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Assistant Professor, MarketingPlease ensure all electronic devices are in “silent

mode”, “vibrate mode” or “turned off”

Anthony Francescucci

MKT 100-021WEEK 7– UNDERSTANDING

BUYER BEHAVIOUR

Welcome to

AGENDA

Understanding Buyer Behaviour & Market Research

Metrics Mastery 5

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MODULE 4

Understanding Buyer Behaviour & Market

Research

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CONSIDER THIS SCENARIO• YOU HAVE JUST START YOUR

UNIVERSITY DEGREE AND YOU REALIZE THAT HAVING A COMPUTER WOULD HELP YOU EXCEL IN YOUR STUDIES. THINK ABOUT THE PROCESS THAT YOU WENT THROUGH TO BUY A COMPUTER. BEGIN THINKING ABOUT THIS PROCESS WHILE YOU WERE STILL IN HIGH SCHOOL.What are the steps you when

through?

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CONSUMER BUYING DECISION (CBD) PROCESS

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase behaviour

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CBD PROCESS – HABITUAL SHOPPING

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase behaviour

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WHY DOES CBD CHANGE WITH HABITUAL PURCHASES?

What has worked in the past (rewarded us) is likely to work again (reward us again) in the future

Habits allow us to save time making decisions and be thinking of other things as we do them

Routine can often be executed more efficiently than new behaviours

Provides a sense of discipline, order and control in our lives

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CBD PROCESS – RECREATIONAL SHOPPING

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase behaviour

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CBD PROCESS – COMPLEX SHOPPING

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase behaviour

FIELD OF BUYER BEHAVIOR

Study of the processes involved when individuals, groups, or companies select,

purchase, use or dispose of products, services, ideas or experiences to satisfy

needs and desires.

• Who consumes?• What?• Why?• Where and how?• What can we do once we know?

Knowledge is Power 10

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A MODEL OF CONSUMER BEHAVIOR

Their needs and processes are under the influence of cultural, social, personal, factors.

Their behavior represents a process of problem solving in stages from need recognition to feelings of (dis)satisfaction.

Consumer Behavior is reasoned and purposive. Consumers enter the marketplace in order to satisfy needs, acquire meanings and produce themselves.

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WHAT INFLUENCES CONSUMER BEHAVIOUR?

Cultural FactorsCultural Factors

Social FactorsSocial Factors

Personal FactorsPersonal Factors

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CULTURE

The fundamental determinant of a person’s wants and behaviours

acquired through socializationprocesses with family

and other key institutions

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SUBCULTURES

Nationalities Nationalities

ReligionsReligions

Racial groupsRacial groups

Geographic regionsGeographic regions

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EXAMPLE OF CULTURAL DIFFERENCES• Differences Between Cultures

– “A house should be dusted and polished three times a week.”

Numbers shown are percentages agreeing with statement

16Numbers shown are percentages agreeing with statement

EXAMPLE OF CULTURAL DIFFERENCES• Differences Between Cultures

– “Everyone should use deodorant.”

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MKT100

Numbers shown are percentages agreeing with statement

EXAMPLE OF CULTURAL DIFFERENCES• Differences Between Cultures

– “My children are the most important thing in my life.”

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SOCIAL FACTORS

Referencegroups

Social roles

Statuses

Family

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PERSONAL FACTORS

Age

Values

Life cyclestage

Occupation

Personality

Self-concept

Wealth

Lifestyle

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PROFESSIONAL OR BUSINESS BUYING BEHAVIOUR

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THE BUSINESS BUYING PROCESSPr

oble

m

Reco

gniti

on

Gen

eral

nee

d de

scrip

tion

Prod

uct

Spec

ifica

tion

Supp

lier

Sea

rch

Prop

osal

So

licita

tion

Supp

lier

Sele

ction

Ord

er-r

outin

e sp

ecifi

catio

n

Perf

orm

ance

Re

view

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BUYING SITUATION

Straight rebuyStraight rebuy

Modified rebuyModified rebuy

New taskNew task

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DEPENDS ON BUYING SITUATIONBuying Stage New Task Modified

RebuyStraight Rebuy

1 Problem recognition Yes Maybe No

2 General need description Yes Maybe No

3 Product specification Yes Yes Yes

4 Supplier search Yes Maybe no

5 Proposal solicitation Yes Maybe No

6 Supplier selection Yes Maybe No

7 Order-routine specification Yes Maybe No

8 Performance review Yes Yes Yes

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MARKET RESEARCH

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THE MARKETING RESEARCH PROCESS

Define the

problem

Develop & design research

plan

Collectdata

Analyze information

Present findings

Make decision

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1. DEFINE THE PROBLEMNot too broadly Not too narrowly

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Start by identifying the decisions

What decisions will need to be made

from the researching findings

Then work backwards to develop research objectives that will

answer the questions

RESEARCH OBJECTIVES TO ADDRESS PROBLEM

Whether to launch new product X ?• Determine Interest in product X• Determine Willingness to pay for product X• Best Price point to maximize revenue• Where would customer purchase

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2. DEVELOPING THE RESEARCH PLAN

Data Sources

Research approaches

Sampling Plan

Research Instrument

Contact Method

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• Fresh, for a specific purposePrimary

• Already exists, collected for another purposeSecondary

2. DEVELOP THE RESEARCH PLANData sources

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2. DEVELOP THE RESEARCH PLAN

Type of Research

• is undertaken when the problem or research question is still fuzzy & management wants additional information before undertaking further research.

Exploratory

• is used to describe customers, either small numbers of customers in-depth (qualitative research), or large numbers by survey research (quantitative research).

Descriptive

• Used to explore the question “Does X cause Y?” Cause-and-

effect

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2. DEVELOP THE RESEARCH PLAN

Type of Research

• sample of customers at a specific point in time

Cross-sectional

• Repeated measurement of the same customer over a period of time

Longitudinal

DES

CRIP

TIV

E R

ESEA

RCH

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2. DEVELOP THE RESEARCH PLAN

Research approaches

Observational Research

Focus Group Research

Survey Research

Behavioural Data

Experimental Research

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Research instruments

2. DEVELOP THE RESEARCH PLAN

Quantitative -Questionnaires

Qualitative

QUALITATIVE RESEARCH

Advantages

• deep understanding• quick, cheap• flexible, fluid, open,

suggestive• able to tap deep,

important, enduring meanings

Disadvantages

• Can’t generalize• requires expertise• ‘subjective’

interpretations• subjective to the

selective perception of manager or analyst

QUANTITATIVE RESEARCH

Advantages

• power of numbers/science

• ‘objective’• can generalize• useful for forecasting

Disadvantages

• superficial/ structured• not innovative• dishonesty/reluctance• non-response• artificiality of control

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2. DEVELOP THE RESEARCH PLANSampling Plan

Sampling Unit• Who to survey

Sample Size• How many to survey

Sampling procedure• probability vs non-probability

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2. DEVELOP THE RESEARCH PLAN

Contact Methods

Mail questionnaire

Telephone interview

Personal interview

On-line interview

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ON-LINE RESEARCH

Advantages

• Reduced errors• Reduced cost• Increased speed• Richer Response

(open-ended)• Richer multimedia

experience

Disadvantage

• Not representative of population

• Dishonesty / reluctance

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3. INFORMATION COLLECTION IS;

Most expensive & error prone step

Respondent

unavailable uncooperative biased or dishonest

Interviewer

biased or dishonest

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5. PRESENT THE FINDINGS

4. ANALYZE THE INFORMATION

6. MAKE THE DECISION

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ANY QUESTIONS

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METRIC 5:MARKUP & MARGIN

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MARK-UP VERSUS MARGIN

• Is always a % based on the cost of a product or service

• It is the amount you want to add to the cost to determine the selling price

Mark-up

• Is always a % based on the price of a product or service

• It is the amount of the selling rice that is available to cover fixed costs (remember contribution margin)

Margin

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MARGINS AND MARK-UPS

PriceCost $10

Margin $ Mark-up $ $5Margin %33.3% 100

$15

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MARGINS AND MARK-UPS

PriceCost

Margin $ Mark-up $ $5Mark-up %50.0% 100

$15$10

MARKUP OR MARGIN?

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RELATIONSHIP BETWEEN MARGINS & MARKUPS

Price Cost Margin Markup

$10 $9.00 $1 = 10% on Price

$1+ 11% on Cost

$10 $7.50 25% 33%

$10 $6.67 33.3% 50%

$10 $5.00 50% 100%

$10 $4.00 60% 150%

$10 $3.33 66.7% 200%

$10 $2.50 75% 300%

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EXAMPLE – PART 1You are a manufacturer of widgets. Your cost to manufacture and package your widget is $10/unit. You decide to sell the product to your wholesaler for $19/unit. You have marked-up the product $9, which will cover your operating expenses and provide for a nice profit.

Cost = $10

Markup $ / Margin $= $9Price = Wholesale Cost = Cost + Markup = $10 + $9 = $19Markup (%) =Margin (%) =

Markup $ / Cost * 100% = $9 / $10 = 90%Margin $ / Price * 100% = $9 / $19 = 47.4%

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EXAMPLE – PART 2Let’s continue: you find a distributor willing to carry and move your product for a 25% margin.

Wholesale Cost = $19 Wholesale Margin (%) = 25%

Wholesale Price =

Wholesale Markup =

Wholesale Markup (%)=

Wholesale Price - Wholesale Cost= $25.33 - $19 = $6.33

Wholesale Markup / Wholesale Cost*100%= $6.33 / $19 * 100% = 33.3%

= Wholesale Cost / (100% - Wholesale Margin)= $19 / (100% - 25%) = $25.33

Cost = Price x (1- Margin %)

EXAMPLE – PART 3

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Finally, the wholesaler is able to sell the product to the retailer. In this industry, it is standard for products of this type to be marked-up by the retailer 50%.

Retailer Cost = $25.33Retail Markup (%) = 50%Retail Markup =

Retail Margin (%) = Retail Markup / Retail Price= $12.67 / $38 = 33.3%

= $25.33 * 50% = $12.67

= $25.33 + 12.67 = $38Retail Price = Retailer Cost + Retail Markup

Retailer Cost * Retail Markup (%)

$10• Manu

f. Cost

$9• Manuf.

Margin

6.33• Wholesale

Margin

$12.67• Retailer

Margin

$38• Retail Price

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LET’S COMPLETE THE WORKSHEET

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BEFORE YOU LEAVE TODAY

name cards

Front of the Class

Hand In:

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SEE YOU NEXT WEEK