MBA_sem3 _511_Consumer Behaviour

Distribution decisions may be fine-tuned based on the type of retail outlets and specific geographic locations that consumers visit. A brand may find that a specific store in a geographical area enjoys a lot of consumer loyalty. The company may not appoint additional retailers in that area. In consumables like FMCGs or house ware, the in-store information or point-of-purchase material may play an influential role in CDM. There is a growing evidence to show that in some categories, buyers make their decisions using the in-store information. Electronic information kiosks may be useful in large stores if consumers need any information about specific brands, sales promotions or about the ingredients of brands. This may be applicable more in supermarkets that attract many consumers. The search dimension is concerned with the order of search activities. Consumers may be involved in the brand search sequence (processing by brand), in which each brand is examined along various attributes, or they may be interested in attribute search sequence (in which the brand information is collected on an attribute-by-attribute basis). For example, a consumer may process by price, warranty and features and in that order. A brand confident of emphasizing its superiority over competitive brands can use comparative advertising. Marketers may also be interested in finding out the sequence in which the information sources are used by consumers. The consumers, for example, depend on TV for awareness, newspapers for specific details and word of mouth for a final endorsement by a source, which they consider credible. It may be worthwhile for the marketers to prioritize the dimensions of information search. 13.4 EVALUATION OF ALTERNATIVES The evaluation of purchase alternatives follows the information search stage. The evoked set (consideration set) refers to the specific brands (or models) a consumer considers in making a purchase within a particular product category. The inept set consists of brands (or models) that the consumer excludes from purchase consideration because they are unacceptable or seen as inferior. The inert set consists of brands (or models) the consumer is indifferent toward because they are perceived as not having any advantages. Regardless of the total number of brands (or models) in a product category, a consumer’s evoked set tends to be quite small on average, often consisting of only three to five brands or models. 13.5 SUMMARY ● Consumer decision-making is the framework that integrates various concepts. 103 CU IDOL SELF LEARNING MATERIAL (SLM)

● The consumer journey begins with need recognition, and in the output, stage includes consuming the product/service, which is only assumed in the decision-making model, but not stated. ● Need recognition occurs when a consumer is faced with a “problem.” ● Not all buying decisions require the same amount of information, cognitive processing and input from reference groups and other sources. ● Pre-purchase search begins when a consumer perceives a need that might be satisfied by the purchase and consumption of a product. ● Decision rules are procedures that consumers use to facilitate brand and other consumption related choices. ● Cognitive dissonance occurs when consumers try to reassure themselves that they made wise choices. ● Information search takes effort, time, and money. ● The positioning should be such that consumers identify themselves with it and perceive the benefits of the brand. ● Information search can be explained in terms of degree, direction, and sequence. 13.6 KEYWORDS Psychology: The study of the human mind and the mental factors that affect behaviour (i.e., needs, personality traits, perception, learned experiences, and attitudes). Sociology: The study of the development, structure, functioning, and problems of human society. Anthropology: The comparative study of human societies’ cultures and developments. Communication: The process of imparting or exchanging information. In the context of consumer behaviour, it is the transmission of messages from senders (the sources) to receivers (the consumers) via media (the channels of transmission). Customer satisfaction: Customers’ perceptions of the performance of the product or service in relation to their expectations. 104 CU IDOL SELF LEARNING MATERIAL (SLM)

13.7 LEARNING ACTIVITY 1. Sony is introducing a 65” Ultra HD TV that has a higher screen resolution than other TVs and advanced signal processing. The TV’s introductory price is $10,000. a) Who should be Sony’s initial target market? What are the target consumers’ demographics and psychographics? ………………………………………………………………………………………………….. ………………………………………………………………………………………………….. b) How would you identify the innovators for this product? …………………………………………………………………………………………………. …………………………………………………………………………………………………. c) Is the new model a continuous, dynamically continuous, or discontinuous innovation? Explain your answer. ------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------------------------- 2. Your elder brother has recently purchased a high-end luxurious apartment in your city. You were part of his decision-making process at every step. List down the complete decision-making process with steps and considerations at every step. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 13.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Mention the two types of decision making. 2. Mention the three kinds of problem solving. 3. What is the significance of evaluation of alternatives? 4. Mention any two external sources of information. 105 CU IDOL SELF LEARNING MATERIAL (SLM)

5. How does a consumer try to reduce cognitive dissonance? Long Questions 1. Differentiate between LPS and EPS. 2. Discuss Steps for Consumer decision-making. 3. How pre information search facilitates the buying decisions? 4. Explain Decision Spectrum. 5. State the purpose of needing recognition. B. Multiple Choice Questions 1. Which of the following statements about RPS is true? a. Complexity of decision making is low. b. Sources of information are both internal and external. c. These are specialty goods. d. The consumer has not narrowed down the priorities amongst brands. 2. Which of the following statements is true in LPS? a. The consumer is aware of some brands and of the various criteria used to evaluate the product or service offering. b. Is unaware of the new brands that have been introduced. c. Has not evaluated the brands amongst the awareness set and has not established preferences amongst the group of brands. d. All of these 3. When a consumer desires to buy a new laptop because he wants an upgraded model, it is a ______________ type of problem solving. a. DS b. AS c. As and DS d. Routine 4. A feeling of tension and anxiety that a consumer experiences after the purchase of a product is called: a. Disequilibrium b. Imbalance 106 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Cognitive dissonance d. None of these 5. Anthropology is related to: a. human mind and the mental factors b. Development, structure, functioning, and problems of human society. c. compares human societies’ cultures and development d. None of these Answers: 1 a) 2 d) 3 a) 4 c) 5 c) 13.9 REFERENCES Reference Books: ● Leon Schiffman, Leslie Kanuk, 2014, Consumer Behavior, Global Edition, Pearson Education. ● Assel Henry, Consumer Behaviour, Cengage Learning, New Delhi. ● Majumdar, R, Consumer Behaviour: Insights from the Indian Market, PHI Learning Pvt. Ltd., New Delhi. Textbooks: ● Schiffman L.G. and Kanuk L.L., Consumer Behaviour, Pearson Education, New Delhi. ● Hawkins, D. I. & Best R. J., and Coney, K.A. and Mookerjee, A, Consumer Behaviour- Building Marketing Strategy. Tata McGraw Hill, New Delhi. Websites:  https://www.coursehero.com/file/p7ovrk6o/With-respect-to-marketing-programmed- decisions-are-related-to-infrequent/  https://www.yourarticlelibrary.com/consumer-behaviour/decision-making-consumer- behaviour/involvement-of-consumers-in-decision-making/64198  https://www.mbaknol.com/marketing-management/nicosia-model-of-consumer- behavior/ 107 CU IDOL SELF LEARNING MATERIAL (SLM)

108 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 14: CONSUMER DECISION MAKING PROCESS II Structure 14.0Learning Objectives 14.1 Introduction 14.2Outlet Selection 14.3 Purchase and Post Purchase Behaviour 14.4 Summary 14.5 Keywords 14.6 Learning Activity 14.7 Unit End Questions (Descriptive and MCQ) 14.8 References 14.0 LEARNING OBJECTIVES After studying this unit, student will be able to: ● Learn the consumer decision making process. ● Identify outlet selection process by the buyer. ● Explain purchase and post purchase behaviour. 14.1 INTRODUCTION For marketers, the purchase behaviour of the consumer or the decision-making process holds a lot of importance. Through this decision-making process consumers choose from alternatives that help address challenges like: What, Where, How, When and How much to buy. This decision-making process involving the customer happens via continuous interactions among actions, cognitive processes, and environmental factors. The marketing mix also impacts consumer decision making. This process comprises multiple steps. The first step is when the consumer decides to resolve any existing problem like say to maintain a cool temperature at home. 109 CU IDOL SELF LEARNING MATERIAL (SLM)

This leads to search for viable alternatives like in this case air conditioner or water cooler. Once the alternatives are identified, they are evaluated by basic means such as cost benefit analysis. And then a suitable brand is finalized, and the purchase is made. Consumer satisfaction/dissatisfaction arising out of constant use can in turn convert either into a repeat purchase or rejection. A successful marketing strategy clearly identifies the customer need and offers the best possible solution. The best marketing strategy in this scenario is to position the product in sync with the customer preferences. A precise customer need analysis in line with the consumer decisioning process guarantees growth in sales. Post which customers can be retained and repeat sales triggered by focusing on customer satisfaction as it is always better business sense to retain existing customers than finding a new set of customers. Consumer characteristics must be studied because it gives an idea of the consumer. Different consumers have different reasons and different desires for shopping. Different consumers make the purchase decision for different reasons like convenience, fulfilling obligations, image creation, etc. Hence, this also throws light on the different shopper orientations and risks perceived by them. These risks can be of following different types: Social risk (societal approval like for something as personal as a hairstyle) and Economic risks (monetary). Some products like furniture can have high degree of both social and economic risks. While some low-cost items like socks, pens, etc, can have both risks to a very low degree. Thus, these risks are both related to the product as well as the consumer characteristics. 14.2 OUTLET SELECTION With the increasing number of product lines and brands, there is also an increase in the number of retail stores. Hence, creating confusion in the minds of the consumers as to which store to choose. While retail outlets are not the only means for retail trade as media, weekly markets, direct mail, and catalogues can also perform this function. But nevertheless, sometimes the service and advice provided at a retail outlet guides the consumer to the desired product/brand. Whereas sometimes both these can be given equal importance by the consumer. Outlet Selection and Purchase Following are the factors that can guide selection of a retail store: location and size, store image, advertising, and characteristics of the consumer. 110 CU IDOL SELF LEARNING MATERIAL (SLM)

Store Location and Size The location if the store is directly related to consumer convenience as consumers prefer stores closest to them. As for the size, for low value items consumers do not mind buying from smaller outlets but for high value purchase, bigger stores are always seen to be preferable. Distance to reach the store can sometimes prove as a barrier to make the purchase from that outlet. Similarly, less accessible displays in smaller outlets can hinder buying behaviour. As consumers like to walk around the ample space in the outlet and see the product display closely. Sometimes factors like store ambience, variety, price range are more important than the store location alone. Store Image Marketers deploy various strategies to create a favourable perception in the minds of the consumer. This can be achieved by aligning the consumer groups with the projected favourable image. Sometimes an attempt to please all customer segments can lead to dilution of the store image. Once the target market is clearly defined, the store should try to match its image accordingly like choosing to be a 24X7 store or providing services not easily available or being an elite store, etc. Advertising Advertising on price is a commonly used strategy by retailers to attract footfalls. Generally, these can also convert into ‘spillover sales’ where consumers also buy additional items. To get the pricing strategy right, decision should be taken regarding the following: Quantum of discount, Duration of the discount offer, Communication of the discount offer to the target segment and whether to use comparison or reference price. Many times, advertisers advertise both the regular and the offer price to highlight the discount. Price advertising should also consider factors like brand, initial pricing, target segment, product category and retail store. 14.3 PURCHASE AND POST PURCHASE BEHAVIOUR This stage is the final stage in the consumer’s decision-making process when he/she is ready to use their wallets/credit cards to make the purchase. But be careful! Business can lose customers even at this stage because of a not so easy purchase experience. Even at this stage the consumer can second guess the product feature suite or consider a different product or the 111 CU IDOL SELF LEARNING MATERIAL (SLM)

return policy. Hence, it is very important for businesses to get the purchase completed at this stage else they can lose the customer. Strategies for Optimizing in the Conversion Stage A good strategy at this stage is to display product reviews at checkout so that trust can be built in the potential customer. This needs to be done with tact to not take away the customer’s focus from purchase completion. The content displayed should not be clickable so that the customer does not drop off the checkout page. Post Purchase Behaviour This is the stage in the purchasing journey where the consumer looks back on his/her recent purchase and considers if it proved to be good use of money. Repeat purchase and recommendation to family/friends is a direct result if the purchase satisfies the customer. Marketers need to have a post purchase strategy deployed to make repeat purchase more probable. Repeat business generally accounts for one third of the total sales volumes. And hence this opportunity to create repeat buyers should not be missed. In this stage, you need to have a post-purchase strategy to increase the likelihood that customers will engage with your brand again in the future. Return customers account for 1/3 of a store’s total income on average, so make sure you are not missing out on this super valuable opportunity to increase your ecommerce conversion rate by turning shoppers into repeat buyers. Our overall reactions to a product after we have bought it—what researchers call consumer satisfaction/dissatisfaction (CS/D) — obviously play a big role in our future behaviour. It is a lot easier to sell something once than to sell it again if it bombed the first time. We evaluate the things we buy as we use them and integrate them into our daily consumption activities. Post Purchase Satisfaction What exactly do consumers look for in products? That is easy: They want quality and value. However, these terms have slippery meanings that are hard for us to pin down. We infer quality when we rely on cues as diverse as brand name, price, product warranties, and even our estimate of how much money a company invests in its advertising. Satisfaction or dissatisfaction is more than a reaction to how well a product or service performs. According to the expectancy disconfirmation model, we form beliefs about product performance based on our prior experience with the product or communications about the product that imply a certain level of quality. When something performs the way we thought it would, we may not 112 CU IDOL SELF LEARNING MATERIAL (SLM)

think much about it. If it fails to live up to expectations, this may create negative feelings. However, if performance happens to exceed our expectations, we are happy campers. This perspective underscores how important it is to manage expectations. We often trace a customer’s dissatisfaction to his or her erroneous expectations of the company’s ability to deliver a product or service. No company is perfect. It is just not realistic to think that everything will always turn out perfectly (although some firms do not even come close!). For a while, the hotel chain Holiday Inn adopted the slogan “No surprises” to assure guests of flawless service. Inevitably, there were surprises (no operator to answer the phone, an unmade bed) and the company had to drop its promise of perfection. Post-purchase Outcome and Reactions This comprises primarily two stages: Post purchase cognitive dissonance and Product usage and reaction. Stage I: Post purchase cognitive dissonance: Once the purchase is complete, the consumer can feel anxious about the product’s performance. He/She begins to question the purchase decision by evaluating the following aspects: Choice of product, Choice of brand, Value for money. Generally, this cognitive dissonance occurs in the following situations:  Irrevocable purchase activity  No Return policy  Unique alternatives  Product purchased is high involvement  Alternatives are also desirable and comparable to the product purchased to reduce this dissonance; consumers adopt the following strategies:  They take the opinion of other customers who are satisfied with the brand/product  They ask the dealer for some reassurance  They evaluate more information on the product  They rationalize their decision  Refer to data or reports that recommend the brand/product  Make other people also buy the same product Similarly, marketers also deploy certain strategies like warranties/guarantees, membership and follow up on purchases to reduce dissonance as far as possible. 113 CU IDOL SELF LEARNING MATERIAL (SLM)

Stage II: Product usage and reaction: Post purchase, the consumer compares the product performance vis a vis his/her expectations. Thus, creating an experience for the customer that can impact future purchase decisions by closing the feedback loop. This post purchase product evaluation can have three resulting scenarios: Performance meets expectations: This makes the consumer feel neutral about the products and make him/her think of alternatives while making a purchase in future. ● Performance exceeds expectations: This scenario leads to repeat purchase as the consumer feels more positively about the product and is also willing to recommend the same to others. ● Performance falls short of expectations: When this happens, the customer feels negatively of the product and will bad mouth the same. Customers might also look for alternatives and express dissatisfaction or even legal action. Note: It should be observed here that the consumer decision making process that comprises five stages is not a straightforward process. Each of its stages is a result of dynamic interaction of consumer behaviour and environmental factors. Also, this process might not necessarily be linear. It could take different paths depending on the purchase situation (emergency or routine), nature of product (high or low involvement), type of problem solving (LPS, RPS or EPS and consumer characteristics. 14.4 SUMMARY ● The decision-making process of a consumer is a choice amongst alternatives that can address problems. ● This process involves a continuous flow of interactions among cognitive and affective processes, environmental factors, and behavioural actions. ● A successful marketing strategy identifies the consumer need and matches it with the best possible solution. Consumers can be understood better by studying their characteristics closely. ● There are several factors that guide the selection of a retail store. ● Retailers attract footfalls through price advertising. Location of a retail store impacts consumer’s purchase behaviour. The post purchase outcome and reactions consist of following two stages; Stage I comprises Post purchase Cognitive Dissonance, and Stage II comprises Product usage and reaction. 114 CU IDOL SELF LEARNING MATERIAL (SLM)

14.6 KEYWORDS Consumer Research: the process and tools used to study consumer behaviour. Exploratory Research: is an examination of resources and materials that had already been collected and can be of value to the research at hand and consists mostly of reviewing secondary data. Qualitative Research:Studies that attempt to delve into the consumer’s unconscious or hidden motivations. This research utilizes focus groups,depth interviews, motivational research, and projective techniques. Quantitative Research: Gathering and analysing statistical data, utilizing observational research, experimentation, and survey research. Motivational Research: A “term of art” that refers to qualitative studies conducted by Dr. Ernest Dichter in the 1950sand 1960, which were designed to uncover consumers’ subconscious or hidden motivations in the context of buying and consumption. 14.7 LEARNING ACTIVITY 1. Empire shopping mall has just launched in your town. To promote their outlets and increase the customer loyalty, they are planning to capture the customer experience after their mall visit. What are the possible ways Empire mall management can employ to capture the feedback? ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ 2. Based on the profile of the below provided people, define their outlet selection criteria. And justify their choices based on their behaviour: Ram Prasad: A rural poor farmer Vijay Sethi: A successful urban businessman Radhika: A Middle-class urban housewife Gyan Prakash: A Rich village landlord ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 115 CU IDOL SELF LEARNING MATERIAL (SLM)

14.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Illustrate post purchase behaviour for consumer. 2. Why is it important to capture post purchase satisfaction? 3. Explain consumer reaction if Performance falls short of expectations. 4. State what difference will a good image make inside a store? 5. Write a note on Post purchase Cognitive Dissonance. Long Questions 6. Discuss the Criteria for outlet selection. 7. What are the ways to capture post purchase consumer behaviour? 8. Explain Consumer behaviour Product usage and reaction. 9. What is the role of Advertising in Outlet selection? 10. What is possible Post-purchase outcome and reactions? B. Multiple Choice Questions 1. A consumer’s decisions are based on marketing mix related to the: a. knowledge b. affect c. behaviour d. All of these 2. spill over sales refers to: a. Sales of discounted items b. Sales of additional items c. Sales of clearance items d. Sales of damaged items 3. Which of the below is an important criteria for the customer while store selection for purchase? a. Location 116 CU IDOL SELF LEARNING MATERIAL (SLM)

b. The variety c. The square feet of floor space d. All of these 4. Displaying reviews on checkout pages is aimed at: a. Building trust b. Distracting the customer c. To provide more selection options to the user d. None of these 5. Which of the below cases is not an example of Cognitive Dissonance? a. the purchase activity is irrevocable b. the consumer can return the product c. the decision making and purchase relates to a high involvement product d. All of these Answers: 1 d) 2 b) 3 d) 4 a) 5 b) 14.9 REFERENCES Reference Books: ● Solomon, Michael R., Consumer Behaviour: Buying, Having and Being, PHI Learning Pvt. Ltd., New Delhi. ● Leon Schiffman, Leslie Kanuk, 2014. Consumer Behavior, Global Edition, Pearson Education. ● Ramesh Kumar, S., 2017, Consumer Behaviour the Indian Context Concepts and Cases, Pearson India. Textbooks: ● Schiffman L.G. and Kanuk L.L., Consumer Behaviour, Pearson Education, New Delhi. ● Hawkins, D. I. & Best R. J. and Coney, K.A. and Mookerjee, A, Consumer Behaviour- Building Marketing Strategy. Tata McGraw Hill, New Delhi. 117 CU IDOL SELF LEARNING MATERIAL (SLM)

Websites:  https://www.coursehero.com/file/p7ovrk6o/With-respect-to-marketing-programmed- decisions-are-related-to-infrequent/  https://www.yourarticlelibrary.com/consumer-behaviour/decision-making-consumer- behaviour/involvement-of-consumers-in-decision-making/64198  https://www.mbaknol.com/marketing-management/nicosia-model-of-consumer- behavior 118 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 15: ORGANIZATIONAL BUYING BEHAVIOUR Structure 15.0 Learning Objectives 15.1 Introduction 15.2 Organizational Buyer Characteristics 15.3 Purchase and Demand Patterns 15.4 Factors Influencing Organizational Buyer Behaviour 15.4.1 Organizational Buyer Decision Process 15.4.2 Organizational Buying Roles 15.5 Summary 15.6 Keywords 15.7 Learning Activity 15.8 Unit End Questions (Descriptive and MCQ) 15.9 References 15.0 LEARNING OBJECTIVES After studying this unit, student will be able to: ● Learn the organizational buyer characteristics. ● Identify purchase and demand patterns. ● Explain factors influencing organizational buyer behaviour. ● Define organizational buyer decision process. ● Explain organizational buying roles. 15.1 INTRODUCTION The decision-making process differs when people choose what to buy on behalf of an organization rather than for personal use. Many employees of corporations or other organizations make purchase decisions daily. Organizational buyers are people who purchase goods and services on behalf of companies for the companies’ use in manufacturing, distribution, or resale. These individuals buy from business-to-business (B2B) marketers that must satisfy the needs of organizations such as corporations, government agencies, hospitals, 2 CU IDOL SELF LEARNING MATERIAL (SLM)

and retailers. In terms of sheer volume, B2B is where the action is: Roughly $2 trillion worth of products and services change hands among organizations, which is more than the end consumer’s purchase. Organizational buyers have a lot of responsibility. They decide on the vendors with whom they want to do business and what specific items they require from these suppliers. The items they consider range in price and significance from paper clips (by the case, not the box) to multimillion-dollar computer systems. Several factors influence the organizational buyer’s perception of the purchase situation. These include his or her expectations of the supplier (e.g., product quality, the competence and behaviour of the firm’s employees, and prior experiences in dealing with that supplier), the organizational climate of the company (i.e., how its rewards performance and what it values), and the buyer’s assessment of his or her own performance (e.g., whether he or she believes in taking risks). Like other consumers, organizational buyers engage in a learning process in which employees share information with one another and develop an “organizational memory” that consists of shared beliefs and assumptions about the best choices to make. Just as the “market beliefs” we discussed previously influence a consumer while shopping with the family on the weekend, the same thing happens at the office. He or she (perhaps with fellow employees) solves problems as they search for information, evaluate alternatives, and decide. Business-to-business (B2B) Business-to-business (B2B) e-commerce refers to Internet interactions between two or more businesses or organizations. This includes exchanges of information, products, services, or payments. The Web revolutionized the way companies communicate with other firms and even the way they share information with their own people. Today the majority of B2B companies, even those that until recently relied heavily on “old-school” techniques such as cold calls and mailed newsletters, use social media to connect with customers and business partners. In the simplest form of B2B e-commerce, the Internet provides an online catalogue of products and services that businesses need. Companies like Dell Computer use their Internet site to deliver online technical support, product information, order status information, and customer service to corporate customers. Early on, Dell discovered that it could serve the needs of its customers more effectively if it tailored its Internet presence to different customer segments. Today Dell’s Internet site allows shoppers to get recommendations based on their customer segment (home, home office, government, small business, and education). The 3 CU IDOL SELF LEARNING MATERIAL (SLM)

company saves millions of dollars a year as it replaces hard-copy manuals with electronic downloads. For its larger customers, Dell provides customer specific, password-protected pages that allow business customers to obtain technical support or to place an order. We must consider these important features when we try to understand the purchasing decisions organizations make. Having said that, however, there are more similarities between organizational buyers and ordinary consumers than many people realize. True, organizational purchase decisions do tend to have a higher economic or functional component compared to individual consumer choices, but emotional aspects do play a role. Organizational buyers may appear to the outsider to be models of rationality, but at times they base their decisions on brand loyalty, on long-term relationships with suppliers or salespeople, or even on aesthetic preferences. Even investors, who are supposed to make cold, calculated judgments about the worth of companies based on financial indicators, sometimes are influenced instead by other concerns; for instance, they may be biased toward companies that provide better working conditions for employees or that are unusual in some other way. Does B2B Decision Making Compare to Consumer Decision Making? Let us summarize the major differences between organizational and industrial purchase decisions versus individual consumer decisions: ● The purchase decisions that company make frequently involve many people, including those who do the actual buying, those who directly or indirectly influence this decision, and the employees who will use the product or service. ● Organizations and companies often use precise technical specifications that require a lot of knowledge about the product category. ● Impulse buying is rare (industrial buyers do not suddenly get an “urge to splurge” on lead pipe or silicon chips). Because buyers are professionals, they base their decisions on experience and they carefully weigh alternatives. ● Decisions often are risky, especially in the sense that a buyer’s career may ride on his judgment. ● The dollar volume of purchases is often substantial; it dwarfs most individual consumers ‘grocery bills or mortgage payments. One hundred to 250 organizational customers typically account for more than half of a supplier’s sales volume, which gives the buyers a lot of influence over the supplier. ● As selling to organisations require more face-to-face interactions with the stakeholder, B2B marketing focuses more on personal selling than advertising 4 CU IDOL SELF LEARNING MATERIAL (SLM)

15.2 ORGANIZATIONAL BUYER CHARACTERISTICS Following are the key characteristics of buying behaviour in organizations: 1. Geographical Concentration While the consumer market can be spread across geographies, generally the organizational buyers are concentrated in a particular area. Which is generally the area closest to the supply chain for that industry. 2. Derived Demand Demand from the end consumer in turn creates derived demand for organizational buying. For example, demand for generators is derived from the end consumers of electric appliances and thus changes accordingly. 3. Few Buyers and Large Volume Generally, organizational buying is of high monetary value, but the decision making is limited to a small group of people. 4. More Direct Channel of Distribution In consumer buying there is a complex structure of the purchase value chain which involves retailers and wholesalers. This introduces some distance between the retail buyer and seller. While in organizational buying there is direct interaction between the buyer and seller. 5. Rational Buying In organizational buying, the buyers make rational decisions by minutely evaluating the product characteristics like quality, features, price, etc. 6. Complexity The participation of different people from different perspectives makes the organizational buying process highly complex. As part of the organizational buying team, there can be motivators, users, buyers, and decision makers. 7. Professional Buying In comparison to consumer buying, organizational buying is a more professional process where participants are trained in the various aspects like contract, material management, legal aspects, and the buying process. This gives rise to more streamlined and professional buying methods. 5 CU IDOL SELF LEARNING MATERIAL (SLM)

15.3 PURCHASE AND DEMAND PATTERNS Customer Behaviour Patterns Buying behaviour patterns are not synonymous with buying habits. Patterns exhibit mental designs that are predictable while habits are tendencies that develop towards an action and over time, they become spontaneous. Every consumer has unique buying habits which collectively present themselves as patterns in buying behaviour. These patterns are closely studied by marketers. These patterns can be grouped as follows: 1. Place of Purchase Customers more often split their purchases as per the stores where the purchase was made even though all items might be available in all those stores. For example, consumer preference to buy clothes from clothing brands rather than a hypermarket which also stocks clothes. Product availability in several stores discourages store loyalty. Marketers can identify key store locations by studying the behaviour of the customer in relation to choose of store. 2. Items Purchased The type and the quantity of items purchased shed light on consumer insights. While items that are necessities can be purchased in bulk, luxury items are bought in smaller quantities and less frequently Also price, perishability, unit of sale influence the amount that a consumer will purchase. 3. Method ofPurchase The method sed by the customer to make a purchase can give important insights on his/her profile. Nowadays, a purchase can be made by store walk in, online or even on a call. Payment can also be made through various modes. 4. Time andFrequency ofPurchase Customers nowadays want convenience and customer service irrespective of the time of making the purchase. Hence, businesses need to meet these customer always demands while keeping in mind the seasonal variations and regional differences. 6 CU IDOL SELF LEARNING MATERIAL (SLM)

15.4 FACTORS INFLUENCING ORGANIZATIONAL BUYER BEHAVIOUR The organizational decision-making process depends on the purchase. As when individuals choose, the more complex, novel, or risky the decision, the more effort the group devotes to information search and to evaluating alternatives. However, if these buyers rely on a fixed set of suppliers for routine purchases, this greatly reduces their information search and effort. Typically, a group of people (members of a buying centre) plays different roles in more complex organizational decisions. As we will see later, this joint involvement is somewhat like family decision making, in which family members are likely to participate in more important purchases. Note: Unlike a shopping centre, a buying centre does not refer to a physical place, but rather the group of people who make the decision. The classic buy class theory of purchasing divides organizational buying decisions into three types that range from the least to the most complex. Three decision-making dimensions describe the purchasing strategies of an organizational buyer: The classic buy class theory of purchasing divides organizational buying decisions into three types that range from the least to the most complex. Three decision-making dimensions describe the purchasing strategies of an organizational buyer: ● The level of information he or she must gather prior to the decision. ● The seriousness with which he or she must consider all possible alternatives. ● The degree to which he or she is familiar with the purchase. In practice, these three dimensions relate to how much cognitive effort the buyer expends when he decides. Three types of “buy classes,” or strategies determined by these. Dimensions encompass most organizational decision situations. ● A straight rebuy is a habitual decision. It is an automatic choice, as when an inventory level reaches a pre-established reorder point. Most organizations maintain an approved vendor list, and if experience with a supplier is satisfactory, there is little or no ongoing information search or evaluation. ● A modified rebuy situation involves limited decision making. It occurs when an organization wants to repurchase a product or service but also wants to make some minor modifications. This decision might involve a limited search for information among a few vendors. One or a few people will probably make the final decision. 7 CU IDOL SELF LEARNING MATERIAL (SLM)

● A new task involves extensive problem solving. Because the company has not made a similar decision already, there is often a serious risk that the product will not perform as how. Table 15.1 Types of Organizational Buying Decisions 15.4.1 Organizational Buyer Decision Process Organizational buying behaviour is the process through which organizations buy services/goods. In contrast to popular belief, this is not a simple process. Organizational buying has the following stages: Stage-1 – Problem Recognition At this stage, an employee of the company identifies a problem that can be resolved via a product/service. Stage-2 – General Need Description Here, the organization defines the requirement in terms of the desired characteristics and quantity. Stage-3 – Product Specification This stage is characterized by identification of the required product along with the technical specifications. Stage-4 – Value Analysis At this stage, the organization looks for ways to reduce cost either through redesign or standardization or by reducing production costs. Stage-5 – Supplier Search Organizations look for good vendors at this stage. Stage-6 – Proposal Solicitation At this stage, the buying organization invites proposals from suppliers. 8 CU IDOL SELF LEARNING MATERIAL (SLM)

Stage-7 – Supplier Selection At this stage, the buying organization reviews supplier proposals and shortlists. Stage-8 – Order-Routine Specification Now the buying organization creates the final order for the chosen supplier. This order comprises the quantity needed, expected delivery timelines, warranties, technical specifications and return policies. Stage-9 – Performance Review At this stage, the buying organization reviews the supplier performance to take a call on whether to retain or drop the supplier. 15.4.2 Organizational Buying Roles Why do we lump together big corporations and small families? One important similarity is that in both cases individuals or groups play several specific roles when they choose products or services for their organizational unit. Depending on the decision, the choice may include some or all the group members, and different group members play important roles in what can be a complicated process. These roles include the following: ● Initiator—the person who brings up the idea or identifies a need. ● Gatekeeper—the person who conducts the information search and controls the flow of information available to the group. In organizational contexts, the gatekeeper identifies possible vendors and products for the rest of the group to consider. ● Influencer—the person who tries to sway the outcome of the decision. Some people may be more motivated than others to get involved, and participants also possess different amounts of power to get their point across. ● Buyer—the person who makes the purchase. The buyer may or may not actually use the product. ● User—the person who consumes the product or service. 15.5 SUMMARY ● The decision-making process differs when people choose what to buy on behalf of an organization rather than for personal use. ● Organizational buyers have a lot of responsibility. ● Business-to-business (B2B) e-commerce refers to Internet interactions between two or 9 CU IDOL SELF LEARNING MATERIAL (SLM)

more businesses or organizations. ● Organizational buying is based on derived demand. ● Buying behaviour patterns are not synonymous with buying habits. ● The classic buy class theory of purchasing divides organizational buying decisions. into three types that range from the least to the most complex. ● The organizational decision-making process depends on the purchase. ● Organizational buying behaviour refers to the process of how companies or organizations buy goods and services. 15.6 KEYWORDS Brand Loyalty:A measure of how often consumers buy a given brand, whether they switch brands and, if they do, how often, and the extent of their commitment to buying the brand regularly. Brand Personification: Communicating human features of a brand in advertising. Trickle-Down Effect: Originally applied to fashion, the concept states that members of lower classes adopt the fashions of the upper class and maintain them even after the upper class has abandoned these fashions, presumably because they no longer reflect the exclusivity of the upper class. To “restore” their exclusivity, members of the upper class adopt new fashions, which are subsequently copied by the lower classes, and the cycle is repeated. Trial ability: One of the five characteristics identified as a determinant of consumer acceptance of a new product representing the degree to which a new product can be tried on a limited basis. Traditional Media: Impersonal, communication channels that are generally classified into print (newspapers, magazines, billboards) and broadcast (radio, television) media, where the communications’ receivers get the same (one-way) message and cannot interact with the senders. 10 CU IDOL SELF LEARNING MATERIAL (SLM)

15.7 LEARNING ACTIVITY 1. Your company has decided to procure gifts for distribution among 10,000 employees on the eve of 10 years of celebration of your company. You are required to create and present a plan for the complete procurement process. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------ 2. Your father is planning to marry your sister but since he stays out of the country, he made you in-charge for the complete procurement process. He has asked you to estimate the budget and create a detailed plan for the procurement process. Now this is your turn to impress him. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 15.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions Why is decision making for organization buying different? 1. Describe Customer behaviour patterns. 2. Explain the purchasing strategies of an organizational buyer. 3. State three types of “buy classes. 4. Write a note on similarities between organizational buyers and ordinary consumers. Long Questions 1. Discuss Business-to-business (B2B) e-commerce. 2. Explain Organizational Buyer Decision Process. 3. Explain factors influencing organizational buyer behaviour. 4. Compare B2B Decision Making to Consumer Decision Making. 5. What are the main characteristics of organizational buying behaviour? B. Multiple Choice Questions 11 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Organizational memory is: a. a learning process in which employees share information with one another b. a hardware setup of the company c. an order for procurement of computers d. None of these 2. Business-to-business (B2B) e-commerce refers to: a. Business of a company with its rich customers b. Business of a company with the government c. Business of one company with other company d. Business of a government company with the company 3. Which of the below is true? a. Impulse buying is rare in individuals as well as companies b. Impulse buying is rare in individuals but frequent in companies c. Impulse buying is frequent in individuals but rare in companies d. There is no impulse buying in individuals as well as companies 4. Which of the below is true? a. Organizational buyers remain concentrated in certain geographical area whereas consumers' market remains scattered all around b. consumers' markets remain concentrated in certain geographical area whereas Organizational buyers remains scattered all around c. Organizational buyers as well as consumers' market both remain concentrated in certain geographical area d. Organizational buyers as well as consumers' market both remain scattered all around 5. Which of the statements is true? a. Total volume of products and services purchase for organizational buyer is more than retail consumers purchase b. Total volume of products and services purchase for retail consumers purchase is more than organizational buyer c. Total volume of products and services purchase for retail consumers purchase and organizational buyer is equal d. Total volume of products and services purchase for retail consumers purchase and organizational buyer are not correctly known Answers: 1 a) 2 c) 3 c) 4 a) 5 a) 12 CU IDOL SELF LEARNING MATERIAL (SLM)

15.9 REFERENCES Reference Books:  Solomon, Michael R., Consumer Behaviour: Buying, Having and Being, PHI Learning Pvt. Ltd., New Delhi.  Assel Henry, Consumer Behaviour, Cengage Learning, New Delhi.  Majumdar, R, Consumer Behaviour: Insights from the Indian Market, PHI Learning Pvt. Ltd., New Delhi.  Stephen Robbin, 2016, Organizational Behaviour, 2nd Ed, Trans-atlantic Publications, Inc. Textbooks:  Schiffman L.G. and Kanuk L.L., Consumer Behaviour, Pearson Education, New Delhi.  Hawkins, D. I. & Best R. J., and Coney, K.A. and Mookerjee, A, Consumer Behaviour- Building Marketing Strategy. Tata McGraw Hill, New Delhi. Websites:  https://www.businessmanagementideas.com/marketing/organisational- buying/organisational-buying-introduction-process-situations-and-buying-centre- roles-business-marketing/17632  https://openpress.usask.ca/entrepreneurshipandinnovationtoolkit/chapter/chapter-3- evaluating-entrepreneurial-opportunities/  https://www.coursehero.com/file/p65kphot/Marketers-should-avoid-the-out-of-stock- situation-because-other-brands-offer/ 13 CU IDOL SELF LEARNING MATERIAL (SLM)