Principles of Marketing

Quarter 1 - Module 3

Marketing Opportunity Analysis

and Consumer Analysis

Lesson 4
Differentiate the buying Behavior and Decision Making of
individual/household customer versus the Business (organizational)
customer
Lesson 4: Differentiate the buying Behavior and Decision Making of
individual/household customer versus the Business (organizational)
customer (ABM_PM11-le-i-13)

At the end of the lesson, you are expected to:

 Describe consumer and business markets; and
 Differentiate the buying behavior and decision making of individual/household
customer versus the business (organizational) customer.

Consumer and Organizational Markets

Business offer products and services to both consumer and organizational

markets.

Consumer Markets

Consumer markets include individuals and/or households that purchase products

and services for personal consumption. Consumers normally make purchase in
smaller quantities, due to their tendency to consume products gradually over a period
of time. Moreover, consumers tend to be more emotional about their purchases. The
purchases are at times impulsive or spontaneous.

Differentiate the buying Behavior and Decision Making of

individual/household customer versus the Business (organizational)
customer

The customer buying process (also called a buying decision process) describes
the journey your customer goes through before they buy your product. Understanding
your customer’s buying process is not only very important for your salespeople, it will
also enable you to align your sales strategy accordingly.

The five stages framework remains a good way to evaluate the customer’s buying
process. John Dewey first introduced the following five stages in 1910:

1. Problem/need recognition

This is often identified as the first and most important step in the customer’s
decision process. A purchase cannot take place without the recognition of the need.
The need may have been triggered by internal stimuli (such as hunger or thirst) or
external stimuli (such as advertising or word of mouth).
2. Information search

Having recognized a problem or need, the next step a customer may take is the
information search stage, in order to find out what they feel is the best solution. This
is the buyer’s effort to search internal and external business environments, in order to
identify and evaluate information sources related to the central buying decision. Your
customer may rely on print, visual, online media or word of mouth for obtaining
information.

3. Evaluation of alternatives

As you might expect, individuals will evaluate different products or brands at this
stage on the basis of alternative product attributes – those which have the ability to
deliver the benefits the customer is seeking. A factor that heavily influences this stage
is the customer’s attitude. Involvement is another factor that influences the evaluation
process. For example, if the customer’s attitude is positive and involvement is high,
then they will evaluate a number of companies or brands; but if it is low, only one
company or brand will be evaluated.

4. Purchase decision

The penultimate stage is where the purchase takes place. Philip Kotler (2009)
states that the final purchase decision may be ‘disrupted’ by two factors: negative
feedback from other customers and the level of motivation to accept the feedback.
For example, having gone through the previous three stages, a customer chooses to
buy a new telescope. However, because his very good friend, a keen astronomer,
gives him negative feedback, he will then be bound to change his preference.
Furthermore, the decision may be disrupted due to unforeseen situations such as a
sudden job loss or relocation.

5. Post-purchase behavior

In brief, customers will compare products with their previous expectations and will
be either satisfied or dissatisfied. Therefore, these stages are critical in retaining
customers. This can greatly affect the decision process for similar purchases from the
same company in the future, having a knock-on effect at the information search stage
and evaluation of alternatives stage. If your customer is satisfied, this will result in
brand loyalty, and the Information search and Evaluation of alternative stages will
often be fast-tracked or skipped altogether.

On the basis of being either satisfied or dissatisfied, it is common for customers

to distribute their positive or negative feedback about the product. This may be
through reviews on website, social media networks or word of mouth. Companies
should be very careful to create positive post-purchase communication, in order to
engage customers and make the process as efficient as possible.
Consumer Buying Roles

There are five roles individuals may portray in a consumer buying decision:

 Initiator- person who initially suggests buying a particular product or

service.
 Influencer- person who tries to convince others of the need for the
product/service and influences the purchase decision.
 Decider- the person who makes the final decision to purchase or makes
the final decision on any product/service components such as what to
buy, how to buy, where you buy, etc.
 Buyer- the person who makes the actual purchase.
 User- the person who actually uses the products/service whether or not
he/she was involved in the buying decision.

As an example, the wife in a family may suggest to her husband that since their
eldest son is about to start working, it may be time for him to have his own car. In this
case, the wife is the initiator. The younger son agrees with the suggestion and informs
his parents of make, model, and color. Both the younger son and elder sister are
influencers. The father may visit several car showrooms, until he eventually decides
on the purchase and pays for the car. The father is the both the decider and the buyer.
The eldest son receives the car and uses it as his personal vehicle. He is the user.

Consumer Markets and Buying Behavior

Consumers are of different genders and ages. They have varying income levels,
live in different regions of the country, and have various personalities and
psychological profiles. This makes developing a single way to sell to consumers.
Difficult as they are influenced by different factors when buying goods and services.

Consumers’ purchases are initiated by marketing stimuli. Marketing stimuli refer

to the elements of the marketing mix, oftentimes referred to as the 4P’s: Product,
Price, Place, and Promotion. Consumers are influenced by the products/services
that they see, hear from mass media, the Internet, and through word of mouth.
Marketing organizations organize these four elements so marketing stimuli can result
in expected sales and brand loyalty.
 Buyer characteristics comprise of cultural, social, personal, and psychological
factors. Cultural characteristics, particularly, play a large role in consumer interest
and eventual purchase. Products and services must “fit” the cultural background of
the potential buyer and not run contrary to it. An individual’s personal culture is
developed overtime. This includes his manner of upbringing, his educational
background, and the collective culture consciousness” or “keeping up with the
Joneses” will favorably influence an individual’s attraction toward products and
services with prestigious brand reputations. A consumer, therefore, may be drawn to
an advertisement of a high-end model but may selectively ignore advertisements of a
high-end model but may selectively ignore advertisements of other lesser known
brands that he perceives are relatively inferior or does not promote his culture of brand
consciousness.
Sub-cultural factors are minute parts of one’s culture that provide specific
identification of its members. This can include one’s nationality mix (e.g. Tsinoy,
Mestizo, Fil-Am) or regional origins (e.g. Ilocano, Batangueño, Ilonggo, or Manileño).
These factors play a critical role in one’s buying behavior. For example, Chinese-
Filipinos are supposedly very practical in their spending habits, and Ilocanos have
been known to be thrifty.
This behavior may likewise be influenced by one’s social class. Social class is a
status hierarchy in which individuals and groups are classified through economic
success and accumulation of wealth. The four most common social classes are upper
class, middle class, working class, and lower class.
Commonly, consumers belonging to a particular economic class (such as class A,
the highest economic class), purchase products and services consistent with their
economic status. An income class A senior corporate executive may therefore drive
or be driven in an expensive car, wear branded clothes, own a high-end smart phone,
dine in the finest restaurants, and speak and act in a restrained, measured, and
socially eloquent manner. In cases of this nature, this person’s income classification
is consistent with his/her social class (income class A= upper social class).
Consumers usually purchase products and services befitting what they perceive
as “acceptable” by their own social class. Purchases made outside this “acceptable”
classification can lead to one being openly or silently ostracized by other members of
their social class.
Therefore, if this senior executive suddenly decides to purchase a 15-year old
obviously dilapidated car and decides to begin driving it personally to and from work,
he may raise many of this office mates and acquaintances eyebrows as “acting
outside his social class” or may even be suspected of having lost his previously
enviable economic status.
Conversely, if one of this senior executive’s lowest ranking employees belonging
to the lowest income classes (classes D and E), invests all his pay, maximizes his
credit, purchasing and coming to work consistently in branded clothes, communicates
with others higher ranking, substantially wealthier office-mates and otherwise exhibits
the purchasing his true economic standing will frown upon this behavior as spending
beyond one’s means, and may even brand him as a “social climber.”
Reference groups, likewise, exert a strong influence on buyer behavior.
Reference groups include individuals or groups that influence consumer opinions,
beliefs, attitude, and behaviors. They often serve as role models and inspiration. Many
consumers belong to reference groups such as families, friends, schoolmates, and
co-workers. These are people whom they have extended and intimate contact with.
These groups exert continuous influence on an individual’s choice of
products/services or brands to purchase.
On the other hand, aspirational groups are groups that a person currently does
not belong to but wishes to belong to or to be associated with. What aspirational
groups purchase also influences and individual considerably, as he may feel that
buying products/services and brands make him feel some degree of belongingness
to the aspirational group:
The challenge to marketers with reference and aspirational groups is to identify
the leaders of these groups and to shape their opinions that influence their followers
in favor of a product or service. Sometimes, product or service. Sometimes, products
advertisers produce aspirational ads to appeal to customers’ desire to be affiliated
with a particular group.
An even stronger influence on buyer behavior is the family. This phenomenon is
particularly true among Filipinos. Because of the length of time one spends with his
family, an individual adopts the values, habits, and philosophical orientation of his
family, i.e. self-worth, spending habits, and general perspective and outlook towards
life. This continues even after he has married. Spouses exert varying levels of
influence in the purchase of goods/services so marketers must be able to identify the
decision-maker in the relationship. In the Philippines, the wife is often the decision-
maker in the purchase of daily household items, while the husband exerts a greater
influence in the purchase of large ticket items such as durable and specialty goods.
Each individual performs a particular role in relation to his environment. This role
is related to his occupation or profession. His buying decisions shall befit the image
or status that he projects. For example, a vice-president of a company is expected to
drive a luxury car and wear high-end clothing, and to be seen frequenting prestigious
commercial establishments.

Figure 10. Buyer

Characteristics
Influencing Purchase
Behavior (Source: stock
photo

An individual’s personal factors also play a sizeable influence in his buying

behavior. People’s need and wants change as one ages-- from toys in early childhood,
to denim pants as teenager, to suits and dress clothes as one joins the workforce. A
very useful guide to buying propensity was developed by William D. Wells and George
Gubar-- the nine stages of a family’s life cycle. The authors have modified it to fit
to the Philippine context.
 Stage 1: Bachelor/bachelorette stage- They are highly dependent on their
parents for finances in the form of allowances. Some may be employed part-
time in fast food chains or business out sourcing companies. They spend
primarily on entertainment, eating out, fashion, dating, and activities with
friends.
Stage 2: Young, newly married couple with no children- Most have dual
income as both spouses may be working. They may be renting a house or
temporarily staying with parent/in-law. They buy household appliances and
audio and video equipment, and spend to make their living space comfortable.
If living with parent/in-law, they may share in household expenses.
Stage 3: Married couple, with eldest child below elementary school age-
They may be renting their living facility or still staying with parent/in-law. They
spend their income on nursery and kindergarten education, food, children’s
clothes, juvenile furniture, toys, and trips to amusement parks.
Stage 4: Married couple, with youngest child six years old or over- They
spend primarily on school tuition, uniforms, books, and allowances. They
usually live independently in an apartment or condominium. They may join
social and civic clubs and begin investing in insurance. They purchase
groceries and food items frequently and in larger quantities.
Stage 5: Older married couple, family head still working, all children living
on their own- They have increased savings as a result of reduced financial
requirements. Their expenditures include vacations, some luxury items,
health and fitness, vitamins and supplements. They initiate retirement fund
investments.
Stage 6: Widow/widower, in labor force - They have substantial savings. They
may move out from a conventional home to live in a small condominium unit.
They spend on eating out, movies, other forms of entertainment, health and
fitness, and dietary supplement. Also, they spend a lot of free time with friends
who share similar lifestyles.
Stage 7: Widow/widower, retired - Pensioner. They may be asked to move in
by one of their adult children for better care. Substantial expenses are for
ambulatory and healthcare, usually with host child’s family.

An individual’s occupation also plays an important indicator in the products and

services he/she purchases. Lawyers are expected to buy a lot of dress shirts, neckties,
suits or barong tagalogs. Blue collar workers purchase work purchase work boots and
denims, while students regularly buy school supplies such as pens, paper, and
notebooks.
Buyer behavior is also dictated by economic capability. It is evident that
individuals need money to purchase goods and services. The more money available,
the greater the amount and quantity of purchase.
Lifestyle is defined as a manner of living that reflects a person’s values and
attitudes. One’s lifestyle is independent of his/her occupation, social class, or status.
Therefore, a person may occupy a high position in a bank, and yet prefer to maintain
a frugal lifestyle. In contrast, an entry-level teller in the same bank may live an
extravagant lifestyle: always eating out, buying branded clothes, and using the latest
communication gadget.
 Personality refers to individual differences in characteristics patterns of thinking,
feeling, and behaving. Typical personality traits are dominance, deference,
defensiveness, adaptability, autonomy, sociability, and self-confidence. The individual
personalities of consumers likewise influence their buying behavior. Marketers can
use personality as a means of enhancing product. For example, a car manufacturer
may discover that most buyers of its brand are self-confident and highly sociable. The
car company can then proceed to compose advertising copy or advertising messages
that appeal to these personality types in marketing its cars.
Similar to psychological factors, motivation addresses the issue of why a
consumer buys a product or what needs he is trying to satisfy. Most individuals
purchase products and services in order to satisfy one or more of the five need levels
identified by Abraham Maslow.

Figure 11. Abraham

Maslow’s Hierarchy of
Needs (Source: stock
photo)

For example, three friends decide to meet and dine in a restaurant. One of the
three may look forward to the event because it will strengthen her relationship with
her friends. She is satisfying her social needs. Another may anticipate the event as
she wants to take advantage of the occasion to make an emergency loan from one of
her friends. In this case, she is satisfying her safety or security needs. The third may
actually just want to attend the occasion because she has heard the food in the
restaurant is particularly good. She is attending the affair to satisfy her physiological
needs.
Perception is the process by which people translate sensory impression into a
coherent and unified view of the world around them. Because of perception,
consumers may view marketing stimuli in different ways. Although a housewife may
have been motivated to buy a pair of shoes for an important occasion, she may have
a negative perception of the level of service in a shoe store. She may judge the efforts
of an extremely motivated salesperson as being “too pushy.” She may just prefer to
just ask for assistance when necessary. Another consumer in another shoe store that
gives shoppers “space” to browse may perceive the store as totally lacking in
customer service and concern.
Three perceptual processes guide an individual’s perception:
 Selective attention - because consumers are exposed to hundreds of
commercial messages each day, they tend to pay attention to only those that
address a current need. This is the reason why therefore meal time,
 consumers are selectively attracted to food commercials, but almost totally
ignore them when their hunger has been satisfied. This is also why companies
develop advertisements that’s stand out and are different from other firms.
They may, for example, use black and white as their medium to set their
advertisement apart, or use extreme dramatization in their messages.
 Selective distortion - pertains to the tendency of individuals to twist or “distort”
information to fit their existing mindset toward a brand. A first time customer
in a restaurant with excellent market reputation may, for example, “twist” or
rationalize the unreasonably long time it takes for his order to arrive. He may
convince himself that the chef is taking extra care in selecting the ingredients
and preparing his order. In reality, however, the delay could simply have been
caused by the order being overlooked by the kitchen staff.
 Selective retention - means that consumers tend to remember only the
positive things that reinforce their attitudes and beliefs. Therefore, a shopper
in a supermarket may only remember the wide product selection, affordable
prices, and relaxing shopping atmosphere and totally “forget” the spill he had
seen at the meat section, or the delay he encountered at the checkout
counter.

Learning is a relatively lasting change in behavior that is the result of experience.

When a consumer purchases a particular brand of product and is completely satisfied
with it, his/her positive experience with the brand is reinforced. This learning can easily
be applied to another product of the same brand. If a consumer purchases a particular
brand of mayonnaise and is completely satisfied with it, he may project the same
positive experience to tomato sauce with the same brand. This is a strong argument
for building brand equity, so that consumers will view several, if not all, the products
under the brand favorably.
A belief is defined as confidence in the truth or existence of something not
immediately susceptible to rigorous proof. On the other hand, an attitude is a settled
way of feeling about someone or something, typically one that is reflected in a person’s
behavior.
Consumers acquire both beliefs and attitudes through learning. Sometimes,
consumers hold strong beliefs about specific products or their qualities and attributes.
Some of these beliefs may be correct, some may be wrong. Correcting an erroneous
belief can be expensive. This is also true with attitudes.
For these reasons, organizations must study and understand various consumer
beliefs and attitudes regarding their product. One way of discovering consumer
attitudes is through the conduct of marketing research, particularly a usage, attitude,
and image survey.
What role do beliefs and attitudes play in consumer marketing? Many of those
who are regularly do their own laundry believe that detergents that produce a lot of
suds clean clothes better. This has caused many households to reject new detergents
in the market that do not produce a lot of suds. A new detergent manufacturer,
therefore, must either tailor his product to fit this belief or engage in a massive
campaign to correct or alter consumer attitudes.
The study of consumer buyer behavior is already complex. Cultural, social,
personal, and psychological characteristics all come into play. Some of these factors
are largely uncontrollable.
 What’s More
Activity 1: Explain in one paragraph

A popular shampoo brand in the market is “Smooth and Fragrant Hair All Day”
The brand is positioned as a fragrance shampoo, currently a very desirable attribute
to both men and women. However, consumer preferences and priorities change over
time. If, example, five years from now, consumers give more importance to the ability
of shampoo to make their hair and shiny, how should “Smooth and Fragrant Hair All
day” reposition itself in the market?

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Activity 2: Explain in one paragraph

If you are going to visit a large supermarket and observe shoppers in the personal
care or toiletries section buying either toothpaste, soap, or shampoo. What do you
observe of their buying behavior and decision making process? Classify specific
shopping behaviors with certain population segments such as: men, women, teenage,
middle-aged, elderly, wealthy, middle-class, etc. And after that, you are going to
document and evaluate their observations.

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What I Have Learned

Activity 3:
As a student;
1. What do you think is a good way to improve your buying behavior?
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2. Does impulse buying consider a negative consumer behavior? Give some

instances and explain.

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