Chapter 12 Organizational and Household Decision Making

1. Chapter 12Organizational and Household Decision Making CONSUMER BEHAVIOR, 8eMichael Solomon

2. 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.

3. 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 • Our traditional notions about families are outdated.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.

4. 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.

5. 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

6. 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 organi- zational buyers

7. 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

8. Buyclass Framework • Buyclass theory: organizational buying decisions divided into three types, ranging from most to least complex: Table 12.1

9. 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

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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.

18. 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

19. 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

20. 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

21. 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

22. Household Decisions (cont.) Specific factors that determine how much family decision conflict there will be: • Interpersonal need • Product involvement and utility • Responsibility • Power

23. 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

24. 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

25. 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

26. 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

27. 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)

28. 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

29. Five Stages of Consumer Development Figure 12.2

30. 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

31. 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

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

33. Sketches Used to Measure Children’s Perception of Commercials Figure 12.3