CHAPTER 3

CONSUMER AND BUSINESS MARKETS

3-1. Customer Buyer Behavior
Consumer buyer behavior refers to the buying behavior of final consumer- individuals
and households who buy goods and services for personal consumption. All of these final
consumers make up the consumer market. Consumers or buyers behaviors involves the
activities of people engaged when selecting, purchasing, using and disposing products, so
as to satisfy the need and desire.
Customer behavior is that subset of human behavior that is concerned with decisions and
acts of individuals in purchasing and using products. Consumer behavior can be defined
as, "the activities and actions of people and organization that purchase and use economic
goods and service, including the influence on these activities and actions". "It is the
process where by individuals decide whether, what, when, where, how and from whom to
purchase goods and services"
3-2. Characteristics Affecting Consumer Behavior
Consumer purchases are influenced strongly by cultural, social, personal, and
psychological characteristics.
A. CULTURAL FACTORS
These factors exert the broadest and deepest influence on consumer behavior. They
include

(a) Culture:

Culture is a set of symbols and artifacts created by a society and handed down from
generation to generation as determinants and regulators of human behavior. The symbols
may be intangible (attitudes, beliefs, values, language) or tangible (tools, housing,
products, works of art). They do not include instinctive acts. However, the way people
perform instinctive biological acts such as eating is culturally influenced. Thus,
everybody gets hungry, but what, when and how people eat vary among cultures. For
example, in the Ukraine, raw pig fat is considered a delicacy. Similarly in Ethiopia raw
beef meat is delicacy. Marketing executives must be alert to the changes in cultural trends
so that they can adjust their planning to be in step with, or even a little ahead of, the
times.

(b) Sub Culture: Sub cultures are groups in a culture that exhibit characteristic
behavior patterns sufficient to distinguish them form other groups with in the
same culture. The behavior patterns that distinguish subcultures are based on the
factors such as race, nationality, religion, and urban-rural identification.

A subculture takes on importance in marketing if it constitutes significant part of the

population and specific purchasing patterns can be traced to it. Many sub cultures make
up important market segments, and marketers often design products and marketing
programs tailored to their needs.

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 c) Social class: Social class is a ranking within a society determined by the
members of the society. Social classes exist in virtually all societies,
and people's buying behavior is often strongly influenced by the class
to which they belong or to which they aspire. Marketers are interested
in social class because people within a given social class tend to
exhibit similar buying behavior.

II SOCIAL FACTORS A consumer's behavior also is influenced by social factors,

such as the consumer's small groups, family, and social roles and
status.

a) Reference Groups A person's behavior is influenced by many small groups.

Reference group is a relatively small social group to which
a person belongs or aspires to belong and that provide
guidance to acceptable beliefs, values, attitudes and
behavior.

Types of Reference groups

1. Membership Groups: Groups that have a direct influence and to which person
belongs are called membership groups.
a. Primary Groups: These are groups who have a regular but informal interaction
such as family, neighbors, friends and co-workers.
b. Secondary Groups: These groups are more formal and have less regular
interaction. These include organizations like religious groups, professional
associations, and trade unions.
2. Aspirational Groups: These are groups to which a person like to belong but is not
the member of that group.
3. Dissociative Groups: A group whose values are rejected by the individual.

The importance of reference group influence varies among products and brands.
Marketers of products and brands where group influence is strong must determine
how to reach and influence the opinion leaders. Group influence is strong for products
that are visible to others whom the buyer respects.

Individual is influenced by a reference group in the following manner.

 These groups expose the persons to possible new behaviors and life styles.
 They also influence the person's attitudes and self concept, because the person
normally desires to fit in.
 They create pressure for conformity that may affect the person's actual
product and brand choices.

b) Family: A family is a group of two or more people related by blood, marriage, or

adoption living to gather in a household. During their lives many people will belong to at

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least two families the one in to which they are born and the one they form at marriage.
The birth family primarily determination core values and attitudes. The marriage family,
in contrast, has a more direct influence on a specific purchases. For example, family size
is important in the purchase of a car. Marketers are interested in the roles and influence of
the husband, wife, and children on the purchases of different products and services.

c) Roles and status: A person participates in many groups through out the life. The
person's position in each group can be defined in terms of roles and status. A role consists
of activities that a person is expected to perform according to the persons around him or
her. Each role carries the status reflecting the esteem given to it by society. People often
choose products that show their status in society.

III PERSONAL FACTORS

A buyer's decisions are also influenced by personal factors such as age and life cycle
stage, occupation, economic circumstances, life style and personality and self-concept.

(a) Age and Life cycle Stage

People buy different goods and services over their lifetime. Consumption is also shaped
by the stage of the family life-cycle-the stages through which families might pass as they
mature over time. Table B2 lists the stages of family life cycle. Marketers often define
their target markets in terms of life-cycle stage and develop appropriate products and
marketing plans for each stage.

(b) Occupation: A person's buying behavioral pattern is also influenced by

his occupation. For example, a company president will by expensive suits,
credit card membership etc. the marketer tries to find out the different
occupational group of the segment and draft the plan accordingly.
(c) Economic Determinants: Economic considerations are very powerful
and influence the consumer behavior to a great extent. Marshall was the first
person to examine the role of economic factor on human behavior. The human
beings want to maximize their satisfaction through their limited resources.
Economic model is based on the assumption that the price of the product affect its
demand. The important economic factors are income and liquid assets.

Income is the most powerful economic factor to influence consumer behavior because it
gives him purchasing power from the marketer's point of view. Here the disposable
income is important than the gross income. Out of disposable income, a major share is
spent to meet the basic needs like food, shelter, education etc. The remaining income
after it is called discretionary income.

T.1 = Taxes, Repayment of Debt - Disposable income

D.1 = Money spend for fulfilling basic needs- Discretionary income

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 (d) Life Style: People coming from some sub culture, social class and occupation
may lead quite different life styles. A person's life style is the person's pattern of
living in the world as expressed in the person's activities, interests and opinions.
Life style portrays the person's interaction with the environment. Life style show a
person's way of being and acting in the world. Marketer will search for
relationships between their products and life style groups.

(e) Personality and self-concept Personality is defined broadly as an

individual's pattern of traits that influence behavioral responses. For example, we
speak of people as being self confident, domineering, introverted, flexible, and/or
friendly, and as being influenced (but not controlled) by these personality traits in
their responses to situations.

IV. PSYCHOLOGICAL FACTORS

A person's buying choices are further influenced by four major psychological facts:
motivation, perception, learning, and beliefs and attitudes.

a) Motivation

Psychology can help in understanding how the consumer learnt about a brand and how
his memory influences his buying habits. Abraham Maslow's model (Need hierarchy
Theory) explains the various need, as exhibited in the following fig:

Self development

Self Esteem and Recognition

Self
Actualization
Needs Sense of belongingness and love
Esteem Needs Security and Protection
Social Needs
Hunger, thirst etc.
Safety Needs

Physiological Needs

The human factor always moves towards satisfying certain basic needs as explained by
Maslow. Therefore, a study of why and how a consumer is motivated to buy certain
products and services, helps us in understanding the consumer behavior.

a) Perception: Since behavior can take many forms, a person gathers information from
the environment to help in making a choice. Perception is the process of receiving,
organizing, and assigning meaning to information or stimuli detected by our five

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 senses. It is in this way that we interpret or give meaning to the world around us.
Perception plays a major role in the stage of the buying-decision process where
alternatives are identified.

What we perceive-the meaning we give to something depends, on the object and our
experiences. Every day we come in contact with an enormous number of marketing
stimuli. However, with the aid of selective perception techniques we are able to deal with
the commercial environment.

- We pay attention by exception (selective attention)

- As a part of perception, new information is compared with a person's
existing store of knowledge, or frame of reference (Selective distortion)
- We retain only part of what we have selectively perceived (Selective
retention)

Why do people perceive the same situation differently? All of us learn by the flow of
information through our five senses: sight, hearing, smell, touch and taste. However, each
of us receives, organizes, and interprets this sensory information in an individual way.
Perception is the process by which people select, organize and interpret information to
form meaningful picture of the world.
People can form different perceptions of the same stimulus because of three perceptual
processes: selective attention, selective distortion and selective retention.

 Selective Attention: the tendency for people to screen out most of the information
to which they are exposed. People are exposed to a great amount of stimuli every
day. For example, the average person may be exposed to a lot of ads a day. And it
is impossible for a person to pay attention to all these stimuli. Thus, marketers
have to work especially hard to attract the consumer's attention. Their message
will be lost on most people who are not in the market for the product. Moreover,
even people who are in the market may not notice the message unless it stands out
from the surrounding sea of other ads.

 Selective Distortion: it describes the tendency of people to adapt information to

personal meanings. In other words, noted stimuli do not always come across in
the intended way. Each person fits incoming information into un-existing mind-
set. People tend to interpret information in a way that will support what they
already believe. Thus, marketers must try to understand the mindsets of
consumers and how these will affect interpretations of advertising and sales
information.

 Selective Retention: people also will forget much that they learn. They tend to
retain information that supports their attitudes and beliefs. Because of selective
retention, a person is likely to remember good points made about a particular
product, which he/she is familiar, and forget good points made about competing
products.

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Because of selective exposure, distortion, and retention, marketers have to work hard to
get their message through. This fact explains whey marketers use so much drama and
repetition in sending message to their market.

Learning: Learning involves changes in behavior resulting from observation and

experience learning theorists say that most human behavior is learned. Learning occurs
through the interplay of drives, stimuli, cues, responses and reinforcement. A drive is a
strong internal stimulus that calls for action. Cues are minor stimuli that determine when,
where, and how the person responds.

The practical significant of learning Theory for marketers is that they can build up
demand for a product by associating it with strong drives, using motivating cues, and
providing positive reinforcement.

But learning is not a perfect predictor of behavior because a variety of other factors also
influence a consumer. For example, a pattern of repeatedly purchasing the same brand
may be disrupted by a person's desire for variety or novelty. Or a short temporary
situation such as being short of money or pressed for time may produce behavior
different than a learned response. Thus learned response does not necessarily occur every
time a stimulus appears.

Beliefs and Attitudes

Through doing and learning, people acquire beliefs and attitudes. These, in turn,
influence their buying behavior. A belief is a descriptive thought that a person has about
something. These beliefs may be based on real knowledge, opinion or faith, and may or
may not carry an emotional charge. Marketers are interested in the beliefs that people
formulate about specific products and services, because these beliefs make up product
and brand images that affect buying behavior. If some of the beliefs are wrong and
prevent purchase, the marketer will want to launch a campaign to correct them.

People have attitudes regarding religion, politics, clothes, music, food, and almost every
thing else. An Attitude is a learned predisposition to respond to an object or class of
objects in a consistently favorable or unfavorable way. In our buying decision process
model, attitudes play a major role in the evaluation of alternatives.

A consumer's attitudes do not always predict purchase behavior. A person may hold very
favorable attitudes towards a product but not by it because of some inhabiting factor.
Changing strongly held attitudes can be difficult or impossible.

Types of Buying Decision Behavior

There are four types of consumer buying behavior based on the degree of buyer
involvement and the degree of differences among brands.
 Complex Buying Behavior: Consumers undertake complex buying behavior
when they are highly involved in a purchase and perceive significant brand

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 differences. Consumers may be involved when the product is expensive, risky,
purchase infrequently, and highly self-expressive (e.g. Car). Typically the
consumer has to learn about the product
 Dissonance-reducing Buying Behavior: It occurs when consumers are highly
involved with an expensive, infrequent, or risky purchase, but see little difference
among brands. For example a consumer buying carpeting may face a high-
involvement decision because carpeting is expensive and self-expressive. Yet
buyers may consider most carpet brands in a given price range to be the same. In
this case, because perceived brand differences are not large, buyers may shop
around to learn what is available, but buy relatively quickly. They may respond
primarily to a good price or purchase convenience. After the purchase, consumer
might experience post-purchase dissonance (after sale discomfort) when they
notice certain disadvantage of the purchased carpet or hear favorable things about
brands not purchased. To encounter such dissonance, marketer’s after-sale
communications should provide evidence and support to help consumers feel
good about their brand choices.
 Habitual Buying Behavior: It occurs under conditions of low involvement and
little significant brand difference. For example, take Salt. Consumers have little
involvement in this product category- they simply go the store and reach a brand.
Consumers appear to have low involvement with most low cost, frequently
purchased products.
 Variety-seeking Buying Behavior: Consumers undertake variety-seeking
buying behavior in situations characterized by low consumer involvement, but
significant perceived brand differences. In such cases, brand switching occurs for
the sake of variety rather than because of dissatisfaction.

THE BUYING-DECISION PROCESS

Consumer buying process is an important process which has a vital role in consumer
behavior study. This is the first essential step to understand consumer behavior. The
buying process is the process of decision-making leading to purchase function. It
represents a problem-solving approach. The mechanism is the same as in any processing
activity in which we supply some input followed by processing activity and finally the
outcome comes before us.

Stages of Buying Process

The buying process is composed of a number of stages and is influenced by an

individual's psychological framework composed of the individual's personality,
motivation, perception and attitudes.

The buyer or consumer takes his buying decision for some commodities immediately
without much consideration such as items of daily use while for some other commodities
mainly luxury or durable items, he thinks much before taking a decision to purchase it.
Some times he consults others. Generally the purchaser passes through five distinct
stages in taking a decision for purchasing a particular commodity.

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i) Need Recognition ii) identification of alternatives
iii) Evaluation of alternatives iv) purchase and related decisions
v) Post purchase behavior

1) Need Recognition

A buying process starts with need arousal. A need can be activated through external and
internal stimuli. The basic needs of a common man arise to a particular level and become
a derive and he knows from his previous experience how to satisfy these needs like
hunger, thirst, sex etc. This is a case of internal stimulus. A need can also be aroused by
an external stimulus such as the sight of new product in a shop while purchasing other
usual products.

There is a two-fold significance of need arousal stage to a marketing man.

i) The marketer must identify the drive that might actually or potentially connect
to the product class or brand and make the buyer feel that the product can
satisfy his needs.
ii) It also recognizes that the need levels for the product fluctuate over a time and
are triggered by different cues. The marketer can arrange cues to confirm
better to the natural rhythms and timing of need.

2) Product Awareness/information search

After need arousal, the consumer tries to solve it and gathers the sources and information
about the product. Depending upon the intensity of need, it produces two states of an
individual. The first state is called heightened attention when the consumer becomes
more receptive to the information regarding the item he needs. He becomes alert to
information bearing on the need and its gratification. If a consumer needs to purchase a
television, he will pay more attention to TV advertisements. He keeps remembering the
remarks made by friends and associates about TVs.

Of need is more intense, the individual enters a state of active information search and he
tries to collect more information about the product, its key attributes, qualities of various
brands and about the outlets where they are available. There are four consumer
information sources.

i) Personal sources (family, friends, neighbors etc.)

ii) Commercial sources (Advertisements, salesmen, dealers etc.)
iii) Public sources (mass media, consumer rating organizations)
iv) Experiential sources (handling, examining, using the product)

The marketer will find it worth while to study the consumer information sources
whenever i) a substantial percentage of the target market engages in search, and ii) the

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target market shows some stable patterns of using the respective information sources.
Identifying the information sources and their respective roles and importance calls for
interviewing consumers about the sources of information. The findings can later on be
used to plan the firm's advertisements.

Interest may be viewed as a state of mind that exists when a consumer perceives a need
and or is aware of alternative products capable of satisfying that need. Consumer interest
is indicated in the consumer's willingness to seek further information about a product. At
this stage consumer is actively involved in the buying process and pays attention to the
product. However, if he losses interest during this involvement, his/her attention will be
diverted and the buying decision process will break down. For example, a house wife
requiring a washing aid, may look for further information about these machines ones she
becomes aware of such machines. The kind of information she may look for is about the
alternative washing machines available in the market place, their relative prices,
operational efficiency, warranty and service facilities.

3) Evaluation of Alternatives

One interest in a product(s) is aroused, a consumer enters the subsequent stage of

evaluation and intention. The evaluation stage represents the stage of mental trial of the
product. During this stage, the consumer assigns relative value weights to different
products/brand on the basis of accumulated stock of product information and draws
conclusions about their relative satisfaction-giving potential value. After this evaluation,
the consumer develops the intention either to purchase or reject the product/brand. The
final purchase will, however, depend on the strength of the positive-intention that is the
intention to buy. For example, the housewife, after arousal of her interest in washing
machines, she will compare the stock of information she has accumulated about the
different washing machines in the market and then evaluate the value of each one of them
before she develops the intention to buy. However, if she feels that washer man/woman
would serve the need then she may altogether reject the idea of buying any washing
machine.

On the basis of the evaluation behavior of consumers, the marketer can improve or
develop the product and segment the market on the basis of product-attributes.

4) Purchase Decisions

In the evaluation stage, the consumer ranks brands and forms purchase intentions.
Generally, the consumer's purchase decision will be to buy the most preferred brand, but
two factors can come between the purchase intention and the purchase decision. The first
factor is the attitude of others. The second factor is unexpected situational factors. The
consumer may form a purchase intention based on factors such as expected income,
expected price and expected product benefits. However, unexpected events may change
the purchase intention. Thus, preferences and even purchase intentions do not always
result in actual purchase choice.

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 5) Post Purchase Behavior

The marketer's job does not end when the product is bought. After purchasing the
product, the consumer will be satisfied or dissatisfied and will engage in Post purchase
behavior of interest to the marketer what determines whether the buyer is satisfied or
dissatisfied with a purchase? The answer lies in the relationship between the consumer's
expectations and the product's perceived performance. If the product falls short of
expectations, the consumer is disappointed; if it meets expectations, the consumer is
satisfied; if it exceeds expectation, the consumer is delighted.

Almost all major purchases result in cognitive dissonance, or discomfort caused by post
purchase conflict. After the purchase, consumers are satisfied with the benefits of the
chosen brand and are glad to avoid the draw backs of the brand not bought. However,
every purchase involves compromise consumers feel uneasy about acquiring the
drawbacks of the chosen brand and about losing the benefits of the brand not purchased.
Thus, consumers feel at least some post purchase dissonance for every purchase.

ORGANIZATIONAL BUYERS
Are business firms and non profit establishments that buy goods and services and then
resell them, with or without reprocessing, to other organizations or ultimate consumers.

Organizational buyers are those who buy goods and services for the purpose of further
production, resale and redistribution. The organizational buyer buys goods and services
for the purpose of increasing sales, cutting costs and supplying their products to the
customers at the lowest costs consistent with quality. Organizational consumers include
profit and non-profit businesses, governmental agencies and institutions (schools,
hospitals etc.)

BUYING SITUATIONS
The organizational buyer faces many problems in buying a product or service. The
buying centre is a the decision making unit of a buying organization. The organizational
buyer makes decision that vary with the buying situation. Mainly there are three types of
buying situations:-

(i) Straight Rebuy The buying situation in which the purchasing department reorders
on a routing basis (eg. Office Supplies, bulk chemicals)

(ii) Modified Rebuy: a situation in which the buyer wants to modify product
specifications, prices, delivery requirements, or other terms.

(iii) New task: is a buying situation in which a purchaser buyers a product or

service for the first time (e.g. office building, new security system etc.)

PARTICIPANT IN ORGANIZATIONAL BUYING PROCESS

i) Initiators: Those who request that some thing be purchased.

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ii) Users : Those who will use the product or service.
iii) Influencers: People who influence the buying decision.
iv) Deciders : People who decide on product requirements and/or on suppliers.
v) Approvers : People who authorize the proposed actions of deciders or buyers.
vi) Buyers: People who have formal authority to select the supplier and
arrange the purchase terms.
vii) Gate Keepers: People who have the power to prevent sellers or information from
reaching members of the buying centre.
BUYING PROCESS
1. Need Recognition
2. General need Description
3. Product Specifications
4. Supplier search
5. Proposal solicitation
6. Supplier selection
7. Order-routine specifications
8. Performance Review

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