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Introduction to Business

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Introduction to Business ­MGT 211
VU
LESSON 28
UNDERSTANDING CONSUMER BEHAVIOR
Marketers study consumer buying behavior to learn what makes individuals buy one product
instead of another. Consumer markets consist of individuals or households that purchase
goods and services for personal use. Issues to be considered are the differences between
organizational and consumer markets, the buyer's decision process, and the factors that affect
that decision process.
Influences on Consumer Behavior
Consumer behavior is essentially the study of why consumers purchase and consume
products. Four key factors influence consumer behavior:
i.
Psychological: Motivations, perceptions, ability to learn, attitudes
ii.
Personal: Lifestyle, personality, economic status
iii.
Social:  Family, opinion leaders, reference groups (e.g. friends,
associates)
iv.
Cultural: Culture, subculture, social class
The Consumer Buying Process
One way to look at the psychology of buying is to understand the decision-making process
people go through when making a purchase. Deciding what to buy is a problem-solving
process. Sometimes consumers become
Brand Loyal to specific products based on the satisfaction they have received from previous
purchases. Nevertheless, consumers decide what to purchase by gathering information to
help them make a choice. The more complex the problem, the more information they are likely
to seek. The steps in the process usually follow this sequence:
i.
Problem/Need recognition: The consumer buying process begins with recognizing a
problem or need. Needs often arise when our personal circumstances change, creating
windows of opportunity for marketers (e.g. getting married, entering the workforce, etc.).
ii.
Information seeking: Sources of information can range from personal sources, to
marketing sources, to public sources, to experience.  Depending on the product,
information seeking ranges from superficial (e.g. "Where is the soft drink machine?") to
extensive (e.g. library research).
iii.
Evaluation of alternatives: This step is essentially a matching process: How do the
attributes of the products you are considering match with your needs and wants? Here,
too, the evaluation process can range from brief to protract.
iv.
Purchase decision: Purchase decisions are typically based on a combination of rational
and emotional motives. Rational motives are based on logical evaluation of product
attributes (e.g. cost, quality, usefulness). Emotional motives are based on non-objective
factors (e.g. "All my friends have 4-inch high heel shoes!").
v.
Post-purchase evaluation: This includes everything that happens after the sale.
Satisfied customers are likely to repurchase products they have used and enjoyed, while
unhappy customers are not only unlikely to repurchase, but also are prone to broadcast
their negative experience to other potential consumers.
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Introduction to Business ­MGT 211
VU
Organizational Marketing and Buying Behavior
a. Organizational Markets can be divided into three main subgroups:
i.
Industrial/commercial market (companies that buy to produce their
own goods and services such as Toyota);
ii.
Reseller market such as wholesalers like Ingram Micro, which
wholesales computers; retailers such as Ann Taylor
iii.
Government and Institutional market including Federal, State and
Local governments, hospitals, churches, museums, and charitable
organizations. Products sold to organizational markets include raw
materials and highly complex manufactured goods such as printing
presses, telecommunications systems, and consulting services.
Organizational buyers are quite different from consumer purchasers:
i.
Professionals:  They are trained in the field of purchasing and
negotiating, and they typically use formal contracts.
ii.
Specialists: They are often specialists in a line of products (e.g. a drug
store buyer might specialize in personal care products).
iii.
Experts: They are often experts (or at least very knowledgeable) about
the products they are buying. The buyer-seller relationship is often much
closer. The development of a long-term connection is beneficial to both
parties.
The International Marketing Mix
Entering foreign markets, a firm must reconsider-and often must adjust-each element of the
marketing mix:
Products --- Must the products be adapted? Redesigned? Recreated?
Some products can be sold abroad with virtually no changes, while other products need to be
adapted to fit the needs of the foreign buyer.
Pricing --- Pricing decisions must include all elements considered domestically, but also
transportation and delivery costs, and exchange rates.
Distribution --- Gaining a distribution foothold is often expensive and time-consuming.
Purchasing local businesses can help in this regard.
Promotion --- Elements of promotional messages should be matched to the customs and
values of each country.
Many standard U.S. promotional devices do not succeed in other countries. Marketers must
consider differences in language and culture when promoting products abroad.
Small Business and the Marketing Mix
Small businesses also face special considerations in terms of the marketing mix:
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Introduction to Business ­MGT 211
VU
Products --- Some new products and firms are doomed at the start because few consumers
want or need what they have to offer. A thorough understanding of what customers want has
paid off for many small firms.
Is there really a consumer need? How can the products be tailored to better meet the need?
(Research can be very helpful in this regard.)
Pricing --- Small business owners must accurately forecast operation expenses. Do prices
truly cover the costs of running the business? Haphazard pricing that is often little more than
guesswork can sink even a firm with a good product. When small businesses set prices by
carefully assessing costs, many earn very satisfactory profits.
Distribution --- Perhaps the most important distribution issue for small businesses is location,
which can help attract and retain customers. Problems in arranging distribution can make or
break a small business. The ability of many small businesses to attract and retain customers
depends on the choice of location.
Promotion --- Promotional expenses should be considered a necessity.  Many small
businesses are ignorant when it comes to the methods and cost of promotion. Successful
small businesses plan for promotional expenses as part of start-up costs. Targeted promotion
(e.g. through trade associations) can be very cost-effective.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures