Chapter Three: Buying Behavior

3.1 Introduction

The aim of marketing is to meet and satisfy target customers’ needs and wants. The field of consumer
behavior studies how individual, groups, and organization select, buy, use, and dispose of goods, services,
ideas of experiences to satisfy their needs & desires.

Understanding consumer buying behavior and "Knowing customers" are never simple. Customers may state
their needs and wants but act otherwise. They may not in touch with their deeper motivations. They may
respond to influences that change their mind at the last minute. Nevertheless, marketers must study their
target customers’ wants, perception, preferences, and shopping & buying behavior.

3.2 Model of Consumer Behavior – 7 O's Framework

Managers have had to rely on the 7’O’s framework for consumer research to answer the following questions
about the market:

Who constitute the market? Occupants

What does the market buy? Objects
Why does the market buy? Objectives
Who participates in the buying? Organizations
How does the market buy? Operations
When does the market buy? Occasions
Where does the market buy? Outlets
The starting point for understanding buying behavior is the stimulus-
response model. The central question to be answered by this model can be
stated as: "how do consumers respond to various marketing stimuli the
company might use?"

The company that really understands how consumers will respond to

different product features, prices, and advertising appeals has a great
advantage over its competitors. What is the relationship between
marketing stimuli and consumer response? In the stimulus response
model of buyer behavior, marketing and other stimuli enter the consumer's
“black box" and produce certain responses.

The marketer wants to understand how the stimuli are changed into
responses in side the consumer's black box. The black box has two parts.
First, the buyer's characteristics influence how he or she perceives and
reacts to the stimuli. Second, the buyer's decision process itself affects
outcomes.
 3.3 Factors Influencing Consumer Buying Behavior
The factors influencing a consumer’s buying behavior in summarized forms are as follows:
1. Cultural Factors
Culture
Subculture
Social class

2. Social Factors
Reference groups
Family
Roles & status

3. Personal Factors
Age & life cycle stage
Occupation
Economic circumstances
Lifestyle
Personality & self concept

4. Psychological Factors
Motivation
Perception
Learning
Belief & attitudes
3.3.1 Cultural Forces
Cultural factors exert the broadest and deepest influence on consumer behavior. The roles played by
the buyer’s culture, subculture, and social classes are particularly important.

Culture is the most fundamental determinant of person’s wants & behavior. E.g. A growing child
acquires a set of values, perceptions, preferences, and behavior through his or her family and other
key institutions.

Subculture: include nationalities, religions, racial groups, and geographical regions. Many subcultures
make up important market segments, and marketers often design products and marketing programs
tailored to their needs.

Social Class: All human societies exhibit social stratification. Stratification sometimes takes the form
of a caste system where the members of different castes are reared for certain roles and cannot
change their caste membership.

Social classes are relatively homogenous and ending divisions in a society, which are hierarchal,
ordered and whose members share similar values, interests, and behavior.

Social classes do not reflect income alone but also other indicators such as occupation, education,
and area of residence. Social classes differ in their dress, speech, patterns, recreational preferences,
and many other characteristics.
3.3.2 Social Factors

Reference Group
A person’s reference group consists of all the groups that have a direct (face-to-face) or indirect influence on the
person’s attitudes or behavior. Groups having a direct influence on a person are called membership Groups.
Some membership groups are primary groups, such as family, friends, neighbors, and coworkers, those with
whom the person interacts fairly continuously and informally. People also belong to secondary groups, such as
religious, professional, and trade union groups, which tend to be more formal and require less continuous
interaction.

People are significantly influenced by their reference groups in at least three ways. Reference groups expose the
person to new behavior and lifestyle, and influence the person’s attitudes and self-concept; they create pressures
to conform that may affect the person’s product brand and vendor choices. People are also influenced by groups
to which they do not belong. Aspirational groups are those a person would like to join. For example, a young
boy may aspire to be part of Ethiopian Coffee Sport Club and may identify himself with this group even though
he is not a member. Dissociative groups are those whose values or behavior a person rejects.

The importance of group influence varies by product and brand. It tends to be strongest when the product is
visible to others whom the buyer respects. Purchases of products that are used privately are not greatly affected
by group influence.

Groups commonly have opinion leaders. These are people within a reference group who, because of special
skills, knowledge, personality, or other characteristics, exert influences over others. Opinion leaders are found in
all strata of society, and one person may be an opinion leader in one product area and a follower in another.
A business should identify the opinion leaders in their community and make sure that they
are invited to important events. For example, the guest list for the grand opening of a
restaurant or the first anniversary of a hotel should include opinion leaders.

Family
Family members can strongly influence buyer behavior. We can distinguish between two
families in the buyer's life. The buyer's parents making the “family of orientation". The
"family of procreation" - the buyer's spouse and children - have a more direct influence on
everyday buying behavior. The family is the most important consumer- buying organization in
society.

Role and Status

A person belongs to many groups: family, clubs, and organizations. An individual’s position in
each group can be defined in terms of role and status.

A Role consists of the activities that a person is expected to perform according to the persons
around him or her. Each role influences buying behavior. For example, college students dining
with their parents may act differently than when they are dining with peers. Each role carries
a status reflecting the general esteem given to it by society. People often choose products
that show their status in society.
3.3.3 Personal Factors

A buyer’s decisions are also influenced by personal characteristics. These include, the buyer’s age and stage in the life
cycle, occupation, economic circumstance, lifestyle, personality, and self-concept.

Age & stage in the life cycle

The types of goods and services people buy change during their lifetimes. Preferences for leisure activities, travel
destinations, food and entertainment are often age related.

Buying behavior is also shaped by the family life cycle stages. If we take examples in towns, Young unmarried persons usually
have few financial burdens, and spend a good portion of their discretionary income on entertainment. Young married people
without children have high discretionary incomes and dine out frequently. Once they have children, their purchases from
restaurants can change to more delivery and carry out. When the children leave home, the discretionary income can jump,
and expenses on dining out can increase.

Marketers are expected to define their target markets in life-cycle terms and develop appropriate products and marketing
plans.

Occupation
A Person’s occupation also influences his or her consumption patterns. A blue-collar worker will buy work clothes, work
shoes, and launch boxes .A company president will buy expensive suits, air travel, country club membership, and a large
sailboat.

Economic Circumstance
Product choice is greatly affected by ones economic circumstances. People’s economic circumstances consist of their
spendable income (its level, stability, and time pattern), savings and assets (including the percentage that is liquid), debts,
borrowing power, and attitude toward spending versus saving.
Lifestyle
People coming from the same subculture, social class and occupation may lead quite different
lifestyles.

A person’s life style is the person’s pattern of living in the world as expressed in the person’s activities,
interests, and opinions. Life style portrays the “Whole person” interacting with his or her environment.

E.g. A person can choose to live a “belonging’ lifestyle by wearing conservative clothes, spending a lot
of time with a family and helping a church. Or he/she can choose an “achiever” life style by working
long hours or major projects and playing had at travel and sports.

Personality and Self-Concept

Each person has a distinct personality that influences his or her buying behavior.
By personality, we mean a person’s distinguishing psychological characteristics that lead to relatively
consistent and ending responses to his or her environment.

Personality is usually described in terms of such traits as self-confidence, dominance, autonomy,

difference, sociability, defensives, and adaptability.

Eg If Laptop computer is promoted and priced for those who want the best, then its brand image will
match his/her self-image. Marketers try to develop brand images that match the target market self
image.
3.3.4 Psychological Factors

A person’s buying choices are influenced by four major psychological factors- motivation, perception,
learning, beliefs, and attitudes. We shall discuss the above factors as follows.

Motivation
A person has many needs at any given time. Some needs are biogenic. They arise from physiological states
of tension such as hunger, thirst, and discomfort.

Other needs are psychogenic; they arise from psychological states of tension such as the need of
recognition, esteem, or belonging. A need becomes a motive when it is aroused to a sufficient level of
intensity. A motive is a need that is sufficiently pressing to drive a person to act. Satisfying the need
reduces the felt tension.

Perception
A motivated person is ready to act. How the motivated person actually acts is influenced by his or her
perception of the situation.

Perception is the process by which an individual selects, organizes, and interprets information inputs to
create a meaningful picture of the world.
People can form different perceptions of the same stimulus because of three perceptual processes:
selective attention, selective distortion and selective retention.

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

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

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

Because of selective exposure, distortion and retention marketers have to work hard to get their messages
through. This fact explains why marketers use so much drama and repetition in sending messages to their
market.
Marketers must therefore be careful to take these perceptual processes into account in designing their marketing
campaigns.

Learning
Learning involves changes in an individual's behavior arising from experience. When people act, they learn.
Learning theorist believe that learning is produced through the interplay of drives, stimuli, responses, and
reinforcement.

Beliefs and Attitudes

Through doing and learning, People acquire beliefs and attitudes. These in turn influence their buying behavior.

A Belief is a descriptive through that a person holds about something.

Manufactures are very interested in the beliefs that people carry in their heads about their products and services.
These beliefs make up product and brand images, and people act on their image.

An Attitude is a person’s enduring favorable or unfavorable evaluation, emotional, feelings, and action
tendencies toward some object or idea.

People have attitudes toward almost everything Religion politics clothes, music, food and so on. Attitude put then
into frame of mind of liking or disliking an object, moving toward or away from it.

Summary: A person's buying behavior is the result of the complex interplay of all these cultural, social, personal,
and psychological factors. Many of these factors cannot be controlled by marketers, but they are useful in
identifying and understanding the consumers that marketers are trying to influence.
 Buying Decision Processes

To be successful, marketers have to go beyond the various influences on buyers and develop an
understanding of how consumers actually make their buying decisions.

Marketers must identify who makes the buying decisions, the types of buying decisions and steps in the
buying process.

We can distinguish five roles people might play in a buying decision:

Initiator: A person who first suggests the idea of buying the product or service
Influencer: A person whose view or advice influences the decision
Decider: A person who decides on any component of buying decision- whether to buy, what to buy, how to
buy, or where to buy.
Buyer: The person who makes the actual purchase
User: A person who consumes or uses the product or services.

E.g. suppose a person wants to learn a computer. His/ her interest might have been initially stimulated by
his/ her friend (initiator). In finding for a computer house, he/ she might have consulted someone he/she
knows, who made some suggestions (Influencers)?

He/ she made the final decision (decider). His/her parents enroll him/ her at the computer house (buyer).
He/She starts learning the computer (user).
Types of Buying Decision Behavior

Consumer decision-making varies with the type of buying decision. The decision to buy tooth
paste, a tennis racket, a personal computer, and a new car are all very different. Complex and
expensive purchases are likely to involve more buyer deliberation and more participants. The
types of consumer buying behavior based on the degree of buyer involvement and the degree
of differences among brands is as illustrated below.

1. Complex Buying Behavior

Complex buying behavior involves a three step-process. First, the buyer develops beliefs
about the product. Second, he/she develops attitudes about the product. Third, he/she makes
a thoughtful choice, consumers engage in complex buying behavior when they are highly
involved in a purchase and aware of significant differences among brands.

This is usually the case when the product is expensive, bought infrequently, risky, and highly
self expressive. Typically they consume does not know much about the product category. For
example, a person buying a personal computer may not know what attributes to look for.
Many product features carry no meaning unless the buyer has done some research. The
marketer needs to differentiate the brand's features, use print media to describe the brands
benefits, and motivate store sales personnel and the buyer's acquaintances to influence the
final brand choice.
2. Dissonance – Reducing Buying Behavior
Sometimes the consumer is highly involved in a purchase but sees little difference in brands. The high involvement is
based on the fact that the purchase is expensive infrequent and risky. In this case, the buyer will shop around to learn
what is available but will buy fairly quickly, perhaps responding primarily to a good price or to purchase convenience.

For example, carpet buying is a high involvement decision because carpeting is expensive and self-expressive, yet the
buyer may consider most carpet brands in a given price range to be the same.

After the purchase, the consumer might experience dissonance that steps from noticing certain disquieting features
or hearing favorable things about other brands. The consumer will be alert to information that supports his or her
decision. In this example, the consumer first acted, then acquired new beliefs, then ended up with a set of attitudes.

Marketing communications should supply beliefs and evaluations that help the consumer feel good about his or her
brand choice.

3. Habitual Buying Behavior

Many products are bought under conditions of low involvement and the absence of significant brand differences.
Consider salt, consumers have little involvement in this product category. They go to the store and reach for the
brand. If they keep reaching for the same brand, it is at of habit, not strong brand loyalty. There is good evidence that
consumers have low involvement with most low-cost frequently purchased products.

With these products, consumer behavior does not pass through the normal sequence of beliefs, attitudes and
behavior. Consumers do not search extensively for information, evaluate characteristics and make a decision on which
brand to buy. Instead, they are passive recipients of information in television or print ads. Ad repetition creates brand
familiarity rather than brand conviction.
Marketers of such products find it effective to use price and sales promotions to
stimulate product trial. Television advertising is more effective than print because
it is a low-involvement medium that is suitable for passive learning.

4. Variety Seeking Buying Behavior

Some buying situations are characterized by low involvement but significant brand
differences. Here consumers often do a lot of brand switching. Think about
cookies. The consumer has some beliefs about cookies, chooses a brand of
cookies without much evaluation, and evaluates the product during consumption.
Next time, the consumer may reach for another brand out of a wish for a different
taste. Brand switching occurs for the sake of variety rather than dissatisfaction.

The market leader and the minor brands in thus product category have different
marketing strategies. The market leader will try to encourage habitual buying
behavior by dominating the shelf space, avoiding out-of-stock conditions, and
sponsoring frequent reminder advertising. Competitor firms will encourage variety
seeking by offering lower prices, deals, coupon, free samples, and advertising that
presents reasons for trying something new.
The Stages of the Buying Decision Process

Buyers to reach a buying decision pass through five stages: problem recognition, information search,
evaluation of alternatives, purchase decision and post purchase behavior. This model emphasizes that
the buying process starts long before the actual purchase and continues after the purchase. Buyers may
not need to pass through all stages with every purchase they make. In more routine purchases,
consumers may skip some of these stages. However consideration of all the stages arises when a
consumer faces a new purchase situation, especially one involving extensive problem solving.

Problem Recognition
The buying process starts when problem or need is recognized. The need can be triggered by internal as
well as external factors. The marketer needs to determine the factors and situations that usually trigger
consumer problem recognition. The marketer should research consumers to find out what kinds of
needs or problems arise, what brings them about, and how they lead the consumer to a particular
product

Information search
An aroused consumer may or may not search for more information. If the consumer’s drive is strong and
a satisfying product is near at hand, the consumer is likely to buy it then. If not, the consumer may
simply store the need in memory or undertake an information search bearing on the need.
At one level the, the consumer may simply enter heightened attention or may go into active information
search.
heightened attention – the consumer become receptive to the information related to the product that
satisfy their need (product class advertisings, products used by friends and product conversations)
Active information search: the consumer looks for reading materials, phones to friends, and gathers
information in other ways.

The amount of consumer search activity increases as the consumer moves from decisions that involve
limited problem solving to those that involve extensive problem solving.

The consumer can obtain information from any of several sources: consumers information sources
include:
Personal sources: family friends, neighbors etc
Commercial sources: advertising, soles people, dealers, packaging, displays etc
Public sources: mass media, consumer rating organizations etc
Experiential sources: handling, examining, and using the product

The relative influence of those information sources varies with the product and buyer. Generally, the
consumer receives the most information about a product from commercial sources- those controlled
by the marketer. The most effective sources, however, tend to be personal.

In order to prepare effective communication to target markets the marketer should carefully identify
consumers’ sources of information and the importance of each source.
Evaluation of Alternatives
The marketer needs to know about alternative evaluation that is, how the consumer processes information to
arrive at brand choices. Unfortunately, no simple single evaluation process is used by all consumers- nor even by
one consumer in all buying situation. Instead, several evaluation processes are at work.
How consumers go about evaluating purchase alternatives depends on the individual consumer and the specific
buying situation. In some cases, consumers use careful calculations and logical thinking. At other times, the some
consumers do little or no evaluation, consumers make buying decisions on their own; sometimes they turn to
friends, consumers’ guides, sales people, or even computer for buying advice.
Marketers should study buyers to find out how they actually evaluate brand alternatives. If they know what
evaluation processes go on, marketers can take steps to influence the buyer’s decision.

Purchase Decision
In the evaluation stage consumer ranks brand and forms purchase intentions. Generally, the consumer’s
purchase decision will be to buy the most preferred brand, but tow factors can come between the purchase
intention and the actual purchase.

The first factor is the attitude of others. Suppose you have the intention to buy an expensive player. But your
husband or wife may feel strongly that you should buy the lowest priced player. Then the chance of your buying a
more expensive player will be reduced. How much another person’s attitudes will affect some one’s choice
depends both on the strength of the person’s altitudes to wards the individual’s buying decision and on the
individual’s wishes to comply with the person’s wishes.

Purchase intention is also influenced by unexpected situational factors. The consumer forms a purchase intention
based on such factors as expected family income, expected price, and expected benefits from the product. When
the consumer is about to act unexpected
situational factors may arise to change the purchase intention. For example, the consumer may lose his/her
job; some other purchase may become more urgent and so on.

A consumer’s decision to change, postpone or avoid a purchase decision is heavily influenced by perceived
risk. Many purchases involve some risk taking. Consumers can not be certain about the purchase outcome.

The marketer must understand the factor that provide feelings of risk in consumers and must respond with
information and support that will reduce the perceived risk

Post Purchase Behavior

The marketer’s job does not end when the product is bought. After purchasing the product; consumer will
be satisfied or dissatisfied and will be engaged in post purchase behavior of interest to the market.

The marketer must monitor:

Post Purchase Satisfaction

Satisfaction is the function of closeness between expectation and performance
If expectation is > performance  the consumer will be disappointed
If expectation is = performance  the consumer will be satisfied
If expectation is < performance  the consumer will be delighted

Consumers base their expectation on messages they receive from sellers, friends and other information
sources. Therefore, marketers should not promise to their consumers what they can not deliver.
 Post Purchase Action
Satisfaction or dissatisfaction influences the subsequent behavior of consumers.
If the buyer is satisfied
will purchase the product again
talks favorably about the product
pays attention to competing brand and advertising
and may buy other products from the company

If the buyer is dissatisfied he/she has a choice between taking and not taking any action. If he/she acts, he/she can take;

Private action
Not to buy the product again
Warn friends not to buy it
Return the product

Public action
Complaining to the co.
Going to a lawyer
Complaining to others etc

Post Purchase Use And Disposal

Marketers should monitor how buyers use and dispose the product.
If they store the product they may not be satisfied.
If they find new use to the product marketers should advertise the new use
3.5 Business Buying Behavior

5.5.1 Introduction
The business market consists of all business users, organization that buy goods and services for one of the following purposes.

To make other goods and services

To resell to other business users or to consumers and
To conduct the organizations operations

In the business market we deal with both consumer products and business products.
Business marketing, then, to the marketing of goods and services to business users, as contrasted to ultimate consumers.

All the manufactures involved have factories and offices with furniture, machinery, fornaees, lights and maintenance equipment
and supplies required to run them – and these also are business goods that have to be produced and marketed.

In short, thousands of business products and business marketing activities come into play before almost any product – consumer
good or business good – reaches its final destination.

5.2.2 Components of the Business Market

Traditionally, business markets were referred to as industrial markets. This caused many people to think the term referred only to
manufacturing firms. But as you can see from what we just explained, the business market is a lot more than that.

Certainly manufactures constitute a major portion of the business market, but there are also six other components – agriculture,
resellers, government agencies, service companies, non profit organizations, and international. Although, they are often
underrated or overlooked because of the heavy attention devoted to manufacturing each is a significant part of the business
market.
. The Agriculture Market
The high level of income from the sale of agricultural products – gives farmers, as a group, the purchasing
power that makes them a highly attractive market. Companies hoping to sell to the farm market must
analyze it carefully and be aware of significant trends. Farming is becoming more automated and
mechanized. This, means, of course, the capital investment is farming to increasing. Agribusiness – farming,
food processing, and other large scale farming related business – to big business in every sense of the
word.

Agriculture has become a modern industry. Like other business executives, farmers are looking for better
ways to increase their productivity, at their expenses, and manage their cash flows.

2. The Reseller Market

Intermediaries like wholesalers and retailer constitute the reseller market. The basic activity of resellers –
unlike any other business market segment – is buying products from suppliers organizations and reselling
these items in essentially the same form to the resellers’ customers. In economic terms, resellers’ create
time, place, and possession utilities, rather than form utility.

Resellers also buy many goods and services for use in operating their businesses – items such as office
supplies and equipment, warehouses, material handling equipment, legal services electrical services, and
material supplies. In these buying activities, resellers are essentially no different from manufacturers,
financial institutions, or any other segments of the business market. It is their role as buyers for resale that
differentiate resellers and attracts special marketing attention from their suppliers.
The Government Market
The fantastically large government market includes the federal, state, and local units that spend a huge
amount for buying for government institutions, such as schools, offices, hospitals, and military bases.

Government procurement processes are different from those in the private sector of the business market. A
unique feature of government buying is the competitive bidding system. Much government procurement,
by law, must be done an a bid basis. That is the government agency advertiser for bids using a standard
format called a request for proposals that states specifications for the intended purchases. Then it must
accept the lowest bid that meets these specifications.

Despite the opportunities, many companies make no effort to sell to the government, because they are
intimidated by the red tape.

There is no question that dealing with the government to any significant extent usually requires specialized
marketing techniques and information.

4. The Service Market

Currently, firms that produce services greatly outnumbered firms that produces goods. That is, there are
more service firms than the total of all manufacturers, mining companies, construction firms and enterprise
engaged in farming, forestry and fishing. The service market includes are transportation carriers and public
utilities, and the many financial, insurance, legal and real estate firms. This market also includes
organizations that produce and sell such diverse services as rental housing, recreation and entertainment,
repairs, health care, personal care and business services.
5. The “non business” business market
In recent year we have been giving some long-overdue marketing attention to the multi billion-dollar
market comprised of so-called non-business or non-profit organizations.

The non-business market includes such diverse institutions as churches, colleges and universities,
museums, hospital, and other health institutions, political parties, labor unions, and charitable organic
stations.

Actually, each of these non-business organizations is a business organization. These organizations do

virtually all the things that businesses do – often a product, collect money, make investment, hire
employees – and therefore require professional management.

Non-profit organizations also conduct marketing campaigns. In terms they spend billions of dollars
buying goods and services to run their operations.

6. The International Market

The biggest recent growth in the international market has been in medical products, scientific
instruments, environmental protection systems, and consumer goods.

Another dimension of international business is companies manufacturing abroad in overseas

subsidiaries. Though these sales do not count as exports, they are a significant part of the operations of
many firms. Philip Morris, for example had a $ 3 billion in exports in 1991, but 13 billion in sales by
foreign subsidiaries.
5.5.3 Characteristics of Business Market Demand

Four demand characteristics differentiate the business market from the consumer market: Demand is derived;
Demands tend to be inelastic; Demand is widely fluctuating; and the market is well informed.

1. Demand is derived
The demand for a business product is derived from the demand for the consumer products in which that
business product is used. Thus the demand for steel depends partially on consumers demand for automobiles
and refrigerators, but it also depends on the demand for butter, baseball gloves and co-players. This is because
the tool, machines, and other equipment needed to makes these items are made of steel. Consequently, as
the demand for baseball gloves increases, companies may buy more steel for sewing machines or filing
cabinet.

2. Demand is inelastic
Another characteristic of the business market is demand elasticity of business products.

Elasticity of demand refers to how responsive demand is to a change in the price of a product.

The demand for many business products is relatively inelastic which means that the demand for a product
responds very little to changes in its price.

As a result, when the price of the business product changes, there is very little change in the price of the
related consumer products. Since there is no appreciable shift in the demand for the consumer goods, then –
by virtue of the derived demand feature – there is no change in the demand for the business product.
3. Demand is widely fluctuating

Although the demand for business goods does not change much in response to price changes, it does
respond to other factors. In fact, market demand for most classes of business goods fluctuates considerably
more than the demand for consumer products. The demand for installations major plant equipments,
factories, and so on- is especially subject to change. Substantial fluctuations also exist in the market for
accessory equipment office furniture and machinery, delivery twice, and similar products. These tend to
accentuate the swings in the demand for business raw materials and fabricating parts. We can see this very
clearly when declines in demand in the construction and also industries affect suppliers to lumber, steel,
and other materials and parts.

A major reason for these fluctuations is that individual businesses are very concerned about having a
shortage of inventory when consumer demand increases or being caught with excess inventory should
consumer demand decline. Thus they tend to over react to signals from the economy, building inventories
when they see signs of growth in the economy and working inventories down when the sign suggests
stagnation. When the actions of all the individuals firms are combined, the effect on their suppliers is
widely fluctuating demand. This is known as the acceleration principle.

One exception to this generalizations is found in agricultural products intended for processing.

Because, people have to eat, there is reasonably consistent demand for animals intended for meat
products, for fruits and vegetables that will be canned or frozen and for grains and diary products used in
cereals and baked goods.
4. Buyers are well informed
Typically, business buyers are better informed about what they are buying than are ultimate
consumers. They know more about the relative merits of alternatives sources of supply and
competitive products for three reasons. First, there are relatively few alternatives for a business
buyer to consider. Consumers typically have many more brands and sellers from which to choose
than do business buyers.

Second, the responsibility of a buyer in an organization is ordinarily limited to a few product.

Unlike, a consumer who buys many different things, a purchasing agent’s job is to be very
knowledgeable about a narrowly defined set of products. Third, for most consumer purchase, an
error is only a minor inconvenience. However, in business buying the rest of mistake may be
thousands of dollars or even the decision makers job.

This need for information has a significant marketing implication. Sellers of business products
place greater emphases on personal selling than do firms that market consumer products.

Business sales people must be carefully selected, properly trained, and adequately compensated.
They must give effective sales presentations and furnish satisfactory service both before and after
each sales is made.

Sales executives are devoting increased effort to the assignment of sales people to key accounts to
ensure that these representative are compatible with business buyers.
5.5.4 Determinants of Business Market Demand

To analyze a consumer market, a marketer would study the distribution of population and various
demographics such as income, and then try to determine the consumers buying motives and habits.

Essentially, the same type of analysis can be used by a firm selling to a business market.
The following discussion identify the several basic deference between consumer market and business
marketers.

A. Number and type of Business users

Number of buyers
The business market contains relatively few buying units compared to the consumer market.
The business market seems even more limited to most companies, because they sell to only a small
segment of the total market.

Size of Business users.

While the business market may be limited in the total number of buyers, it is large in purchasing power. A
relatively small percentage of firms account of the greatest share of the value added to products by
manufacturing.

The marketing significance of these facts is that buying power in many business markets is highly
concentrated in a relatively few firms. That is, a high percentage of industry sales are accounted for by a
very small number of firms.
B. Regional concentration of business users
There is substantial regional concentration is many major industries and among business users as a whole. A firm
that sell producers used in copper mining will find the block of its market is concentrated area.

C. Vertical and Horizontal Business market

For effective marketing planning, a company should know whether the market for its products is vertical or
horizontal. If a firm’s product is usable by virtually all firms in only one or two industries, it has a vertical business
market. For example, some precision instruments are intended only for the marine market, but every boat builder
or ship builder is a potential customer.
If the product is usable by many industries, then it is said to have a broad or horizontal business market. For
example, lubricating oils and greases may be sold to a wide variety of industries.

D. Buying Power of Business Users

Another determinant of business market demand is the purchasing power of business customers. This can be
measured either by the expenditures of business usurer by their sales volume. However, such information is not
always available or is very difficult to estimate. In such cases purchasing power is estimated indirectly, using an
activity indicators of buying power – measures of manufacturing activity, measures of mining activity, measures
of agricultural activity of measures of construction activity. That is some market factor related to sales and
expenditure.

Business Buying Behavior

Business buying behaviors, like consumer buying behavior is initiated when an around need (a motive) is
recognized. This lead to goal-oriented activity designed to satisfy the need. Once again, marketers must try to
determine what motivates the buyer, and then understand the buying process and buying patterns of business
organizations in their markets.
5.5.5 The Importance of Business Buying
Business buying or purchasing, formerly a relatively minor function in most firms, is now an
activity that top management is very much interested in. once viewed as an isolated activity that
focused primarily on searching out low prices, purchasing has become an important part of overall
strategy for at least three reasons: -
Companies are making less and buying more
Firms are under intense quality and time pressures. To reduce costs and improve efficiency, firms
no longer buy and hold inventories and parts and supplies. Instead they demand that raw
materials and components that meet specification be delivered “just in time” to go into the
production process.
To get what they want, firms are concentrating their purchases with fewer suppliers and develop
long term “partnering” relationship. This level of involvement extends beyond a purchase to
include such things as working together to develop new products and providing financial support.

Buying motives of Business Users

One view of buying motives is that business purchaser’s are methodical and structured. Business
buying motives, for the most part, are presumed to be practical and in emotional. Business buyers
are assumed to be motivated to achieve the optimal combination of price, quality and service is
the products they buy.

An alternative view is that business buyers are human, and then business decisions are certainly
influenced by their attitudes, perceptions and values.
In fact, many sales people would maintain that business buyers seem to be motivated more toward
personal goals than organizational goals, and the two are often in conflict.
The tooth is somewhere is between. Business buyers have two goals – to further their company’s
positions (is profit, acceptance by society) and to protect or improve their positions in their firm (self-
interest).

Sometimes these goals are mutually consistent.

For example, the firms highest priority may be to save money, and the buyer knows hat he/she will be
rewarded for negotiating a low price. Obviously the more consistent the goals are, the better for both
the organization and the individual, and the easier to make buying decisions.

However, there are often significant areas where the buyer’s goals do not coincide with these of the
firm, as when the firm insists on dealing with the lowest-price supplier, but the buyer has developed a
good relationship with another supplier and doesn’t want to change.

Promotional appeals directed to the buyer’s self-interest are particularly useful when two or more
competing sellers are offering essentially the same products, prices, and post sales services.

5.5.6 Types of Buying Structure

Searchers in organizational buying behavior have identified three classes of business buying situations.
The three buy classes are new-task buying; straight re buy, and modified re buy.
1. New-task buying
This is the most difficult and complex buying situation because it is a first-time purchase of a major
product. Typically more people are involved in new task buying than in the other two situations because
the risk is great. Information needs are high and the evaluation of alternative is difficult because the
decision makers have little experience with the product.

2. Straight re-buy
This is a routine, low involvement purchase with seminal information needs and no great considerations
of alternatives. These buying decision are made in the purchasing department, usually from a
predetermined list of acceptable suppliers.

3. Modified re-buy
This buying situation is somewhere between the other two in terms of time and people involved,
information needed, and alternative considered.

5.5.7 Buying – Decision Process in Business

The buying-decision process is business markets are a sequence of five stages similar to the ones
followed by consumers. Not every purchase involves all five steps. Straight re-buy purchases usually are
low-involvement situations for the buyers, so they typically skip some stages. But a new-task purchase
of an expensive good or services is likely to be high involvement total-stage buying decisions.
The steps involved in the buying decisions are as follows:

1. Need Recognition: -
The first step in the buying process is identifying of the need. Such need may arise form the consumer or from the
organization itself.

2. Identification of Alternatives
The second step in the process is identifying of alternatives. That is, searching for the potential sources of supply. The
purchasing department identifies the alternative brand and supply sources for substitutes that generally meet the
specifications.

3. Evaluation of alternatives
The production, research and purchasing people jointly evaluate both the alternative products and sources of supply.
The complete evaluation considers such factors as product performance and price as well as the suppliers abilities to
meet delivery schedules and provides consistent quality.

4. Purchase decision
Based on the evaluation, the buyer decides on a specific brand and supplier. Next, the purchasing department
negotiates the contract. Since large sums are involved, the contract will likely to include many details.

5. Post purchase behaviors

The buyer continues to evaluate the performance of the product and the selected supplier to ensure that both meet
expectations. Future dealings with a supplier will depend on this performance evaluation and on how well the
supplier handles any problems that may later arise involving its product.
5.5.8 Multiple Buying influences – The Buying center
One of the biggest challenges in business – to – business marketing is to determine which
individuals in the organizations play the various buying roles.

That is, who influences the buying decision, who determines product specifications, and
who makes the buying decision? In the business market these activities typically involve
several people.

In other words, there are multiple buying influences, particularly in medium-sized and large
firms. Even in small companies where the owner-managers make all major decisions,
knowledgeable employees are usually consisted before certain purchases are made.

Understanding the concept of a buying center is helpful in identifying the multiple buying
influences and understanding the buying process in business organizations. A buying center
may be defined as the individuals or groups who are involved in the process of making a
decision to purchases. Thus a buying center includes the people who play any of the
following roles.

1. Users: - The people who actually use the business product – perhaps a secretary, and
executive a production live worker, or a truck driver.
2. Influences: - The people who set the specifications and aspects of buying
decisions because of their technical expertise, their organizational position, or
even their political power in the firm

3. Deciders: - The people who made the actual buying decision regarding the
business product and the supplier. A purchasing agent may be the decider is a
straight-reby situation. But someone is top management may make the decisions
regarding whether to buy.

4. Gate keepers: - The people who control the flow of purchasing information
within the organization as well as between the firm and potential vendors. These
people may be purchasing agents, secretaries, receptionist or technical personnel

5. Buyers: - The people who interact with the suppliers, arrange the terms of sale,
and process the actual purchase orders. Typically this is the purchasing
departments role. But as gain, if the purchase is an expensive, complex new buy,
the buyer’s role may be filled by someone in top management.
5.5.9 Buying Patterns of Business Users

Buying behavior is the business market differs significantly from consumer behavior is several ways. These differences stem
from the producers, markets, and buyer – seller relationship is business markets.

1. Direct Purchase
In the consumer market, consumers rarely buy directly from the producer except in the case of services. In the business
market, however, direct purchase by the business user from the producer is quite common even for goods. This is the
especially when the order is large and the buyer needs much technical assistance.

From a seller’s point of view, direct sale in the business market is reasonable, especially when there are relatively few
potential buyers, they are big, or they are geographically concentrated.

2. Nature of the relationship

Many business marketers take a broad view of exchanges. Rather than focus only on the immediate customer they
approach marketing as a value chain.

That is, they consider the roles of suppliers, producers, distributors, and end users to see how each adds value to the final
product. This perspective leads to recognition of the importance of all parties involved in successfully bringing a product to
market and an emphasis on building and maintaining relationships.

3. Frequency of purchase
In the business market, firms buy certain products very infrequently. Large installations are purchased only once in many
year. Small parts and materials to be used in the manufacture of a product may be ordered on long term contracts, so that a
selling opportunity exists as seldom as once a year. Even standard operating supplies, such as office supplies or cleaning
producers, may be bought only once in a month.
4. Size of order
The average business order is considerably larger than its counter part is the consumer market. This fact,
coupled with the infrequency of purchase, spotlights the importance of each sale in the business market.

5. Length of Negotiation Period

The period of negotiation in a business sale is usually much longer than in a consumer transaction. Some
reasons for extended negotiation are:
Several executives participate in the buying decision
The sale involves a large amount of money
The business product is made to order and considerable discussion is required to establish the
specifications.

6. Reciprocity Arrangements
A highly controversial business buying practice is reciprocity. The policy of “I’ll buy from you if you will buy
from me”. Traditionally, reciprocity was common among firms marketing homogeneous basic business
products (oil, steel, rubber, paper products, and chemicals).

7. Demand for service

The user’s desire for excellent service is a strong business buying motive that may determine buying
patterns. Frequently a firm’s only differentiating features is its service because the product itself is so
standardized that it can be purchased from any number of companies.
8. Dependability of supply
Another business buying patterns is the users insistence on an adequate quantity of uniform-quality products. Variations
on the quality of materials going into finished products can cause considerable trouble for manufactures. They may be
faced with costly disruptions is their production processes if the imperfections exceeds quality control limits. Adequate
quantities are as important as good quality. A work stoppage caused by an insufficient supply of materials is just as costly
as one caused by inferior quality of materials.

9. Leasing instead of buying

A growing tendency among firms in the businesses market is leasing business goods instead of buying them. In the past
this practice was limited to large equipment, packaging equipment and heavy construction equipment. Presently,
industrial firms are expanding leasing arrangements to include delivery trucks, automobile used by sales people, machine
tools, and other items that are generally less expensive than major installations.

Leasing has several merits for the lesser – the firm providing the equipment.
Total net income – the income after charging of repairs and maintenance expenses – is often higher than it would be if the
equipment were sold.
The lessee’s market may be expanded to include users who could not afford to buy the product, especially for large
equipment.
Leasing after an effective method of getting users to try a new product. They may be more willing to rent a product than to
buy it.

From the lessee’s or customers – point of view, the benefits of leasing are:
Leasing allows users to retain their investment capital for other purposes.
Firms can enter a new business with less capital outlay than would be necessary if they had to buy equipment.
Leased products are usually repaired and maintained by lessons, eliminating one headache associated with ownership
Leasing is particularly attractive to firms that need equipment seasonally or sporadically