Wednesday, 18 April 2007

CONSUMER BUYER BEHAVIOR

CONSUMER BUYER BEHAVIOUR
Consumer buyer behaviour is concerned with the buying of goods and services by individuals and households for personal consumption. Consumers buy a large range of goods and services, although in general they are frequently much less well informed than business buyers at the point of purchasing the product.
Influences
The main influences on consumer behaviour are culture, social factors, personal factors and psychological factors. It is useful to note, however, that culture is not specific to the international context, but rather a normal feature of all models of buyer behaviour. Culture is given a higher prominence in international business because it is a major cause of difference between one market and another.
There are certain aspects of these influences on the buying process that should be put under the spotlight here because there are likely to be differences in them from one country to another. You should note the following points.
(a) Social Class
In some countries, social class is very rigid; little movement up or down is possible.
(b) Family
The concept of the family varies from the narrow version of the family (parents and their associated children) to the extended family (including grandparents and other relatives) as is the norm in, say, Italy.

(c) Age and life-cycle stage
Consumer purchases are influenced by age and by the stage in the family life-cycle. Thus, a two-year old will have different requirements from a middle-aged person, and a 24-year-old person, married with young children, will buy with a different set of priorities when compared with a 24-year-old single person.
In different countries the age composition varies. Atypical difference is that industrially advanced countries (such as Germany) will have ageing populations, whereas in lesser developed countries the population will have a much younger profile, with large numbers of babies and children.
(d) Gender
The roles and status associated with men and women vary within most cultures and between cultures. You need to be aware of these differences and of the way in which changes are occurring.
(e) Needs and motives
In many Western countries, customers share similar motives and motive hierarchies, such as the desire to succeed and belong and achieve social affiliation. These derive from Maslow's model of a hierarchy of needs, which has been very influential in the way consumer behaviour is considered. However, these are not consistent across cultures. So, for example, in some parts of the world, self-esteem needs are met before physiological needs.
The Consumer Buying Process
Atypical way of considering the buying process is:
• problem recognition;
• information search;
• the evaluation of alternatives;
• the purchase decision; and
• post purchase evaluations.
This process describes the full rational decision making process which a buyer might go through. The extent to which a buyer will go through all the stages in a lengthy and deeply considered way depends upon the type of purchase. Thus, marketing theory usually distinguishes between three types of approach - habitual, limited problem solving and extended problem solving. A key distinction between these types is whether there is an external search for information. For example, the daily purchase of a newspaper, the infrequent purchase of a holiday or the major purchase of a new house have different levels of personal involvement and will span the range of approaches. Extended problem solving will involve external information through word of mouth, advertising, media, product information, salespeople and other sources of information.
Note, too, that not all recognised problems end up with a purchase decision - sometimes the consumer may change his/her mind during the process and decide to save the money or even buy a completely different product or service.
The consumer buying process is sometimes thought of as a " one person, one buyer" situation. On occasions, though, there is a " decision-making unit" at work. If you consider the purchase of toys at Christmas, the child will use the toy and the child might also initiate the purchase by asking for it. Parents might reject some requests (too expensive, looks dangerous, not educational enough, will break easily, etc.) and will retain others. Parents might buy some toys, whilst others might be purchased by other gift providers, such as grandparents or godparents.
As with the influences on consumer buyer behaviour, the consumer buying process itself may be very different from country to country. Take, for example, the purchase of a gift for a wedding present. Different countries have different cultural attitudes towards gift giving and specifically differences towards gift giving to celebrate a wedding. In the United Kingdom, for example, it is common practice for the would-be bride and groom to provide a "wedding list" comprising items they would like to have purchased as gifts. In other parts of the world, however, this practice would be considered unusual and even distasteful. So, for example, in some cultures wedding gifts comprise mainly money gifts bestowed to bride and groom on the day of their wedding. Similarly, if we take an example of toy purchasing, in some cultures it would not be considered appropriate for children to have any say or influence on this process.
Again what we are stressing here is the fact that consumer behaviour is not the same in different international markets. Again, even countries which in many respects have very similar cultures and/or are geographically proximate, can be very different with respect to consumer buying processes. In fact, there still remains much research to do with regard to models of the buying process in different parts of the world, and it is useful to bear in mind that many of the different models of the buying process have been developed with reference to consumers in highly developed economies.
BUSINESS-TO-BUSINESS BUYER BEHAVIOUR
This type of buyer behaviour is sometimes referred to as industrial buyer behaviour, or organisational buyer behaviour. Well known writers in this area, Webster and Wind, define organisational buying as
"the decision-making process by which formal organisations establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers".
The key elements in this process are as follows. (a) Decision-making unit (DMU)
Various people are involved in the buying process within an organisation. Collectively they constitute the DMU or buying centre.
Within a DMU there are a number of roles - although this does not imply that each is held by a different person:
• Users
• Influencers
• Deciders
• Approvers
• Gatekeepers
• Buyers
This group, the way they interact and the processes through which they make decisions will be conditioned by their environment - the structures and culture within the organisation and the culture of the broader society. Thus, some organisations will be autocratic, with the decider being the central role, whilst in others it is more usual for all of the roles to have influence in the buying decision. Similarly, general cultural differences between societies - for example, in terms of deference to seniority - will influence organisational behaviour.
(b) Interaction between buyer and seller
It is quite usual in business-to-business buying for buyers and sellers to negotiate and influence each other in determining the form of the final transaction and other aspects of the interaction. Contrast this with your own personal influence as a buyer on the manufacturers of, say, chocolates or CD players.
It is particularly the large important buyers who have influence on sellers. These important buyers, such as Toyota for car components, will often contact sellers and negotiate influence over the way the product is made, how it is delivered, how it is priced and so on, in order to meet their requirements. This process is not, of course, one-way. Sellers will contact buyers and present propositions based on various groupings of the marketing mix, based around their assessment of the needs of the buyer. In the end, the final purchased product or service is usually shaped by the negotiations which take place between the buyer and the seller.
It is common for satisfactory initial contracts to be developed into a longer-term relationship between buyers and sellers.
In the 1960s and 1970s, there was a tendency for western firms to buy from whatever was the cheapest source of supply. However, more modern approaches to business-to-business marketing have been influenced by the success of the Japanese approach which, whilst still in its own way aggressive, is longer-term, evolving and more to do with developing a consensus. Most businesses now aim to select a few key companies from which to buy products and services and to develop long-term relationships with them. The benefits of this approach are to reduce the costs in switching from one company to another and to use the supplying company as an additional resource. The supplying company might hold stocks for the buyer (for example, as in just-in-time systems), carry out most of the quality assurance process (ensuring zero defects, total quality management, etc.) and even have a role in the buyers new product development process.
(c) Major types of buying situation
The numerous types of buying situation have been grouped into three buy-classes by a number of writers on business markets. The three buy-classes are:
• Straight rebuy;
• Modified rebuy;
• New task.
In international business, it is particularly valuable to isolate the buy-class. By doing this you can see how the buying process will differ and this will influence negotiation of the appropriate marketing mix for the product.
(d) Differences between international business-to-business buyers
As with consumer buyer behaviour, the international business needs to be careful not to assume that the processes of buying from other businesses, and the factors which affect them, are the same in every country - again they are not. Although the basic models of business-to-business buyer behaviour and some of the concepts outlined here (such as the DMU, buy-classes and so on) can be used to investigate the behaviour of business-to-business buyers in international markets, this process can be very different between different countries.
Again, the primary reasons for differences are likely to be essentially cultural factors, but also differences in the economic, political and legal factors may cause differences in business-to-business buyer behaviour. Examples of possible areas where differences in business-to-business buyer behaviour in different international markets may be encountered include:
• Differences in approaches and attitudes to negotiation.
• Differences in approaches to searching for suppliers.
• Differences in the importance and nature of relationship marketing.
• Differences in attitudes towards gift giving.
GOVERNMENT BUYER BEHAVIOUR
Governments and other governmental institutions, such as local authorities and nationalised industries, are important buyers in most national markets. In many countries, governmental bodies account for around 50% of all goods and services purchased within the country. The methods used in buying by governments and other institutions are therefore very important.
The key elements of buying by governmental institutions are as follows.
(a) Buying will be a bureaucratic process
A bureaucratic process is more likely to apply than an open DMU approach - or, at least, the DMU roles are likely to be submerged within the bureaucratic framework.
(b) A tender system is usually used
The tender system is used by governmental bodies to ensure public accountability. The taxpayers' money needs to be spent, and to be seen to be spent, efficiently and without corruption. The tender system aims to reduce or eliminate personal bias and prejudice in the awarding of what are often very large contracts. (In practice, of course, bias of various kinds might exist.)
The broad principles of the tender system are the public announcement of a contract for specific goods or services inviting those wishing to respond do so by submitting a quotation for the contract - a tender. Details of the contract and the criteria for selection are made available to interested parties. All tenders remain sealed until the buying committee meets and they are all then adjudicated according to agreed rules.
There are two main tender systems, open tender and selective tender
• an open tender system is one where anyone can submit a tender;
• a selective tender system is one in which only specified contractors are invited to submit
a tender. There will usually be lists of appropriate companies for different types of
contract and companies will be concerned to develop and maintain relationships with the
buying organisation to get onto those lists.
The adjudication of tenders might be based on the lowest price tendered or it might be based on an estimation of best value, in which case factors such as quality and delivery may be important.
(c) Political influence
The decisions of governmental bodies are ultimately the responsibility of politicians and buying decisions - particularly those involving the award of large contracts - may have political importance. Thus, there is always the possibility that political influence will be brought to bear to achieve a satisfactory outcome.
The type of political system will also influence government purchasing. The more democratic systems of the US and EU countries will buy differently from central controlled and command approaches, such as those in Cuba, China and, in the past, the COMECON countries - the USSR, Poland, Bulgaria, etc.
(d) National preference
In most countries, for all the obvious reasons (political, economic, employment, etc.) governmental institutions will try to buy from their own nations. In some countries, national preference will be a major barrier to market entry for companies seeking to export.
In the EU a high priority has been placed on reducing the barriers created by national and regional preference. Legislation has been enacted to provide free and fair competition in the area the EU calls "public procurement" (i.e. government and institutional buying). Public contracts must be predetermined in one of two ways - lowest prices or best value. Whichever tender is best, according to the method selected, will win the contract. Public procurement contracts showing preference to national suppliers will be penalised. This has implications for the market opportunities of EU companies specialising in gaining government contracts.
(e) Types of business and government buying
Certain types of business are more dependent upon government buying than others. Most goods and services can be bought by government and institutions, but some markets revolve solely around government decisions. A good example of this is companies selling defence equipment - tanks, guns, radar, night sights, etc. National governments are, generally, the only buyer of defence equipment within a country, and they may also control which other countries may be supplied - for example, the ban on arms supplies to Iraq or the controls that the US placed on arms and defence-capability-related equipment to the COMECON countries.
Once again, it is important to stress that business must carefully look for differences in institutional or government buyer behaviour in international markets. Once more, cultural factors will play a key role in giving rise to differences here, but so too, given the nature of the buyer, will political differences. The business must therefore carefully analyse and appraise each market in which they operate or intend to operate, developing an in-depth understanding of customers and customer behaviour in each market. Then, and only then, will it be in a position to make a decision about the extent to which there are similarities in customer behaviour.
D. BUYING BEHAVIOUR IN LESSER-DEVELOPED COUNTRIES
We identified that these countries are poor with comparatively low levels of economic and social infrastructure. It is difficult to market to these countries because there is little spending power and market sizes are small in most instances.
The usual support systems are often deficient in some ways, for example, the electricity supply might be unreliable. Amongst other things, this would reduce the market for consumer durable products that use electricity as a power source. The physical distribution of products can be difficult because of poor quality road or rail systems - products can take longer to arrive because speeds on the road or rail systems are much slower than in more developed countries and may even be damaged by constant bumping and jolting. Companies may also suffer cash flow problems because of time delays between product delivery and invoice payment.

This does not mean to say that these markets should necessarily be ignored. In most LDCs it will be possible to sell some products. In particular, companies might be willing to accept low sales because they hope to become well established and be in a position to benefit when the country begins to grow and develop larger, more worthwhile markets. Companies might also wish to prevent their competitors picking off easy, unopposed market opportunities. Note that, in some LDCs, the size of the total population may result in worthwhile sales - for example, Nigeria with a population of around 110 million - even though the sales measured on a per capita basis might be low.
Consumer Buyers
Most consumers will have very low levels of income and little discretionary spending power. Consumer buying decisions will, therefore, be considered more carefully because, relatively, the cost of purchase will be very high.
Think, for example, of the different significance for a consumer in an African country with a family annual income of £500 considering whether to buy a portable radio priced at £15, compared with a consumer in Germany with a family income of £20,000 considering the same purchase. For the African family the purchase is very significant, it involves considerable risk. For the German family the expenditure is so insignificant in terms of the total spending power that it could be almost an impulse purchase.
There will, though, be some segments of the population with higher amounts of money to spend, including an urban middle and upper social class as well as some expatriate managers, administrators and civil servants from other more affluent countries. There will be a ready market among these groups for fast moving consumer goods (FMCGs) which can be sold with little or know adaptations.
For the less well-off citizens of an LDC, fast moving consumer goods might have to be adapted in the following ways:
• The product size might be reduced in order to reduce the price. Razor blades might be sold
singly instead of in a pack containing 10 or 20 blades. Food products might be sold in small
pack sizes rather than the US large family pack.
• Product labelling might need to take account not only of different languages, but also the level
of literacy. If low levels of literacy are encountered, it might be necessary to use colours and
symbols to aid identification rather than to rely on written words.
• Advertising might take visual and aural forms rather than press advertising.
• Sales promotions might be limited because of the inability of retailers and wholesalers to
handle the promotions.
Business Buyers
There will be comparatively few business buyers. It is likely that industrial development will be limited to a few industries, probably based upon developments from the primary production of agriculture, fishing or the extraction of minerals - for example, the canning of vegetables or the mining of coal. LDCs often rely heavily on a few products for their total export earnings. As a result, they are usually limited in their reserves of convertible currencies. This means that the political and economic management of LDCs is often geared to encouraging exports from their country and discouraging imports into it.
Distribution channel intermediaries - retailers, wholesalers and distributors - represent another type of business buyer. Many of these intermediaries operate on a very small scale with limited capital resources. It is difficult, therefore, to sell large quantities of product without resorting to a wide-scale coverage of wholesale and retail outlets.
If there are marked differences in the cultural context level, there will be considerable difficulties in understanding and developing strong working relationships with business buyers in LDCs.
Government Buyers
In many LDCs, the influence of the government and government-influenced buying departments is high. For major capital projects - for example irrigation systems or hydro-electricity schemes - the domestic government, together with foreign country and major world agencies, will be important participants in the buying and the financial funding processes.
It is often the case that the bureaucratic processes of government bodies in LDCs will slow the whole decision-making process by requiring a series of permits, approvals and agreements before projects can proceed. In some countries, the bureaucracy relies on a certain "oiling" in order to gain approvals. Cultural differences between what is regarded as an acceptable exchange of money for a service and what is a bribe vary from one culture and one country to another. It is certain that in some countries it is important to know the right people and to understand and use the right system of inducements to ensure that the contract is agreed at the right level in the government.
E. BUYING BEHAVIOUR IN NEWLY INDUSTRIALISED COUNTRIES
The main attraction of NICs is the growth potential that they represent. Some NICs, particularly some countries in S.E. Asia (such as Malaysia, Korea, Singapore and Taiwan) have consistently shown faster than average growth for a number of years. This higher level of growth, when contrasted with slow growth or recession in many other parts of the world, together with their higher levels of income per person in the population, makes NICs particularly attractive as market opportunities both for consumer goods and business supply.
Note, though, that whilst there are considerable opportunities in these markets, there are often barriers to entry into them. The governments of NICs sometimes set high tariff barriers on goods coming into the country in order to protect their own developing industries.
Consumer Buyers
The consumer markets in NICs can develop rapidly once a certain critical point of income level has been reached. In consumer durables, the growth possibilities of opening up the market in NICs are very attractive, particularly where the markets in more developed economies have reached the maturity phase of the product life-cycle. Increasing affluence also allows the development of FMCG markets which initially might have been slow to grow because of income constraints and conflicts with indigenous culture.
Retailers are changing their approaches from small, customer-service market stalls and small fixed units into some of the larger, more capital-intensive styles of Western retailing. These changes provide opportunities for retailers from other countries to enter the NIC market.
Many of the NICs are in Asia and Latin America. For international businesses operating from Europe or the US, this poses problems. The cultural differences between the comparatively low context Europeans and North Americans and the high context Asians and Latin Americans are quite large. There are, of course, examples of countries with smaller context gaps - for example, Spanish companies will have far fewer cultural difficulties in marketing to Latin America than would a British or Scandinavian company.
Business Buyers
The growth in NICs has been created through the expansion of business. Accordingly there are many more business buyers than in LDC countries. As the NICs expand, there is an inevitable link to increased demand for a wide range of infrastructure improvements - power and communications, education and health care, in addition to internal and external defence.
The increased opportunities to market to businesses have to be set in the context of the cultural differences of many of the NICs. This may mean that understanding the ways in which business buys is more difficult than in low context culture countries. Whilst the main concepts of business buying hold true, the nature of the roles in the DMU, or the length of time taken to go through the whole process, might be rather different from more advanced industrial companies.
It is also quite likely that the nature of competition in NICs will be fierce. Local suppliers will have advantages of lower labour costs and less transport and packing expenses. The NIC competitor might also be prepared to operate on lower profit margins than companies from the UK and the US. Business buyers in NICs might favour local suppliers in any event, but be particularly attracted to them because of the lower prices offered by the local, indigenous supplier. To succeed, companies from more highly industrialised countries will need to offer more sophisticated, high technology solutions. If they are able to do this, and keep in front of their NIC competitors, they will maintain their market position in NIC countries.
Government Buyers
Government buyers in NICs will be a major source of business. The need to maintain control of inflation, government spending and the balance of payments during the turbulent times of fast growth will encourage overt or covert support for local businesses.
F. BUYING BEHAVIOUR IN HIGHLY INDUSTRIALISED COUNTRIES
Most of the material written about marketing has come from the US and from Europe. More recently, material has started to appear from Japan. All the main concepts of buyer behaviour have originated from scholars in highly industrialised countries. Because of this there is a cultural sympathy between the concepts and the culture of buyers in these countries. The main exception to this is Japan. In many ways Japan is different. It is a high context culture. It has been isolated from many cultural forces until quite recently and has evolved a number of different business and management systems. For example, just-in-time and an insistence on quality both originated in Japan.
In considering marketing to highly industrialised countries, it is perhaps more useful to think about the problems facing an LDC or an NIC producer in attempting to market products in the US, the UK or Germany. That is not to say that marketing from one highly industrialised country to another is easy, but the level of difference (Japan excluded) is not so large as in the former situation.
Consumer Buyers
A major problem will be overcoming the country of origin problem, especially in the purchase of consumer durables. To overcome this problem, the NIC or LDC company might need to sell products at a low price and include many additional features within that low price. In addition, they will need to fight hard to secure adequate distribution channels. After-sales service will need to be convincingly strong to reassure potential buyers.
The main markets for LDCs are in craft products and ethnic fashion clothing, as well as certain food products - for example, bananas from Caribbean countries.
Business Buyers
The difficulties are somewhat lower amongst business buyers. It is likely that business buyers will be more receptive than consumer or government buyers since they will judge products on more objective and careful evaluative criteria.
Businesses around the world are trying to find ways to cut costs. They are, therefore, receptive to business propositions that offer reliable, high quality production at lower prices than can be obtained from suppliers based in more highly industrialised countries. The opportunity that LDC and NIC suppliers have is the lower costs of land and labour. The difficulties that they face are those of convincing the business buyer that high quality product will be supplied consistently with reliable delivery.

Government Buyers

There are opportunities to sell to government buyers, but in practice it will be difficult for LDC and NIC suppliers to gain contracts. Geographical distance and political pressure, plus the sophisticated manufacturing and marketing expertise of the local suppliers, will offer few gaps in the market. There is usually quite strong pressure exerted by business and through political considerations to buy from local suppliers - local suppliers provide local employment and politicians can gain support from the electorate by promoting their interests.

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