Organizational & Household Decision Making

Michael J. KalsherMGMT 4460/6962

Summer 2014

Chapter ObjectivesWhen you finish this chapter, you should understand

why:1.Marketers often need to understand consumers’

behavior rather than an individual consumer’s behavior.

2.Companies as well as individuals make purchase decisions.

3.Our traditional notions about families are outdated.4.Many important demographic dimensions of a

population relate to family and household structure.5.Members of a family unit play different roles and

have different amounts of influence when the family makes purchase decisions.

6.Children learn over time what and how to consume.

Learning Objective 1 Marketers often need to understand

consumers’ behavior (collective decision making) rather than a consumer’s behavior.

Roles In Collective Decision Making

Initiator: Brings up idea or identifies a need

Gatekeeper: Conducts information search and controls info flow

Influencer: Attempts to sway the outcome of the decision

Buyer: Purchaser

User: Consumes the product or service

Learning Objective 2 Companies as well as individuals make

purchase decisions.

Organizational Decision Making Organizational buyers:

purchase goods and services on behalf of companies for use in the process of manufacturing, distribution, or resale.

Business-to-business (B2B) marketing is VERY big business ($trillions)

Compared to Consumer Decision Making, Organizational Decision Making…

Involves many people Requires precise, technical specifications Is based on past experience and careful

weighing of alternatives May require risky decisions Involves substantial dollar volume Places more emphasis on personal selling

(e.g., medical devices)

Hemodialysis Catheters

http://www.youtube.com/watch?v=fXeuB1P8sDs

What Influences Organizational Buyers? Internal stimuli External stimuli (Nature of the industry & the

organization)

Cultural factors Type of purchase (Level of risk and complexity)

Buyclass theory of purchasing: organizational buying decisions can be divided into 3 types that vary in complexity. Straight rebuy (Low risk; Habitual decision making e.g.,

approved vendors) Modified rebuy (Moderate risk; Limited problem solving) New task (High risk; Extensive problem solving)

Learning Objective 3 Our traditional notions about families are

outdated.

Learning Objective 4 Many important demographic dimensions of a

population relate to family and household structure.

The Modern Family Changes in family structure (nuclear vs.

extended) Changes in concept of household (any

occupied housing unit)

Family Size Depends on educational level, availability of

birth control, and religion Many women want smaller families The rate of voluntary childlessness is rising,

making DINKs (dual incomes no kids) a valuable market segment

Sandwich Generation Sandwich generation:

adults who care for their parents as well as their own children

Boomerang kids: adult children who return to live with their parents Spend less on household

items and more on entertainment

Nonhuman Family Members Pets are treated like family members Pet-smart marketing strategies:

Name-brand pet products Lavish kennel clubs Pet accessories http://www.youtube.com/watch?v=Pi60Aj2EkyE

Family Life Cycle Factors that determine how couples spend

money: Whether they have children Whether both spouses work

Family life cycle (FLC) concept combines trends in income and family composition with change in demands placed on income

Variables Affecting Family Life Cycle

Age

Marital Status

Presence/Absence of Children

Ages of Children, if present

Learning Objective 5 Members of a family unit play different roles

and have different amounts of influence when the family makes purchase decisions.

Household Decisions

Consensual Purchase Decisions:

Agreement on purchase, but not necessarily on the details.

Accommodative Purchase Decisions:

Differing preferences/priorities prevent agreement and may lead to conflict

Resolving Decision Conflicts in Families: Contributing Factors

Interpersonal need Product involvement

and utility Responsibility Power

Who Makes Key Decisions in the Family?

Autonomic decisions: one family member chooses a product

Syncretic decisions: involve both partners Used for cars, vacations, homes,

appliances, furniture, home electronics, interior design, phone service

As education increases, so does syncretic decision making

Gender convergence Sheconomy

In General, Four Factors Determine Decision-Making Patterns Among Couples

Sex-role stereotypes

Spousal Resources

Experience

Socioeconomic Status

Heuristics in Joint Decision Making

Synoptic ideal: calls for both members of the couple to take a common view and act as joint decision makers

Heuristics simplify decision making: Find areas of agreement on salient, objective dimensions Task specialization (reduces “turf wars”) Concessions based on intensity of each spouse’s

preferences (pick your battles wisely)

Learning Objective 6 Children learn over time what and how to

consume.

Children as Decision Makers: They form three distinct markets

Primary market: kids spend their own money

Influence market: parents buy what their kids tell them to buy (parental yielding)

Future market: kids “grow up” quickly and purchase items that normally adults

purchase (e.g., photographic equipment, cell phones) Important to “lock-in” brand loyalty

Consumer Socialization

Consumer socialization is the process by which young people acquire skills, knowledge, and attitudes relevant to their functioning in the marketplace

Children’s purchasing behavior is influenced by Parents, family, and teachers Television and toys Culturehttp://www.youtube.com/watch?v=4CA11vk_X-A&feature=

relatedhttps://www.youtube.com/watch?v=DVvigQ_RFKc

Five Stages of Consumer Development

Parental Styles for Socializing Children

Authoritarian

Neglecting

Indulgent

Cognitive Development: New view stresses differences in information-processing abilities

Limited: Below age 6, children do not use storage and

retrieval strategies Cued:

Between ages 6 and 10, children use these strategies, but only when prompted

Strategic: Children ages 10 and older spontaneously

employ storage and retrieval strategies

Chapter Summary The purchase decisions made by many may

differ from those made by individuals. Buying for one’s self is different than buying

for one’s company. Our traditional notions of family are outdated. Family members play different roles and

varying levels of influence. Children learn over time how to consume.