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Consumer Behaviour

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Consumer Behavior
Consumer Science

The science of consumer behavior describes and defines how you shop and, more importantly, why you buy. Smart retailers study consumer behavior patterns and lay out their stores and merchandise accordingly.

For example, did you know that 86 percent of women look at price tags when they shop, while only 72 percent of men do?[2] According to Paco Underhill, author of the book Why We Buy: The Science of Shopping, consumers don’t actually begin shopping until a certain point after they enter the store.

Smart retailers include a transition zone at the entry to their store; it allows customers to get their bearings and choose their shopping paths. In other words, products, signs, and displays that are in the very front of the store might not be seen if there is not a transition for the customers when they enter.

In the case of Abercrombie & Fitch, the transition is the space just inside the entrance that includes the humongous photo of the Abercrombie model du jour. When you go into Hollister, it’s the outside porch that serves the same purpose; it’s a transition that allows you to get your focus and plot your course in the store, even if you don’t consciously realize it.

Think about the last time you went into a grocery store or drug store; you might not have noticed anything until you were well inside the store, which means that the merchandise and signs that were displayed in the area before you got your bearings were virtually invisible to you. [3]

Based on consumer research, there’s a high likelihood that you turned right when you entered the store. Take note the next time you go shopping; chances are, you’ll turn right after you walk in. [4]

Understanding how and why customers buy can make a significant difference in how you sell. Is the product a considered purchase, like a computer or car, or an impulse buy, like a sweater or music download?

Is the product bought frequently, like an energy drink, or only once every few years or even once in a lifetime, like a car or a college education? For each of these products, the customer goes through a buying process. Understanding the customer and the buying process can make your selling efforts successful.

Need It or Want It?
Think of something you need, like an annual medical checkup, a new apartment because your lease is up, or even food to survive.

There are some products and services you purchase solely because you can’t exist without them. Now think about something you want: a new pair of jeans, an iPhone, tickets to a concert. There is a significant difference in what motivates you to buy products and services you need, compared to those you want.

Needs and wants have different motivations. Think about buying a car; you could focus on the functional attributes of the car such as miles per gallon, maintenance costs, and safety ratings.

Those are considered utilitarian needs, or the objective, tangible aspects of a product or service.[6] So, if those were your only needs, you might choose a Smart For two, Ford Focus, or Toyota Prius. But you might want to have something a bit sportier, maybe even hipper, to get around campus, and you might choose a Mini Cooper, a Scion, or even a Jeep.


You might choose to buy a Mini Cooper because you can customize the design online. That would certainly meet a need other than providing basic transportation. Some people buy a BMW or Mercedes-Benz because they want the status that goes with owning that make of car.

These cars would do more than simply provide transportation; they would meet your hedonic needs, which are subjective aspects of a product or service. [7]
When you understand the difference between needs and wants and between utility needs and hedonic needs, you are better able to tailor your selling communications.

Hierarchy of Needs

When Hurricane Katrina hit the United States the Gulf Coast was devastated. Thousands of people were stranded without food, water, or shelter due to flooding. Almost two thousand people lost their lives. [8] The tragedy demonstrates Maslow’s hierarchy of needs. His theory explains human behavior in simple terms: A hierarchy of needs that begins with the most basic of physiological needs (e.g., food, water, shelter) motivates people. [9]

Physiological Needs

During the days after Hurricane Katrina hit, people were rescued and provided with water, food, and shelter. Many were relocated to temporary housing or even to housing outside the affected areas.

It was not until after the physiological needs were met that people became concerned about the next level of needs on Maslow’s hierarchy: safety needs.

Safety Needs

Looting of shops in some of the cities began to occur, and there was even concern that the police force in some cities was not taking an active role in arresting those who were breaking the law. [10]

The people of the Gulf Coast were no longer motivated by simply getting water, food, or shelter; they had moved up Maslow’s hierarchy and were concerned about their personal security and well-being.

Social Needs

As the weeks passed after Hurricane Katrina hit, its victims wanted to get back to their normal lives. By Christmas 2005, people stopped to celebrate the holiday together.

According to a story reported by CBS Evening News on the Christmas gatherings in New Orleans, “The will to be home for the holidays outweighed everything else.” [11]

By this time, they were motivated by social needs, or the need to belong and have an attachment or bond to others. [12]

Esteem Needs

Slowly but surely, people began to rebuild their lives. People took on leadership roles and began to take recovery to the next level.

Volunteers from all over the country began to make the pilgrimage to the Gulf Coast to help in any way they could. In fact, volunteer vacations to help rebuild cities such as New Orleans became commonplace and are still going on today. [13]

This is an example of esteem needs, or the need to feel respected and appreciated by one’s peers.

Self-Actualization

Although recovery will be going on for years to come, many of the people affected by the destruction of Hurricane Katrina are striving for self-actualization, which focuses on learning new skills, taking on new challenges, and “being all you can be.” [14]

John and Starr Chapman are perfect examples of this; their restaurant, Chappy’s Seafood, was lost in the hurricane. The couple relocated to Nashville, Tennessee, and in 2006, opened Chappy’s on Church Street. Although it was challenging and overwhelming at times, the husband-and-wife team is not only surviving but also thriving after this life-changing experience. [15]

Lessons in Selling

Nikki Olyai, president and CEO of Innovision Technologies, recently made a significant investment for her company and purchased new software and hardware. Her buying philosophy? Nikki looks for a strong value system, trust, commitment, a proactive approach to helping her solve her business problems, and cost-effectiveness. But she expects more from a vendor and business partner; she gives extra consideration to vendors who have demonstrated a commitment to community service and development. Nikki believes that businesses and their vendors need to give back to the communities they serve. [16]

This all comes together at the point of sale, whether you are selling in business-to-consumer (B2C) or business-to-business (B2B) environments. When you understand the motivation of your customer, you can customize your solution and your message to meet their needs, emotions, and motivations.

Consider the Hurricane Katrina example; would you attempt to sell fine jewelry, pitch the benefits of a landscaping service, or suggest a home theater system to someone in New Orleans on August 29, 2005? Probably not.

Remember to look at the world through your customer’s eyes, as you’ll see a completely different view. Now that you can see what motivates people to buy, it’s time to learn who is buying.

Although the buying process is similar for B2C and B2B, there are some distinct differences that can make a difference in the way you sell.

Business-to-Consumer (B2C)

In marketing parlance, you are the consumer, the end user of the product or service. You might be shopping for yourself or buying a gift for a family member or a friend.

Either way, you (or the person to whom you are giving the product) are the ultimate consumer, which is what defines B2C buying. Whether you are buying a cell phone, a music download, or a burger and fries, you are buying in the B2C arena. Even though you may behave differently than others in terms of your purchasing decisions, you are a B2C customers because you are the ultimate consumer of the products or services.

Clothes for your avatar, “bling” for your online profile, or a virtual birthday cupcake are all reasons to make digital purchases virtually: paying real money for something that exists only online. Facebook, SecondLife.com, and Stardolls.com are just a few Web sites that give users the option to buy virtual goods. Why do people buy things that aren’t even real? For some of the same reasons people buy the real thing: to be able to do more (i.e., increase functionality), build relationships, and establish identity. [17]

Business-to-Business (B2B)

Some B2B companies buy products to sell directly to consumers, whereas others purchase products as ingredients or components to produce their product. Still other companies lease products or services, while others serve the public, such as government or nonprofit organizations. Each of these different types of companies and organizations has different needs and requirements that impact the buying process. [18]

Companies that buy products to make or build a product or service to sell, are called producers. For example, in the case of Reebok, the company purchases components for its athletic shoes from a variety of vendors around the world. Reebok uses the components to manufacture the shoes and sell them to retailers such as Foot Locker, which in turn, sell the shoes to consumers like you.

In this example, Reebok is engaged in B2B buying as a producer because the company purchases parts or materials to make shoes and then sells them to other companies. [19]

Resellers purchase finished goods to sell, lease, or rent to B2B or B2C purchasers. In the example, Foot Locker is a reseller because the company buys finished products from manufacturers such as Reebok and others.

In other words, Foot Locker doesn’t manufacture products but rather buys them from other companies to sell them. It’s important to note that although Foot Locker buys in the B2B arena as a reseller, the company sells in the B2C arena because it sells its products to the ultimate consumer. [20]

Organizations include government bodies, which are a huge consumer, using over $1 trillion in goods and services annually. [21] In fact, according to the U.S. government budget in 2010, their outlays are projected to be 24.4 percent of the U.S. gross national product. [22] In 2009 alone the US government purchased 17,205 cars for a total of $287 million. [23]

As a result of being such a huge customer, there are processes for prospective vendors to apply to provide products or services to the US government. The Web site www.fbo.gov provides information about federal business opportunities. [24]

Nonprofit organizations such as the Salvation Army, the Susan G. Komen Foundation, the American Cancer Society, churches, schools, shelters, and others are also B2B purchasers of goods and services.

Some may be producers, such as a soup kitchen that buys ingredients for soup and other meals, and some may be resellers, such as the yellow bands for the LIVESTRONG Foundation. [25]

Nonprofit organizations such as the Lance Armstrong Foundation are purchasers of products and services. [26]

Big Differences

B2C and B2B purchasers are different. B2C consumers purchase for their own consumption, whereas B2B customers purchase to produce or resell. Generally, B2C buying is based-for the most part-on impulse, low-risk decisions. However, in a B2B buying decision, the buying is complex, and there is significant risk. [27]

Because B2C buyers are purchasing only for their consumption or for the consumption of a limited number of people, the size of the purchases is relatively small.

By contrast, B2B purchases are significant because the companies are purchasing to sell to other companies or to many consumers.

Consider this difference: you might buy ten pairs of jeans in a year, but Nordstrom buys hundreds of thousands of pairs of jeans to stock in their inventory. [28]

If you think it’s difficult to keep everyone in your apartment happy with the food purchases you make at the supermarket, that’s easy compared to the number of people involved in a B2B purchasing decision. In most B2B transactions, there are multiple decision makers involved in each purchase.

There must be approval for the money to invest in the inventory and shelf space. Depending on the organization and the size and impact of the decision, several people from several different departments may be involved in a B2B buying decision.

There are over three hundred million people who live in the United States and approximately a hundred million households. However, there are less that half a million businesses and other organizations. [29]

Because B2B buyers are making decisions that may ultimately impact the sale of a product or service to millions of consumers, there are naturally fewer businesses.

Consider the fact that according to the United States Census Bureau, there are only 7,569 hospitals in the country, yet there are over 110 million visits to emergency rooms annually. [30]

Since there are many fewer businesses and organizations compared to the number of ultimate consumers, it makes sense that there is a geographic concentration of B2B customers.

For example, in the US, the fashion industry is primarily located in New York, filmmaking in Los Angeles, and technology in Silicon Valley. B2B buyers can determine where they want to be located based on resource or on access and can even choose where to build warehouses or call centers based on costs, transportation, and availability of labor. [31]

Business-to-Business Means Person-to-Person

B2B buying decisions are subject to the same behaviors as B2C buying decisions, but on a more challenging level because B2B buying decisions usually include multiple decision makers, an extensive evaluation process, extended analysis, and they represent a high risk on the part of the decision makers. [32] While many B2B buying decisions are made by an individual decision maker, many are made by a group of people working together, usually from different departments. When this is the case, the group is called a buying center, all the people in a group who are involved in the buying decision. [33]

Initiators are those people in the company who start the purchasing process for a particular product or service. [34]

For example, the e-commerce manager in the marketing department may begin the process of seeking a new technology provider for e-mail and social networking services on the company’s Web site. However, he may not be the final decision maker.
There may be several departments involved in the purchasing decision including marketing, IT, and customer service.

At the end of the day, it is the decision maker or decision makers who will make the final purchasing decision. Decision makers could be anyone who holds the responsibility or accountability for making buying decisions for the company.

Depending on the company, the decision maker might be the CEO, the head of the marketing department, or even a committee of people from marketing, IT, and customer service.

The decision making process in B2B can take days, weeks, months, or even years to make, depending on the company and the product or service being purchased.

When you are selling in a B2B environment, you may not always have access to the ultimate decision maker. But building a relationship with the initiator, influencers, and users can be just as important and effective as meeting with the decision maker.

However, you should always be aware of the “power level,” or exactly the level in the organization that is making the buying decision.

Sometimes, salespeople don’t get to the power level, but instead stop at one or two levels below that critical level where the purchasing decision is being made.

Types of B2B Buying Situations

Companies are so different from each other (some are large multinational corporations while others are one-person operations) and the types of products and services being purchased are so different (everything from business cards to office buildings). It might seem difficult to know how to apply the concepts covered to every buying situation. One way is to understand the different types of buying situations that face a B2B buyer.

If a company is moving its headquarters to a new building that does not come equipped with office furniture, the company will need to acquire furniture for all of its employees. This is a new purchase for the company, which would classify it as a new-task buy. [35]

When a customer is contemplating a new-task buy, it is an excellent opportunity to use your consultative selling skills to bring information to your customer to help her make the best possible decision.

What if your customer is already purchasing the product or service regularly? Although he may currently be purchasing the product from you, he already knows about the product or service, how to use it, and how much he is currently paying for it.

This is called a straight rebuy, [36] a routine repurchase of a product or service. Usually, straight rebuys are consumable products or supplies such as office supplies, maintenance supplies, or parts.

Sometimes, your customer may already be purchasing the product but wants to change the specifications; this is called a modified rebuy. [37]

For example, when the magazine Vanity Fair did a split run of their magazine cover for their September 2009 issue, they printed half of the copies with Michael Jackson on the cover and half with Farrah Fawcett. [38]

Although they print the magazine monthly, they modified the printing specifications for that issue. Therefore, the sales rep from the printer sold the September 2009 print run as a modified rebuy.

Some selling situations go beyond the traditional relationship between a salesperson and the customer. Some actually create a partnership that puts both parties at risk but provides opportunities for all parties to gain; this is called a strategic alliance.

In an effort to compete with Google, Microsoft powers Yahoo!’s search with its new engine called Bing. [40] Together, their market share is 28 percent, still a far cry from industry-leading Google at 65 percent. [41] Despite spending billions, neither company has been successful overtaking Google, but the strategic alliance gives these companies a chance to compete. [42]

KEY TAKEAWAYS

Customer behavior is a science, not an art, driven by specific needs that drive motivation.

A consumer who purchases in a B2C environment is the end user of the product or service.

A B2B purchaser, also called an organizational or institutional purchaser, buys a product or service to sell to another company or to the ultimate consumer.

B2B purchasers may be producers, resellers, or organizations.

B2B buys are characterized by being methodical, complex, budgeted, high risk, analytical, and coordinated across different parts of the company.

B2B purchases are larger than B2C purchases, include multiple buyers, involve a smaller number of customers, and are geographically concentrated.

Maslow’s hierarchy of needs describes how people are motivated based on the level of needs that are being satisfied. Understanding a customer’s motivation based on the hierarchy can provide valuable insights for selling. There can be several types of people involved in a B2B purchasing decision, including users, initiators, influencers, and decision makers.

Exercises

Visit at least two different retailers. Determine whether each has a transition zone at the front of the store. Discuss the differences between the shopping experiences. Which one is more conducive to buying?
Identify one B2C seller and one B2B seller. List at least three differences between their buyers.

Bibliography

[1] Barbara Farfan, “Retail Industry Information: Overview of Facts, Research, Data, and Trivia,” About.com,http://retailindustry.about.com/od/statisticsresearch/p/retailindustry.htm (accessed August 3, 2009).


[2] Paco Underhill, Why We Buy: The Science of Shopping (New York: Touchstone, 1999), 99.

[3] Paco Underhill, Why We Buy: The Science of Shopping (New York: Touchstone, 1999), 46.

[4] Paco Underhill, Why We Buy: The Science of Shopping (New York: Touchstone, 1999), 46.

[5] Kristin Biekkola, “Needs versus Wants,” slide show, Wisc-Online.com,http://www.wisc-online.com/objects/index_tj.asp?objID=ABM3302 (accessed August 2, 2009).
[6] Kristin Biekkola, “Needs versus Wants,” slide show, Wisc-Online.com,http://www.wisc-online.com/objects/index_tj.asp?objID=ABM3302 (accessed August 2, 2009).


[7] Kristin Biekkola, “Needs versus Wants,” slide show, Wisc-Online.com,http://www.wisc-online.com/objects/index_tj.asp?objID=ABM3302 (accessed August 2, 2009).


[8] United States Department of Health and Human Services,http://www.hhs.gov/disasters/emergency/naturaldisasters/hurricanes/katrina/index.html (accessed August 2, 2009).


[10] Associated Press, “Looters Take Advantage of New Orleans Mess,” msnbc.com, August 30, 2005, http://www.msnbc.msn.com/id/9131493 (accessed August 2, 2009).


[11] Joel Roberts, “Christmas After Katrina,” CBS Evening News, December 25, 2005,http://www.cbsnews.com/stories/2005/12/25/eveningnews/main1165360.shtml(accessed August 2, 2009).

[13] Sheryl Kane, “Volunteer Vacations: Rebuilding New Orleans,” June 26, 2009, SingleMindedWomen, http://singlemindedwomen.com/2009/06/rebuilding-new-orleans(accessed August 2, 2009).


[15] Joy Messer, “Survivors of Hurricane Katrina Overcome Adversity and Open ‘Chappy’s on Church Street,’” July 23, 2008, Associated


[16] Mary Cantando, “How Savvy Women Entrepreneurs Make Buying Decisions,” Women Entrepreneurs, Inc., January 1, 2005,http://www.perfectbusiness.com/articles/newsarticle.cfm?newsID=948&news=1(accessed August 1, 2009).


[17] Jeremy Liew, “Why Do People Buy Virtual Goods?” Wall Street Journal, February 9, 2009, http://online.wsj.com/article/SB123395867963658435.html (accessed August 1, 2009).
[18] Jeremy Liew, “Why Do People Buy Virtual Goods?” Wall Street Journal, February 9, 2009, http://online.wsj.com/article/SB123395867963658435.html (accessed August 1, 2009).


[19] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 86.


[21] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 88.


[22] Office of Management and Budget, “Updated Summary Tables, May 2009: Budget of the U.S. Government, Fiscal Year 2010,”http://www.usgovernmentspending.com/us_20th_century_chart.html (accessed August 2, 2009).

[23] Jeremy Korzeniewski, “U.S. Government Buys 17,205 Cars for $287 Million, Ford Represents,” Autoblog Green, http://www.autobloggreen.com/2009/06/11/u-s-government-buys-17-205-new-cars-for-287-million-ford-repr (accessed August 2, 2009).


[24] Federal Business Opportunities
http://www.fbo.gov (accessed August 2, 2009).


[25] Lance Armstrong Foundation, http://www.livestrong.com (accessed August 2, 2009).


[26] Lance Armstrong Foundation, http://www.store-laf.org (accessed August 2, 2009).


[27] Randy Shattuck, “Understand the B2B Buying Cycle,” http://www.internetviz-newsletters.com/PSJ/e_article001037852.cfm (accessed August 1, 2009).


[29] United States Census Bureau, http://www.census.gov/Press-Release/www/releases/archives/facts_for_features_special_editions/004491.html(accessed August 2, 2009).
[30] United States Census Bureau, http://www.census.gov/Press-Release/www/releases/archives/facts_for_features_special_editions/004491.html(accessed August 2, 2009).


[31] Kae Groshong Wagner, “The B2B Buying Process,” http://www.internetviz-newsletters.com/PSJ/e_article001037852.cfm (accessed August 2, 2009).


[32] Kae Groshong Wagner, “The B2B Buying Process,” http://www.internetviz-newsletters.com/PSJ/e_article001037852.cfm (accessed August 2, 2009).


[33] Kae Groshong Wagner, “The B2B Buying Process,” http://www.internetviz-newsletters.com/PSJ/e_article001037852.cfm (accessed August 2, 2009).
[34] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 97.


[35] Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163.
[36] Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163.


[37] Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163.


[38] Lorena Bias, “Fawcett, Jackson Get ‘Fair’ Magazine Play,” USA Today, August 3, 2009, life 1.

[39] “Vanity Fair’s Two September 2009 Covers: Michael Jackson, Farrah Fawcett Split Cover,” Huffington Post, August 3, 2009,http://www.huffingtonpost.com/2009/08/03/vanity-fairs-two-septembe_n_249809.html(accessed February 20, 2010).


[40] “Yahoo-Microsoft Deal,” New York Times, July 30, 2009,http://topics.nytimes.com/top/news/business/companies/yahoo_inc/yahoo-microsoft-deal/index.html (accessed August 3, 2009).


[41] Patricia Resende, “Microsoft Keeps Watchful Eye on Yahoo’s Earnings,” Yahoo! Tech, July 20, 2009, http://tech.yahoo.com/news/nf/20090720/tc_nf/67859 (accessed August 3, 2009).


[42] “Yahoo-Microsoft Deal,” New York Times, July 30, 2009,http://topics.nytimes.com/top/news/business/companies/yahoo_inc/yahoo-microsoft-deal/index.html (accessed August 3, 2009).