Stages of the Purchasing Decision Process

Stages of the Purchasing Decision Process P-1: Describe the main stages of the purchasing decision making process Business buying decision process Business buying decision process consists of the following steps. Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review (Kotler, Armstrong, 2008) Problem recognition: It will occur when an organization recognizes a problem or need that can be meet by buying a product or service. General need description: Lets assume that an organization wants to improve its services or products soin this step characteristics of the services and products needed are explicitly expressed. Product specification: After the pervious step an organization will express the specification of the product or services which will be of course done with the consultation of the engineering or technical team. Supplier search: In this step an organization will search for the supplier of the goods needed this can be done by reviewing trade directories or by doing computer search. It will obviously short list those one who has good reputation and offers best deals. Proposal solicitation: Once the search is complete then an organization will invite suppliers to submit their proposal, in this case presentation by the supplier might be needed. Supplier selection: In this step the organization will finalize the supplier. Factors like competitive prices, honest communication, quality products and services etc are of great importance in this regard. Order routine specification: At this stage the organization management will prepare an order-routine specification. It will also incorporate final order with selected supplier and list of other elements technical services after sales required, date of delivery return polices and warranties etc. Performance review: After order-routine specification in this step organization will assess the performance of the suppliers products or services. This may lead organization to keep on, change, of drop the arrangement with the supplier. Consumer buying decision process Consumer buying decision process consists of the following steps Need recognition Information search Evaluation of alternatives Purchase decision Post Purchase behavior (Kotler, Armstrong, 2008) Need recognition: The process starts with need recognition the buyer feels that he should have the specific products or services in order to fulfill his need. The reason behind this can be internal stimuli i.e. need to fulfill and external stimuli i.e. products or services ads. Information search: An interested prospect intending to buy products or services will search for information regarding various companies offering those products or services. He will use sources like internet, friends etc. Evaluation of alternatives:The marketing people of companies need to know about how various consumers evaluate products or services well the process is not easy to understand. Here the consumers might keep the following points of evaluation criteria prices, quality, and brand. Purchase decision: Normally the consumer is suppose to buy that product or service which up to highest level fulfill his evaluation criteria but even at this stage same factor might alter consumers decisions. Post Purchase behavior: Consumers buying decision process does not end with the purchase of the product or service it engages itself in post-purchase process. This determines whether the buyer is satisfied with product or service bought or not. If satisfied then good word mouth will happen and vice versa. Consumers satisfaction, dissatisfaction or delightedness depends upon buyer expectations and the product or service quality perceived performance. P-2: Identify approaches and theories of buyer behavior in terms of individuals and markets The basic purpose of marketing is to affect how customers think about the organization and about its products. To affect whats, whens, and hows of the buying behavior, marketing managers should first understand the whys. Buying behavior is very hard to understand yet it is extremely important task that marketer need to perform. If a marketer can identify buying behavior of its target audience, he or she will be in a better position to target products and services at them. Buyer behavior is focused upon the needs of individuals, groups and organizations. Talking about buyer fundamentally there are two types of buyers recognized the first is the Ultimate consumers and the second one is business buyers (in this outcome markets refers to business buyers). Ultimate Consumers: Those individuals and households who buy good and services for personal consumption. Business buyer: Those firms that buy goods and services for the use in the production of their products and services or for the purpose of reselling and renting them to others at a profit. Approaches used to alter target audience buying behavior Model for Consumer behavior For companies the buying decision is the most crucial element for their entire organization. The most prominent question in the regard is that: how do consumers respond to different marketing activities that a firm might use? The first step in finding the solution to this important question can be stimulus response model of consumer buying behavior. This model suggests that marketing efforts and other stimuli enter the consumers â€Å"black box† and produce certain responses. Marketers must understand what is their in that black box. Marketing stimuli consists of four Ps and includes other major environmental forces and actors like economic, technological etc. All these inputs go in the black box, where these efforts are converted into various responses like product choice, dealer choice, purchase timing etc. The important thing that marketers need to figure out is that what is there in black box. It has twp parts first buyers characteristics influence how he or she perceives and reacts to the stimuli. Secondly the buyers decision itself affects the buyer behavior. (Kotler, Armstrong, 2008) Model for business buyers This model helps the marketers to understand that how business buyers will respond to various marketing stimuli. The marketing and the other stimuli which are carved in order to affect buyer behavior are similar to the consumer model. How ever the expected responses are little bit different which include Product or service choice, supplier choice, order quantity etc. the biggest difference between consumer and business model is the difference between the factors and people which alter and perform buying process. With in the organization purchasing those goods consists two major parts: the buying center i.e. the people who make the ultimate decision and buying process. This approach suggests four questions about business buyer behavior. What buying decisions do business buyers make? Who participates in the buying process? What are the major factors that influence buying process? How does an organization make its buying decision? (Kotler, Armstrong, 2008) Types of individual and business buying behavior situation Types of individual buying behavior situations Complex buying behavior: in this type of buying the situation the consumer is highly involved in the purchase process and there is a clear perceived different among various brands. For example if someone intends to buy an insurance policy in this case he is highly involved in the process along with having significant information about various companies. Dissonance- reducing buying behavior: when the consumer is highly involved in the purchase process but he knew very little about companies offering that particular good i.e. he cannot differentiate brands for example in Pakistan if someone intend to buy a dry cleaner in this case he or she may deeply involve in the buying but having very less information about the brands. Habitual buying behavior: this type of buying process incurs when there is low involvement of consumer and the buyer has few significant perceived differences about brands. Variety seeking buyer behavior: It occurs under the condition of low consumer involvement in the purchasing process but having significant knowledge about different brand. For example buying a cold drink. Types of Business buying behavior situations Straight re-buy: an organization buying things in a routine order without any modification. For example if a car company buys tires on routine basis without any medication. Modified re-buy: in this buying situation the buyer reorders something but along with instructions of some modification. For example if Car Company reorders tires but with some modifications lets say with good quality rubber. New-Task: when a business buys any product or service for the first time this type of buying situation is called new task. For example if a Car company diversify and buy machine for tire manufacturing. System selling: Purchasing a packaged solution to some problem for single seller as a result ignoring all the separate decision involved in a complex buying situation. This is often a key marketing strategy for availing and retaining business accounts. (Kotler, Armstrong, 2008) Theories regarding individual and business buying behavior Maslows theory of Motivation Abraham Maslows through his famous theory explained that how human beings are motivated by particular needs at particular times. He argued that all behaviors start with a need: physical needs social acceptances are examples of needs. Why does a person spend so much of money and time on personal security and on gaining social status? His answer to this is that human needs are arranged in hierarchy from the most compelling one in the start and the least compelling one at the end. These needs include physiological needs, safety needs, social needs, esteem needs and self actualization needs. An individual tires to attain such means through the most pressing (physiological needs) needs can be satisfied once one levels needs are sufficiently enough satisfied then an individual will endeavor to satisfy the next levels needs like for example any body physical and security needs should be satisfied sufficient enough in order to get telecom services as this services can be related to belongings level because many people buy this service in order to communicate. (Maslow, Blogger, 1954) Freud was psychologist he believed that people are largely unaware about the actual psychological forces shaping their behavior. He observed that people while growing up keep inside many urges which are never eliminated or under full control: they are expressed in dreams, slips of tongue etc, or some times in psychoses. His theory suggested that human beings buying decisions are influenced by subconscious motives that the purchaser may not fully understand. For example if any person buys a Mercedes might say that I have bought it because its very comfortable and make status statement. At a deeper level the actual reason might be to eliminate the feel of inferiority. (Kotler, Armstrong, 2008) P-3: Explain the factors that affect buyer behavior As explained earlier that there are two types of buyer who are the ultimate consumer and second one is business buyer here factors that influence there buying behavior is explained separately for both. Factors that affect final consumers buying behavior Consumer behavior is deeply affected by cultural, social, personal, and psychological characteristics these factors at most of the time are uncontrollable. These factors are explained in detail which is as follows: Cultural factors Culture: Culture is basic reason behind any person wants and behavior. Human beings behavior is mostly learned. As time passes our culture is becoming more materialistic which implies that people will buy more electronic and other technological goods so changing culture is a bit difficult for those firms which are not advanced technologically. Subculture: Each culture has smaller subcultures. It is basically a group of people who have same value system based on ordinary life experience and conditions. Social class: Social classes are a society‘s permanent and arranged sections whose members beliefs in common values, interests and ways of doing things. It is not determined by keeping on element in mind like income rather factors like occupation, income, education, wealth, and other variables are kept in mind. Social factors Groups: A persons way of doing things is also altered by the group to which he belongs. Group can affect firms target audience in some way or other. Reference group: Reference group for a person is that group to which he admires. It serve wither in straight (face to face) or indirect point of judgment or reference in forming a persons attitude or behavior. People most of times are influenced by reference group to which they do not belong. Family: It is the most significant consumer buying unit in a society and it has been researched widely. Marketing managers must pay a great deal of attention to the roles of consumers which deeply influence the purchase decision while buying products or services to themselves. Roles and status: A person at the same time belongs to different groups- family, organization, clubs, etc. A role consists of actions that one is suppose to execute according to environment around him or her. Very role contain a status representing the general esteem given to it by society. Personal factors Age and life cycle stage: Choices of food, clothes, etc are often age related. People change their buying habits with changes in their age. Purchasing is also influenced by the stage of the family life cycle- the stages through which families might. Occupation: An individual occupation influence the choice of goods and services bought. Economic situation: A persons buying pattern is affected by economic situation in a very significant manner. For example economy of Pakistan is in a worst shape so people will have less money to spend which they will buy products or services too so this factor is really important for firms. Life styles: life style is a person way of living presented in this or her psychographics. Individuals which belong to same culture, subculture, social class and occupation may have different life style. Life style portrays something more than on persons social class or personality. Personality and self concept: Personality means the distinct psychological attributes that lead to comparatively consistent and lasting responses to ones own world. Each person distinct personality put and effect on his or her buying pattern. It is usually described in term traits like self confidence, autonomy, adaptability and aggressiveness. Many marketers utilize a notion related to personality i.e. â€Å"self concept†. The idea which self concept convey is that people possessions contribute to and reflect their identities; that is we are what we have. Hence to understand your target audience psyche first you must understand the relationship between self concept and possessions. Psychological factors Motivation: Human beings at the same time have many needs. Some are biological such as hunger, thirst or discomfort others are physiological, arising from the need of recognition, esteem, or belonging. A need transformed into a motive when its deficiency is experienced up to an intense level thus compelling a person to satisfy it. Two famous theory regarding motivation were proposed by Sigmund friend and Abraham Maslow. Perception: It is the procedure by which human being select, organize, and interpret information to form meaningful picture of the world. If for example people perceive a firm as a good company so more and more people will buy its products or services as its existing customers will suggest it to others. Learning: When people take action they learn. Learning is basically changes in the individuals behavior as a consequence of experience. It incurs when on interacts with stimuli, cues, responses and reinforcement. When one buy firms products or services and or respond to its advertisements and if he/she found the sayings of firm correct so consumers will learn about its products and services in a positive manner and vice versa. Beliefs and attitude: A belief is an expressive thought that a person has about something. It may be based upon real knowledge, opinion, or faith and it also may or may not have an emotional factor. It is of great importance to any firm marketers because it shapes its brand image that alters purchasing decision. Attitudes are comparatively consistent evaluations, feeling, and tendencies toward object or idea. It structures people liking and disliking patterns. Changing someone attitudes is a very hard task to perform. P-4: Evaluate the relationship between brand loyalty, corporate image, and repeat purchase Before explaining the relationship between these three elements first its definition one should understand its definitions. Brand loyalty: brands that consumer generally buy from the same manufacturer repeatedly over time rather that buying it from multiple suppliers within the category. It also refers to the degree to which consumers consistently purchase the same brand within the product class. (12manage) Corporate image: The perceptions and impressions of an organization by the public as a result of interaction with the organization and the way the organization presents itself. Organizations have traditionally focused on the design of communication and advertising materials, using logos, symbols, text, and color to create a favorable impression on target groups, but a variety of additional activities contribute to a positive corporate image these include PR programs. (CBS Interactive Business Network) Positioning (the way the consumer perceive you or in simple words corporate image) of a company is affected by Performance of an organization Features of products or services Shape of firms offering Distribution channel used Location of a company offices and outlets Countries of origin i.e. the country where organizations headquarter are located. For example France is famous for perfumes so some company office is there so it is obvious that people will perceive it in a positive manner. This factor has been discussed deeply by famous Harvard professor Michael E Porter in his book â€Å"Competitive Advantage of Nations†. A company that mismanages or ignores its image is likely to encounter a variety of problems. Reputation problems grow like weed in a garden, Davis Young wrote in his book â€Å"Building Your Companys Good Name. Four types of positioning error can occur Under positioning: in this condition firm is not able to portray full benefits of its offerings. Over Positioning: in such status quo company narrow its image in the mind of consumers. Confused Positioning: consumers are confused that what does this company really offers and to whom. Doubtful Positioning: in this situation buyers are skeptical that whether whatever the company is saying is true or not. Repeat purchase: This term is referred to the notion when customer buys the same brand purchased by him on the previous occasion; also called repurchase. Brand loyalty can be calculated by a pattern of repeat purchases. For retaining (repeat purchasing) so that consumers buy your product again and again the business should produce better product then their competitors. P-5: Review and evaluate different type of market research techniques? Marketing research is a systematic design of collection, analysis and reporting of data in order to improve management decision by providing relevant, accurate, and timely (RAT) information. (Aaker, Kumar and Day, 2005 p.no.1) Marketing researchers employ different kinds of research techniques in order to meet their research objective. The following are different kinds of marketing research techniques which are discussed and evaluated in detail below: Qualitative marketing research techniques Observational marketing research technique Different surveys techniques (Quantitative methods) Experimentation Qualitative marketing research techniques: These methods are less structures and more flexible. Data gathered from these kind of marketing research techniques is very rich and deep because of the longer and flexible relationship with the respondents which implies more chances of new insights and perspectives. There are three main areas where these techniques can be employed. Exploratory: defining the problem, suggesting hypothesis etc. Orientation: learning more about consumer real motives; the way the think. Clinical: having and insight in to such issues that otherwise is might not be possible to know with structured research methods. So for the following qualitative marketing research techniques have been identified and employed by researchers. Individual in-depth interviews Focus group session Projective techniques Individual in-depth interviews: These types of interviews are employed by having a face to face contact with the respondents in which an issue is discussed in great details. There are two basic types of individual in depth interviews which are nondirective and semi structured. In nondirective interviews the interviewee is given full freedom to respond within the limits of issue under discussion, such sessions are one to two hour long. In semi structured interviews the researcher attempt to explore only those area which are on his list. The time and exact wording are pre decided for each question to be discussed. Advantages Studies can be conducted in remote area through telephone in depth interview. Data gathered is rich and deep because of the time consumed. Focus on research issue. More value: it helps the researcher to find unconscious motivational factors. Semi structured interviews are very flexible to interview busy executive because time and wording is pre decided. Disadvantages Time consuming because most of time these sessions are conducted for 1 to 2 hours. Difficulty regarding record keeping most of people especially executives dont like tape recorders. As very few people are considered for the research so it means a poor representative of the whole population This type of techniques requires very skilled researcher which might become a problem in some situations. Focus group sessions: It is the process of attaining possible idea or solutions to a marketing issue from a group of people by discussing it. The basic elements which makes a focus group session successful or flop is group interaction on a chain of topics introduced by a moderator. The group included consists of five to nine members who are encouraged to express their opinion on the issue, and to further explain or react with the views of other respondents. The main aim is similar to unstructured interview but the moderator plays a more inactive role in the discussion. Advantages It provides more encouragement than an in depth interview which results in new perspectives. People speak out in these sessions because of a sense of security by being in a crowd (group behavior). More depth: as it names explains that these session are focused on one issue which means more value and deepness in the data. Sparking: some time one person views sparks a new idea in another respondents mind which is unlikely to happen in depth interviews. Disadvantages Time consuming: as these sessions are conducted for 2 to 3 hours. Again the respondents selected might not a better representation of the population. Poorly conducted session leads towards wrong results which mean waste of time and money Its cost is very high. Analysis and interpretation of the data collected is very complex because of dispersion in the respondents opinions. Projective techniques: This technique is employed by presenting an ambiguous, unstructured object, activity, or person that a respondent is asked to explain. Respondents involvement is directly proportional to level of ambiguity which will result in hidden motives and feeling. This technique become a part of whole research design when it is expected that a populations sample will not or cannot respond expressively to a direct questions about the reason for certain behavior and about the motives behind buying certain products. It has different kinds for example word association, picture interpretation, case studies etc. Advantages It is used by researchers where other techniques cannot be used to obtain the research objective i.e. it helps to identify hidden consumer motives. By using this technique a marketer can identify opportunities for really new functions in any product category. The word association technique has been very useful for obtaining responses to potential brand names. Strong control on research information as it is a simulation test so it wholly depends upon the researcher that where he want to take the research. Disadvantages Very difficult to employ because of its complexities and skill requirement for the researcher. It might be very hard find the right persons for these tests. It might not be possible to employ this research method in some parts of the world because of the technology requirement for these tests. Idea taken from (Aaker, Kumar and Day, marketing research, 2005) Observational marketing research technique: Observational research or field research is research technique that involves the direct observation of people in their natural setting. There are many types of observational methods which have been identified and implemented by researchers. These methods have yielded very good results. Some organization believe very much in observational methods for example Swedish home appliances maker Electrolux. These techniques are widely used in retail store audits, shelf space audit etc. its different kinds are direct observation, contrived observation, Content analysis, Physical trace methods, etc. These methods are limited to providing information on current behavior. Due to this strong argument many researchers do not use these methods. However there are some strong reasons that why observational research should be used in overall research design. Some of the reasons are as follow; Causal observation is an important exploratory research technique. Organization managers constantly observe factors such as competitive prices and advertising activities the length of lines of buyer waiting to buy products of that particular company and read trade journal in order identify threats and opportunities. Systematic observation can be fruitful addition to other research methods. For example during a personal interview if a researcher observe the respondents race, his neighborhood, and other conditions under which he lives so it this data can supplement his analysis . It can be some time the most effect way to check the effectiveness of some activities. For example it can help a researcher to observe in store traffic pattern, check the effectiveness of in store advertising etc. Advantages It is probably the less expensive if compared with other research methods. The data achieved through this method is most accurate because the consumers is un-aware that he is been observed so every action is original. Some time the observation is the only method that can employed. This is the case with infant children they are not able to clearly identify their choices so observing them is the only choice. Physical trace method tough used very rarely is also sometimes the only option left. For example if someone want to measure the amount of Alcohol consumed in Peshawar so it can only measured by counting the bottles in carbides because officially Alcohol is not allowed for sale in Peshawar. Disadvantages Observational methods only observe current behavior they cannot observe human motives, attitudes, or indentations. It may be sometimes very costly and time consuming if there is a sample problems of the research is supposed to highly subjective. It cannot be used to study cognitive or affective variables. Idea taken from (Aaker, Kumar and Day, marketing research, 2005) Different surveys techniques (Quantitative methods): Following are the different kinds of survey techniques Personal interviewing Telephone interviewing Mail surveys Web surveys Personal interviewing: It is characterized by the interaction of the four elements the researchers, the interviewers, the interviewee and the interview environment. While a personal interview the interviewer interact with interviewee and at the same time affect on another in an interview environment. Door to door interviews, executives interviews, Mall intercept surveys; self- administrated questionnaires, etc are the types of this kind of techniques. Advantages Interest can created in the start through face to face interaction with respondents which will increase the participation rate. This mode of research can very useful when respondents are asked complex questions. This problem can be eliminated by showing him pictorial aids. It is the most feasible option when large amount of data is required and the questionnaires contain complex questions. This type of method has got more flexibility. Some questions can be skipped by the researcher in order to save time if needed. Disadvantages Personal interviews are time consuming. It cost a lot as it is administrated for large samples. Because of time and cost expenditures per person it cost more than mail or telephone surveys. Telephone interviewing: It is generally more like personal interviewing expect some elements are unique. Its process includes selecting the telephone numbers, the call outcomes, the introduction, when to call and call reports. This is gradually becoming the widespread method for obtaining information from large sample. Advantages It has got more operational flexibility as it can administrated from central place in appropriate hours or from the examiner home. It less time consuming as more interviews can be conducted in less time. Time can be better utilized for example if the survey is based on teenagers so one can call on that time on which they are expected to be at home. It is more efficient than other metho