Module 4 Understanding Consumer and Industrial Markets Kotler’s Chapters 6 and 7.
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Transcript of Module 4 Understanding Consumer and Industrial Markets Kotler’s Chapters 6 and 7.
Module 4
Understanding Consumer and Industrial Markets
Kotler’s Chapters 6 and 7
Chapter 6: Analyzing Consumer Markets and Buyer Behavior
• Learning Objectives– 1. Describe and apply the cultural, social, personal, and
psychological factors that influence buying behavior of consumers.
– 2. Describe and apply the four categories of consumer buying behavior (complex, dissonance-reducing, habitual, and variety-seeking buying behavior).
– 3. Describe and apply the stages of the buying process.
Chapter 6/Objective 1: The factors that influence buying behavior of consumers.
• Cultural: culture, subculture, social class
• Social: reference groups, family, roles and statuses
• Personal: age/stage in life cycle, occupation and economic circumstances, lifestyle, personality and self-concept
• Psychological: motivation, perception, learning, beliefs and attitudes
Chapter 6/Objective 1: The factors that influence buying behavior of consumers.
• Culture: Is what binds a society together. It’s the values, ideas, perceptions, and experiences we hold in common. The most fundamental determinant of a person’s wants and behaviors.
– Subculture: provides more specific identification and socialization for their members; based on nationality, ethnicity, religion, age, and geographic region.
– Social Class: relatively homogeneous and enduring divisions in society, which are hierarchically ordered and whose members share similar values, interests, and behavior;based not just on wealth but also on the source of wealth, education, neighborhood.
Chapter 6/Objective 1: The factors that influence buying behavior of consumers.
• Social Factors– Reference Groups: groups that have a direct or
indirect influence on a person’s attitudes or behaviors; can be membership, secondary, aspirational,or dissociative. Focus on opinion leaders who can spread word of mouth.
– Family: the most influential primary reference group
– Roles and Statuses: a role consists of the activities that a person is expected to perform and each role carries a status. Need to be aware of status symbols.
Chapter 6/Objective 1: The factors that influence buying behavior of consumers.
• Personal Factors– Age/Stage in the Life Cycle - family life cycle
– Occupation and Economic Circumstances - product choice affected by income, savings and assets, debts, borrowing power, and attitude toward spending/saving
– Lifestyles - the person’s pattern of living in the world as expressed in AIO (activities, interests, and opinions)
– Personality (distinguishing psychological characteristics that lead to consistent and enduring responses to the environment) and Self Concept
Chapter 6/Objective 1: The factors that influence buying behavior of consumers.
• Psychological Factors– Motivation - a need becomes a motive when it is aroused to a
sufficient level of intensity; presses the person to act
– Perception - the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world; selective attention, selective distortion, and selective retention
– Learning - involves changes in an individual’ls behavior arising from experience
– Beliefs - a descriptive thought that a person holds about something
– Attitudes - a person’s enduring favorable/unfavorable evaluations, emotional feelings, and action tendencies toward some object
Chapter 6/Objective 2: The four categories of consumer buying behavior.
• Complex - high involvement with significant differences between brands; think-feel-do; usually product is expensive, bought infrequently, risky and self-expressive.
• Dissonance-Reducing - high involvement with few differences between brands; usually product is expensive, infrequent, and risky; consumer wants info to support decision
• Habitual - low involvement with few differences between brands; ad repetition creates brand familiarity
• Variety-Seeking - low involvement with significant differences between brands; brand switching common.
Chapter 6/Objective 3: The 5 Stages of the Buying Process.
• Problem Recognition - recognizes need; marketers need to identify circumstances that trigger need.
• Information Search - 4 groups of sources: personal (most effective), commercial, public, experiential. Need to get brand into awareness set, consideration set, and choice set.
• Evaluation of Alternatives - compare benefits/attributes• Purchase Decision - purchase intention and buy• Postpurchase Behavior - postpurchase satisfaction a
function of buyers’ expectation versus product perceived performance.
Chapter 7: Analyzing Business Markets and Business Buying Behavior
• Learning Objectives– 1. Describe how the business market differs
from the consumer market.– 2. Describe and apply the major influences
(environmental, organizational, interpersonal, and individual) in the business buying process.
– 3. Describe the purchasing/procurement process (including purchasing orientation and the 8 stages in the process).
Chp 7/Obj 1: How the Business Market differs From the Consumer Market
– Fewer and Larger buyers
– Closer supplier-customer relationship
– Geographically concentrated buyers (7 key states)
– Derived, Inelastic, and Fluctuating Demand
– Professional Purchasing w/ Several Buying Influences
– Need for Multiple Sales Calls - 4-5 calls to close
– Direct Purchasing - buy from manufacturers rather than intermediaries
– Reciprocity - select suppliers who buy from them
– Leasing - lease instead of buy
Chapter 7/Objective 2: The 4 major influences in the buying process
• Environmental– Current and expected economic factors, supply of key
materials; Technological; Political/ legal; Competitive; Social responsibility - ex. environmental concerns
• Organizational
• Interpersonal
• Individual
Chapter 7/Objective 2: The 4 major influences in the buying process
• Organizational - objectives, policies, procedures, organizational structures, and systems– Trends Include Purchasing-Department Upgrading (more
strategic oriented); Cross-Functional Roles (more responsibility); Centralized Purchasing (fewer, higher level buyers); Decentralized Purchasing of Small-Ticket Items (ex. use of corporate purchasing cards to empower employees to buy smaller items); Internet Purchasing; Long-Term Contracts; Purchasing-Performance; Evaluation, and Buyers’ Professional Development; and Lean Production (ex. JIT).
Chapter 7/Objective 2: The 4 major influences in the buying process
• Interpersonal - interests, authority, status, empathy, and persuasiveness– Recognize several participants that may differ
• Individual - age, income, education, job position, personality, risk attitudes, and culture– Recognize individuals have different styles
• Also have to address Cultural Factors in doing business globally.
Chapter 7/Objective 3: The Purchasing/Procurement Process
• Business buyers seek to obtain the highest benefit package (economic, technical, service, and social) in relation to a market offering’s costs. Incentive higher if benefit>cost.
• Purchasing Orientation– Buying - executing discrete transactions with suppliers where the
relationships are arms-length and possibly adversarial; focus short-term and tactical.
– Procurement - seek quality improvements and cost reductions; more collaborative with smaller # suppliers.
– Supply Management - purchasing becomes strategic value-added; improve entire value chain from raw materials to end users.
Chapter 7/Objective 3: The Purchasing/Procurement Process
• 8 Stages in Process– 1. Problem Recognition– 2. General Need Description– 3. Product Specification – 4. Supplier Search– 5. Proposal Solicitation– 6. Supplier Selection– 7. Order-Routine Specification– 8. Performance Review
Chapter 7/Objective 3: The Purchasing/Procurement Process
• 8 Stages in More Detail
• 1. Problem Recognition– Recognize a problem due to creating a new
product, break down of equipment, unsatisfactory material, and opportunity for lower prices or better quality.
• 2. General Need Description – Determine general characteristics and required
quantity.
Chapter 7/Objective 3: The Purchasing/Procurement Process
• 3. Product Specification– Product Value Analysis - an approach to cost
reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production.
• 4. Supplier Search– Use trade directories, computer search, trade
shows and ads, www.wiznet.net, etc...
Chapter 7/Objective 3: The Purchasing/Procurement Process
• 5. Proposal Solicitation– Qualified suppliers invited to submit proposals.
• 6. Supplier Selection - price still key– Rate suppliers on specific, weighted attributes.– Companies reducing # of suppliers.
• 7. Order-Routine Specification– Negotiate final order, list technical specs, quantity
needed, expected time of delivery, return policies, warranties, etc . . .
Chapter 7/Objective 3: The Purchasing/Procurement Process
• 8. Performance Review– Contact end users and ask for their evaluations.– Rate supplier on several criteria using a weighted
score method.– Aggregate the cost of poor supplier performace
to come up with adjusted cost of purchase, including price.
– May result in continuing, modifying, or ending relationship with supplier.
Module 4: Understanding Consumer and Industrial Markets• Chapter 6:
– Consumer Markets and Buying Behavior
• Chapter 7:– Business Markets and
Buying Behavior
• Any Questions