Chapter 12 Organizational and Household Decision Making

Chapter 12

Organizational and Household Decision Making

CONSUMER BEHAVIOR, 8eMichael Solomon

Prentice-Hall, cr 2009

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Chapter Objectives

When you finish this chapter you should understand why:

• Marketers often need to understand consumers’ behavior rather than consumer behavior, since in many cases more than one person decides what to buy.

• Companies as well as individuals make purchase decisions. The decision-making process differs when people choose what to buy on behalf of a company versus a personal purchase.

• Many important demographic dimensions of a population relate to family and household structure.


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Chapter Objectives (cont.)

• Our traditional notions about families are outdated.

• Members of a family unit play different roles and have different amounts of influence when the family makes purchase decisions.

• Children learn over time what and how to consume.


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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) marketers: specialize in meeting needs of organizations such as corporations, government agencies, hospitals, and retailers.


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Organizational versus Consumer Decision Making

Differences:

• Involves many people

• Requires precise, technical specifications

• Is based on past experience and careful weighing of alternatives (impulse buying is rare)

• May require risky decisions are often risky

• Involves substantial dollar volume

• Places more emphasis on personal selling


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Organizational versus Consumer Decision Making (cont.)

Similarities

• Emotions do guide decisions

• Brand loyalty

• Long-term relationships

• Aesthetic concerns

• Branding and product image

• Intel Inside

• Aflac

Click to view Quicktime video on AFLAC’s branding strategy to organizational buyers


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What Influences Organizational Buyers?

• Internal stimuli• Buyer’s psychological characteristics

• External stimuli• Nature of buyer’s organization, economic, and

technological environment of industry

• Cultural factors• Different norms for doing business in different

countries

• Type of purchase• The more complex or risky the decision, the more

evaluation is needed


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Buyclass Framework

• Buyclass theory: organizational buying decisions divided into three types, ranging from most to least complex:

Buying Situation Extent of Effort Risk Buyers Involved

Straight rebuy Habitual decision making

Low Automatic reorder

Modified rebuy Limited problem solving

Low to moderate One or a few

New task Extensive problem solving

High Many

Table 12.1


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Decision Roles

In collective decisions, one may play any (or all) of the following roles:

• Initiator: bring up idea or identifies need

• Gatekeeper: conducts information search

• Influencer: sways outcome of decision

• Buyer: actually makes the purchase

• User: winds up using product


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Discussion

Assume that you are a sales representative for a large company that markets gauze bandages for use in hospitals.

• List all the people (by position, such as doctors or nurses) that may be involved in the decision making.

• Try to match all the people to their possible decision roles as outlined on the previous slide.


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Crowd Power in Organizations

• Prediction market: groups of people with knowledge about an industry are jointly better predictors of the future than are any individuals

• Two ways to predict product success:

• Employees collectively select factors for product success

• Knowledgeable “outsiders” (industry experts, consumers) predict success


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B2B E-Commerce

• B2B e-commerce: Internet interactions between two or more businesses

• Roughly half of B2B e-commerce consists of auctions, bids, and exchanges among numerous suppliers/purchasers

• Example: Dell Computer uses Web site to deliver technical support, product information, order status, and customer service to corporate customers

Click photo for Dell.com


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The Modern Family

• Before 1900s: extended family

• 1950s: nuclear family (mother, father, and children)

• Today, many households:

• Married couples less than 50% of households

• Majority of adult women live without spouse

• Unmarried opposite sex couples

• Same-sex couples


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Discussion

• In identifying and targeting newly divorced couples, do you think marketers are exploiting these couples’ situations?

• Are there instances in which you think marketers may actually be helpful to them?

• Support your answers with examples


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Family Size

• Depends on educational level, availability of birth control, and religion

• Marketers keep an eye on fertility rate and birth rate

• Worldwide, women want smaller families (especially in industrialized countries)• Contraception/abortion are more readily available• Divorce is common• Older people now pursue non-grandchildren

activities• Some countries want people to have more

children


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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


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Nonhuman Family Members

• Pets are treated like family members

• Spending on pets has doubled in the last decade

• Pet-smart marketing strategies:

• Name-brand pet products

• Designer water for dogs

• Lavish kennel clubs, pet classes/clothiers

• Pet accessories in cars

• Perma-pets

• Neopets Inc.


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Family Life Cycle

• Factors that determine how couples spend money:

• Whether they have children

• Whether the woman works

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

• As we age, our preferences/needs for products and activities tend to change


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FLC Models

• Useful models take into account the following variables in describing longitudinal changes in priorities and demand for product categories:

• Age

• Marital status

• Presence/absence of children in home

• Ages of children

• Such factors allow use to identify categories of family-situation types


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Life-Cycle Effects on Buying

FLC model categories show marked differences in consumption patterns

• Young bachelors and newlyweds: exercise, go to bars/concerts/movies

• Early 20s: apparel, electronics, gas

• Families with young children: health foods

• Single parents/older children: junk foods

• Newlyweds: appliances

• Older couples/bachelors: home maintenance services


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Household Decisions

Families make two types of decisions:

• Consensual purchase decision: members agree on the desired purchase, differing only in terms of how it will be achieved

• Accommodative purchase decision: members have different preferences or priorities and they cannot agree on a purchase to satisfy the minimum expectations of all involved


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Household Decisions (cont.)

Specific factors that determine how much family decision conflict there will be:

• Interpersonal need

• Product involvement and utility

• Responsibility

• Power


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Sex Roles and Decision-making Responsibilities

Who makes key decisions in a family?

• Autonomic decision: one family member chooses a product

• Wives still make decisions on groceries, toys, clothes, and medicines

• Syncretic decision: involve both partners

• Used for cars, vacations, homes, appliances, furniture, home electronics, interior design, phone service

• As education increases, so does syncretic decision making


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Identifying the Decision Maker

Family financial officer (FFO)

• In traditional families, the man makes the money and the woman spends it

• If spouses adhere to modern sex-role norms, participation in family maintenance activities

Four factors in joint versus sole decision making:

• Sex-role stereotypes

• Spousal resources

• Experience

• Socioeconomic status


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LeoShe Mother Types

• June Cleaver: traditional, stay-at-home mom

• Tug of War: work but not happy about it

• Strong Shoulders: lower income but optimistic and strong

• Mother of Invention: enjoy working and being mothers


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Heuristics in Joint Decision Making

• Synoptic ideal: Husband and wife to take a common view and to act as joint decision makers

• Heuristics simplify decision making:

• Salient, objective dimensions

• Task specialization

• Concessions based on intensity of each spouse’s preferences


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Children as Decision Makers

Children make up 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)


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Consumer Socialization

• Consumer socialization: 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

• Television (“electric babysitter”)

• Sex roles


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Five Stages of Consumer Development

Figure 12.2


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Cognitive Development

• Marketers segment children by their stage of cognitive development: ability to comprehend concepts of increasing complexity

• Three segments often used today:

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

• Cued: Between ages 6 and 12, children use these strategies, but only when prompted

• Strategic: Children age 12 and older spontaneously employ storage and retrieval strategies


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Marketing Research and Children

• Little real data on children’s preferences/influences on spending patterns is available

• Kids tend to:

• Be undependable reporters of own behavior

• Have poor recall

• Not understand abstract questions

• Two areas where researchers have been successful:

• Product testing

• Advertising message comprehension


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Discussion

• Do you think market research should be performed with children? Why or why not?


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Sketches Used to Measure Children’s Perception of Commercials

Figure 12.3

Documents

Chapter 12 Organizational and Household Decision Making