CONSUMERS Sagacity It then splits up each stage in accordance with income and then income is split up according to white collar(managerial/higher) or blue collar(skilled/lower) occupations. The underlying suggestion of this model is that people will have different hopes and buying behaviour as they move through their lives and will be influenced by their current situation.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR Maslow suggested that each individual has certain needs, basic and higher, and that only when one level of need has been satisfied will the individual move up into the next level. This model can be very useful for marketing purposes as marketers can target activities at people who are seen to be at one level and help them to reach the next level.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR The problem with this model is that it is very difficult to know exactly which level someone has reached at any given time. People may be at several levels at the same time for different reasons. For example, someone who has a high powered car in order to impress people, may not have a permanent and secure home base.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR All that marketers can do is to accept the overall meaning of the model and use Maslow as a guideline for general targeting purposes.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR Maslow's hierarchy of needs is a fascinating and useful theory for all kinds of people, but particularly for marketers since it explains to us why people want different things at different times. So there would be no point, for us as marketers, talking to people about the satisfaction of aesthetic (level five) needs, when our potential customers are still feeling their physiological (level one) needs have not been met.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR The reverse is also true: once a particular level of need has been satisfied, a new level comes to the front and it is a waste of effort to stay to any great extent on those below. So, for instance, if you are in the fashion business it would be madness to try to appeal to your customers on the basis of warmth and comfort.

THE SOCIAL PSYCHOLOGY OF CONSUMER BEHAVIOUR It has also long been recognised that the way people move from awareness of a need to the point where they act to satisfy it is by no means necessarily simple. For instance, we can say with some certainty that everyone who goes without food for a day or two will begin to feel hungry (at least, under normal conditions). What we cannot say with the same degree of certainty is that the person will act to satisfy that hunger.

ORGANISATIONAL PURCHASING So far we have been looking at general factors in the purchasing process. The process applies equally in both consumer and industrial markets, but we have to accept that there are differences between the two markets.

ORGANISATIONAL PURCHASING Organisations buy differently from individual consumers for a number of reasons: Purchases tend to be of higher value. Purchasing tends to be for higher quantities. Purchasing tends to be better documented. Buying tends to be done in a logical manner.

Organisational versus consumer buying

Buying Stages of Organisations

Types of Industrial Purchases Industrial purchases have been well documented as being one of three types: straight re-buy: simply repeat purchasing without changes of any kind modified re-buy: where some aspect is changed, e.g. specification or supplier new buy: involving new specifications, new supplier, etc.

Small and Medium-sized Enterprises Buying Decisions The SME is likely to be working in a limited number of markets, probably with a limited range of products or services. The scope of the organisation is therefore likely to be less of a strategic issue than that of larger organisations.

Industrial Buying Decisions The buyer in a factory will purchase three kinds of things: housekeeping supplies such as cleaning materials, brushes, dusters and so on machinery with which to make the products that the company markets for profit raw materials which will be made into products.

Wholesaler/Retailer Buying Decisions The wholesaler and retailer share the same purpose to make profit by buying products from manufacturers then selling the same products to other people. It renders their decision-making process quite different from that of the industrial buyers. Usually, the wholesaler buys in bulk from the manufacturer and sells smaller quantities to the retailer, who then sells individual items to the consumer.

Influences on Organisational Buying (a) They have multiple objectives/needs These objectives/needs are: 1. profits 2. reduced costs 3. meeting needs of employees 4. legal and social restraints.

Influences on Organisational Buying (b) A lot of people may be involved in the purchasing decision The roles of the DMU may be fragmented around the organisation, which adds to the time taken to reach any decision. Some people may think they have power when, in reality, the power lies with someone else.

Influences on Organisational Buying (c) Buying patterns may be formally set by the organisation The buyer may have to buy in bulk, or buy from only one source, or buy at the lowest price, etc.

Influences on Organisational Buying (d) The value of the purchase is often high The buyer is spending money on behalf of the organisation. They need to be sure that they do not waste it or their job could be in danger.

Past Paper Review June 2008 / Q 3 Examine the main principles and processes involved in organisational buying behaviour and compare these with consumer purchasing processes and behaviour. Use examples to illustrate the key points. (25 marks)

Past Paper Review The term organisational buying reflects purchasing in three different buying situations as shown below:

Past Paper Review The principal similarity between consumer and organisational purchasing is that they both represent a need-satisfying process. This need reflects itself in buying behaviour, and this is why it is important that marketers understand purchasing motives in order to effectively target their marketing efforts in a way that satisfies these needs. It can be seen that organisational purchasers have to work with more stringent purchasing constraints, because they have the commercial and budgetary interests of their respective organisations to serve.

Past Paper Review They also have logistical factors like delivery schedules to maintain. There is little opportunity for impulse purchasing in which everyday consumers can indulge. As purchasing professionals they should have a great deal of technical and commercial knowledge about their prospective purchases.

Past Paper Review Models of organisational buying Below is a model of the organisational purchasing decision process. It is, perhaps, more precise in its application than the models suggested for consumer buying behaviour as items for purchase require a more business-like description through a formal specification at the need description and product specification stages.

Past Paper Review

Past Paper Review Organisational and consumer purchasing compared How do purchasers in organisational buying situations differ from consumer buyers in their purchasing decision-making processes? The following list provides the main characteristics of an organisational purchasing situation:

Past Paper Review Rationality of purchasing motives Derived demand especially in industrial buying situations, where demand is dependent upon purchases further down the supply chain and creates demand further up the chain Small numbers of individual buyers Large number of influences on individual buyers

Past Paper Review Often multi-person purchasing decision-making unit Suppliers are sometimes in active competition with each other Industrial customers may have more power Many products are pre-specified by the buyer s organisation

Past Paper Review Unequal purchasing power of customers Distribution is more direct Higher value of purchases There is sometimes a geographical concentration of purchasers Company policies, for instance in relation to suppliers being listed for a particular quality standard, may act as a constraint on the buyer

Past Paper Review Possible reciprocal purchasing arrangements, in that certain markets may be closed off because of a mutual trading agreement A sale is often preceded by lengthy negotiation Relationships between buyers and sellers tend to be more long term, rather than depending on a single commercial transaction

Past Paper Review The Decision Making Unit (DMU) The predominant difference between consumer and organisational buying is that organisational buying often involves group decision-making. In 1972 Frederick E Webster (Jr) proposed that there were distinct roles in the purchasing process, sometimes taken up by different individuals. He termed this idea the notion of the buying centre or the decision making unit (DMU).

Past Paper Review

Past Paper Review Organisational buyers tend to work to obtain satisfaction in relation to the company s commercial needs. Much consumer behaviour has a psychological foundation. Although organisational purchasers have an explicit rationale for their actions, this does not imply that they are inflexible to receiving psychological influences.

Past Paper Review Marketers should not overlook the psychological factors that drive industrial customers. Nowhere is this more important than in a market where products or services on offer are broadly similar. It is here that organisational marketers must attempt to modify their marketing advances to serve specific idiosyncratic needs and requirements.

Past Paper Review June 2009 / Q - 8 Compare and contrast the factors influencing the process of organisational buying behaviour with those influencing individual consumer buying behaviour. Use appropriate diagrams as well as consumer behaviour and buyer behaviour theories or models to illustrate your points. (25 marks)

Past Paper Review Answer In adddition to June 2008 answer following details need to be included

Past Paper Review The structured nature of organisational purchasing Each time a consumer makes a purchase from a retailer, a derived demand is created for a series of materials and components which make up the final product. Added to this is an elaborate chain of supply from companies who buy and sell ancillary products like packaging materials, machinery and maintenance equipment. So that companies can control this steady flow of goods and services, they must organise their purchasing activities so that they have:

Past Paper Review 1. A constant supply of goods and services of the requisite quality as and when required. 2. A system which monitors supplier performance in terms of the above. 3. A system of review of existing suppliers and potential suppliers.

Past Paper Review The larger the organisation, the more structured the methods of buying should be. There should be an established procedure for each of the steps outlined in the figure above. Purchasing will tend to be more critical in flow production situations than in a jobbing works. Even a minor delivery or quality problem could cause substantial losses in terms of lost production and loss of customer goodwill.

Past Paper Review Organisational purchasers tend to be far more demanding than consumer purchasers because of the implications just outlined, so the notion of customer care, which is dealt with in more detail later in the text, has profound significance in modern marketing.

Past Paper Review Organisational buying situations Three major types of organisational buying situation have been identified, together with the problems surrounding each, as shown below:

Past Paper Review

Past Paper Review May 2012 / Q 7 Compare and contrast the factors that influence the process of organisational buying behaviour with those that influence individual consumer buying behaviour. Use appropriate diagrams as well as consumer behaviour and buyer behaviour theories or models to illustrate your answer. (25 marks)

Past Paper Review Answer: Refer June 2009

Past Paper Review December 2010 / Q -5 (a) Briefly describe Abraham Maslow s theory of motivation and explain how managers might apply this theory in order to help them understand individual consumer behaviour. (12 marks)

Past Paper Review December 2010 / Q -5 (b) A marketing manager is considering moving from a job in fast-moving consumer goods (FMCG) to a business to business (B2B) position. Discuss the different or additional buyer behaviour factors that he/she would have to learn and take into account. Explain using diagrams and examples. (13 marks)

Q & A