Analyzing Consumer and Business Markets According to Keller and Kotler (2015), a consumer’s buying behavior is

influenced by cultural, social, and personal factors. Of these, cultural

The Power of the Consumer factors exert the broadest and deepest influence.
Marketers are fundamentally interested in learning about the process Cultural Factors
people use to make purchase decisions. Delivering value to the customer
is the core of marketing, and a company can only do that with a thorough Culture, subculture, and social class are particularly important influences
accurate and timely understanding of the customer. Complex forces on consumer buying behavior. Culture is the fundamental determinant of
influence consumer choices, and these forces change over time, which a person’s wants and behavior. A child growing up in another country
adds to the challenges marketers face (Marshall and Johnston, 2009). might have a different view of self, relationship to others, and rituals.

Marketers must have a thorough understanding of how consumers think, Marketers must closely attend to cultural values in every country to
feel, and act and offer clear value to each and every target consumer. understand how to best market their existing products and find
Adopting a holistic marketing orientation requires fully understanding opportunities for new products. Each culture consists of smaller
customers—gaining a 360-degree view of both their daily lives and the subcultures that provide more specific identification and socialization for
changes that occur during their lifetimes so the right products are always their members. Subcultures include nationalities, religions, racial groups,
marketed to the right customers in the right way (Keller and Kotlet, and geographic regions. When subcultures grow large and affluent
2015). enough, companies often design specialized marketing programs to serve
them.
Let's watch the video as Deoloitte Consumer Review presents the growing
power of consumers Virtually all human societies exhibit social stratification, most often in the
form of social classes, relatively homogeneous and enduring divisions in a
Source: Deloitte UK. Retrieved from [Link] society, hierarchically ordered and with members who share similar
What Influences Consumer Behavior? values, interests, and behavior. One classic depiction of social classes in
the United States defined seven ascending levels: (1) lower lowers, (2)
Consumer behavior is the study of how individuals, groups, and upper lowers, (3) working class, (4) middle class, (5) upper middles, (6)
organizations select, buy, use, and dispose of goods, services, ideas, or lower uppers, and (7) upper uppers (Coleman, 1983). Social class
experiences to satisfy their needs and wants (Solomon, 2013). Marketers members show distinct product and brand preferences in many areas.
must fully understand both the theory and the reality of consumer
behavior. Social Factors
In addition to cultural factors, social factors such as reference groups, desired status in society. Marketers must be aware of the status-symbol
family, and social roles and statuses affect our buying behavior. potential of products and brands.

A person’s reference groups are all the groups that have a direct (face-to- Personal Factors
face) or indirect influence on their attitudes or behavior. Groups having a
direct influence are called membership groups. Some of these are Personal characteristics that influence a buyer’s decision include age and
stage in the life cycle, occupation and economic circumstances,
primary groups with whom the person interacts fairly continuously and
informally, such as family, friends, neighbors, and coworkers. People also personality and self-concept, and lifestyle and values.
belong to secondary groups, such as religious, professional, and trade- Our taste in food, clothes, furniture, and recreation is often related to our
union groups, which tend to be more formal and require less continuous age. Consumption is also shaped by the family life cycle and the number,
interaction. age, and gender of people in the household at any point in time.
The family is the most important consumer buying organization in society, Marketers realize that changes in life stage (for example, graduating from
and family members constitute the most influential primary reference college, getting married, or having a child) transform an individual’s
group (Moore et al. 2002). There are two families in the buyer’s life. The buying habits and are referred to as the family life cycle.
family of orientation consists of parents and siblings. From parents a
person acquires an orientation toward religion, politics, and economics Occupation also influences consumption patterns. Marketers try to
and a sense of personal ambition, self-worth, and love (Palan and Wilkes, identify the occupational groups that have above-average interest in their
1994). Even if the buyer no longer interacts very much with his or her products and services and even tailor products for certain occupational
parents, parental influence on behavior can be significant. groups.

We each participate in many groups—family, clubs, organizations—and By personality, we mean a set of distinguishing human psychological
these are often an important source of information and help to define traits that lead to relatively consistent and enduring responses to
norms for behavior. We can define a person’s position in each group in environmental stimuli including buying behavior. We often describe
terms of role and status. A role consists of the activities a person is personality in terms of such traits as self-confidence, dominance,
expected to perform. Each role in turn connotes a status. A senior vice autonomy, deference, sociability, defensiveness, and adaptability
president of marketing may have more status than a sales manager, and a (Kassarjian and Sheffet,1981). Brands also have personalities, and
sales manager may have more status than an office clerk. People choose consumers are likely to choose brands whose personalities match their
products that reflect and communicate their role and their actual or own. We define brand personality as the specific mix of human traits that
we can attribute to a particular brand.
People from the same subculture, social class, and occupation may adopt intensity to drive us to act. Motivation has both direction—we select one
quite different lifestyles. A lifestyle is a person’s pattern of living in the goal over another—and intensity—we pursue the goal with more or less
world as expressed in activities, interests, and opinions. It portrays the vigor.
“whole person” interacting with his or her environment. Marketers
search for relationships between their products and lifestyle groups. Three of the best-known theories of human motivation—those of
Sigmund Freud, Abraham Maslow, and Frederick Herzberg—carry quite
Consumer decisions are also influenced by core values, the belief systems different implications for consumer analysis and marketing strategy.
that underlie attitudes and behaviors. Core values go much deeper than
Sigmund Freud assumed the psychological forces shaping people’s
behavior or attitude and at a basic level guide people’s choices and
desires over the long term. Marketers who target consumers on the basis behavior are largely unconscious and that a person cannot fully
understand his or her own motivations. Someone who examines specific
of their values believe that with appeals to people’s inner selves, it is
possible to influence their outer selves—their purchase behavior. brands will react not only to their stated capabilities but also to other,
less conscious cues such as shape, size, weight, material, color, and brand
Source: Buzzle, Key Factors That Influence the Buying Decisions of name. A technique called laddering lets us trace a person’s motivations
Consumers. Retrieved from http//[Link] from the stated instrumental ones to the more terminal ones. Then the
marketer can decide at what level to develop the message and appeal
Key Psychological Processes (Reynolds and Olson, 2001).
The marketer’s task is to understand what happens in the consumer’s Abraham Maslow sought to explain why people are driven by particular
consciousness between the arrival of the outside marketing stimuli and needs at particular times (Rapaille, 2007). His answer is that human needs
the ultimate purchase decisions. Keller and Kotler (2015) identified four are arranged in a hierarchy from most to least pressing—from
key psychological processes—motivation, perception, learning, and physiological needs to safety needs, social needs, esteem needs, and self-
memory—fundamentally influence consumer responses. actualization needs. People will try to satisfy their most important need
Motivation first and then move to the next.

We all have many needs at any given time. Some needs are biogenic; they Frederick Herzberg developed a two-factor theory that distinguishes
arise from physiological states of tension such as hunger, thirst, or dissatisfiers (factors that cause dissatisfaction) from satisfiers (factors that
discomfort. Other needs are psychogenic; they arise from psychological cause satisfaction). The absence of dissatisfiers is not enough to motivate
states of tension such as the need for recognition, esteem, or belonging. a purchase; satisfiers must be present.
A need becomes a motive when it is aroused to a sufficient level of Perception
A motivated person is ready to act—how is influenced by his or her information to be consistent with prior brand and product beliefs and
perception of the situation. In marketing, perceptions are more important expectations. When consumers report different opinions of branded and
than reality because they affect consumers’ actual behavior. Perception is unbranded versions of identical products, it must be the case that their
the process by which we select, organize, and interpret information brand and product beliefs, created by whatever means (past experiences,
inputs to create a meaningful picture of the world (Berelson and Steiner, marketing activity for the brand, or the like), have somehow changed
1964). Consumers perceive many different kinds of information through their product perceptions.
their senses.
Most of us don’t remember much of the information to which we’re
Perception depends not only on physical stimuli but also on the stimuli’s exposed, but we do retain information that supports our attitudes and
relationship to the surrounding environment and on conditions within beliefs. Because of selective retention, we’re likely to remember good
each of us. One person might perceive a fast-talking salesperson as points about a product we like and forget good points about competing
aggressive and insincere, another as intelligent and helpful. Each will products. Selective retention again works to the advantage of strong
respond to the salesperson differently. brands. It also explains why marketers need to use repetition—to make
sure their message is not overlooked.
People emerge with different perceptions of the same object because of
three perceptual processes: selective attention, selective distortion, and Learning
selective retention.
When we act, we learn. Learning induces changes in our behavior arising
Attention is the allocation of processing capacity to some stimulus. from experience. Most human behavior is learned, though much learning
Voluntary attention is something purposeful; involuntary attention is is incidental. Learning theorists believe learning is produced through the
grabbed by someone or something. It’s estimated that the average interplay of drives, stimuli, cues, responses, and reinforcement.
person may be exposed to more than 1,500 ads or brand communications
A drive is a strong internal stimulus impelling action. Cues are minor
a day. Because we cannot possibly attend to all these, we screen most
stimuli out—a process called selective attention. Selective attention stimuli that determine when, where, and how a person responds.
Learning theory teaches marketers that they can build demand for a
means that marketers must work hard to attract consumers’ notice. The
real challenge is to explain which stimuli people will notice. product by associating it with strong drives, using motivating cues, and
providing positive reinforcement.
Even noticed stimuli don’t always come across in the way the senders
intended. Selective distortion is the tendency to interpret information in a Emotions
way that fits our preconceptions. Consumers will often distort
Consumer response is not all cognitive and rational; much may be Memory Processes
emotional and invoke different kinds of feelings. A brand or product may
make a consumer feel proud, excited, or confident. An ad may create Memory is a very constructive process because we don’t remember
information and events completely and accurately. Often we remember
feelings of amusement, disgust, or wonder. Marketers are increasingly
recognizing the power of emotional appeals—especially if these are bits and pieces and fill in the rest based on whatever else we know.
rooted in some functional or rational aspects of the brand. Given it was Memory encoding describes how and where information gets into
released 10 years after Toy Story 2, Disney’s Toy Story 3 used social media memory. The strength of the resulting association depends on how much
to tap into feelings of nostalgia in its marketing (Lerner, 2010). we process the information at encoding (how much we think about it, for
Memory instance) and in what way (Lynch Jr. and Srull, 1982). In general, the
more attention we pay to the meaning of information during encoding,
Cognitive psychologists distinguish between short-term memory (STM)— the stronger the resulting associations in memory will be.
a temporary and limited repository of information—and long-term
The Buying Decision Process: The Five-Stage Model
memory (LTM)—a more permanent, essentially unlimited repository. All
the information and experiences we encounter as we go through life can The basic psychological processes we’ve discussed play an important role
end up in our long-term memory. in consumers’ actual buying decisions.
Most widely accepted views of long-term memory structure assume we Marketing scholars have developed a “stage model” of the process. The
form some kind of associative model. For example, the associative consumer typically passes through five stages: problem recognition,
network memory model views LTM as a set of nodes and links. Nodes are information search, evaluation of alternatives, purchase decision, and
stored information connected by links that vary in strength. Any type of postpurchase behavior (Keller and Kotler, 2015).
information can be stored in the memory network, including verbal,
visual, abstract, and contextual. Problem Recognition

In this model, we can think of consumer brand knowledge as a node in The buying process starts when the buyer recognizes a problem or need
memory with a variety of linked associations. The strength and triggered by internal or external stimuli. With an internal stimulus, one of
organization of these associations will be important determinants of the the person’s normal needs—hunger, thirst, sex—rises to a threshold level
information we can recall about the brand. Brand associations consist of and becomes a drive. A need can also be aroused by an external stimulus.
all brand-related thoughts, feelings, perceptions, images, experiences,
Marketers need to identify the circumstances that trigger a particular
beliefs, attitudes, and so on, that become linked to the brand node.
need by gathering information from a number of consumers. They can
then develop marketing strategies that spark consumer interest. Evaluation of Alternatives
Particularly for discretionary purchases such as luxury goods, vacation
packages, and entertainment options, marketers may need to increase How does the consumer process competitive brand information and
make a final value judgment? No single process is used by all consumers
consumer motivation so a potential purchase gets serious consideration.
or by one consumer in all buying situations. There are several processes,
Information Search and the most current models see the consumer forming judgments
largely on a conscious and rational basis.
Surprisingly, consumers often search for only limited information. Surveys
have shown that for durables, half of all consumers look at only one Some basic concepts will help us understand consumer evaluation
store, and only 30 percent look at more than one brand of appliances. We processes. First, the consumer is trying to satisfy a need. Second, the
can distinguish between two levels of engagement in the search. The consumer is looking for certain benefits from the product solution. Third,
milder search state is called heightened attention. At this level a person the consumer sees each product as a bundle of attributes with varying
simply becomes more receptive to information about a product. At the abilities to deliver the benefits
next level, the person may enter an active information search: looking for
reading material, phoning friends, going online, and visiting stores to Consumers will pay the most attention to attributes that deliver the
sought-after benefits. We can often segment the market for a product
learn about the product.
according to attributes and benefits important to different consumer
Marketers must understand what type of information consumers seek— groups.
or are at least receptive to—at different times and places (Häubl et. al
2012). Beliefs and Attitudes. Through experience and learning, people acquire
beliefs and attitudes. These in turn influence buying behavior. A belief is a
Major information sources to which consumers will turn fall into four descriptive thought that a person holds about something. Just as
groups: important are attitudes, a person’s enduring favorable or unfavorable
evaluations, emotional feelings, and action tendencies toward some
• Personal. Family, friends, neighbors, acquaintances object or idea. People have attitudes toward almost everything: religion,
• Commercial. Advertising, Web sites, e-mails, salespersons, dealers, politics, clothes, music, or food.
packaging, displays Attitudes put us into a frame of mind: liking or disliking an object, moving
• Public. Mass media, social media, consumer-rating organizations toward or away from it. They lead us to behave in a fairly consistent way
toward similar objects. Because attitudes economize on energy and
• Experiential. Handling, examining, using the product thought, they can be very difficult to change.
Purchase Decision of choosing an attribute is positively related to its importance—and
eliminates brands that do not meet minimum acceptable cutoffs.
In the evaluation stage, the consumer forms preferences among the
brands in the choice set and may also form an intention to buy the most Intervening Factors. Even if consumers form brand evaluations, two
preferred brand. In executing a purchase intention, the consumer may general factors can intervene between the purchase intention and the
make as many as five subdecisions: brand (brand A), dealer (dealer 2), purchase decision. The first factor is the attitudes of others. The influence
quantity (one computer), timing (weekend), and payment method (credit on us of another person’s attitude depends on two things: (1) the
card). intensity of the other person’s negative attitude toward our preferred
alternative and (2) our motivation to comply with the other person’s
The expectancy-value model is a compensatory model, in that perceived wishes (Fishbein, 1967). The more intense the other person’s negativism
good things about a product can help to overcome perceived bad things. and the closer he or she is to us, the more we will adjust our purchase
But consumers often take “mental shortcuts” called heuristics or rules of intention.
thumb in the decision process.
The second factor is unanticipated situational factors that may erupt to
With noncompensatory models of consumer choice, positive and change the purchase intention.
negative attribute considerations don’t necessarily net out. Evaluating
attributes in isolation makes decision making easier for a consumer, but it Preferences and even purchase intentions are not completely reliable
also increases the likelihood that she would have made a different choice predictors of purchase behavior. A consumer’s decision to modify,
if she had deliberated in greater detail. postpone, or avoid a purchase decision is heavily influenced by one or
more types of perceived risk: (Campbell and Goodstein, 2001)
We highlight three choice heuristics here (Dzyabura and Hauser, 2011).
1. Functional risk—The product does not perform to expectations.
1. Using the conjunctive heuristic, the consumer sets a minimum
acceptable cutoff level for each attribute and chooses the first alternative 2. Physical risk—The product poses a threat to the physical well-being or
that meets the minimum standard for all attributes. health of the user or others.

2. With the lexicographic heuristic, the consumer chooses the best brand 3. Financial risk—The product is not worth the price paid.
on the basis of its perceived most important attribute.
4. Social risk—The product results in embarrassment in front of others.
3. Using the elimination-by-aspects heuristic, the consumer compares
5. Psychological risk—The product affects the mental well-being of the
brands on an attribute selected probabilistically—where the probability
user.
6. Time risk—The failure of the product results in an opportunity cost of stop buying the product (exit option) or warning friends (voice option)
finding another satisfactory product. (Hirschman, 1970).

Postpurchase Behavior Postpurchase Uses and Disposal. Marketers should also monitor how
buyers use and dispose of the product. A key driver of sales frequency is
After the purchase, the consumer might experience dissonance from product consumption rate—the more quickly buyers consume a product,
noticing certain disquieting features or hearing favorable things about the sooner they may be back in the market to repurchase it.
other brands and will be alert to information that supports his or her
decision. Marketing communications should supply beliefs and Source: Directive, 5 Stages of the Consumer Decision-Making Process and
evaluations that reinforce the consumer’s choice and help him or her feel How it's Changed. . Retrieved from [Link]
good about the brand. The marketer’s job therefore doesn’t end with the
Before we proceed to the next topic, let us first answer Question for
purchase. Marketers must monitor postpurchase satisfaction,
postpurchase actions, and postpurchase product uses and disposal. Module 3a

What is Organizational Buying?

Postpurchase Satisfaction. Satisfaction is a function of the closeness
between expectations and the product’s perceived performance (Oliver, Many people believe marketing is focused primarily on consumers—the
2006). If performance falls short of expectations, the consumer is ultimate users of the product. This is due at least in part to the fact that
disappointed; if it meets expectations, the consumer is satisfied; if it most people experience marketing as a consumer. The reality, however,
exceeds expectations, the consumer is delighted. These feelings make a is that large consumer products companies purchase hundreds of billions
difference in whether the customer buys the product again and talks of dollars of products and services every year (Marshall and Johnston,
favorably or unfavorably about it to others. 2009).
Postpurchase Actions. A satisfied consumer is more likely to purchase the Webster Jr. and Wind define organizational buying as the decision-making
product again and will also tend to say good things about the brand to process by which formal organizations establish the need for purchased
others. Dissatisfied consumers may abandon or return the product. They products and services and identify, evaluate, and choose among
may seek information that confirms its high value. They may take public alternative brands and suppliers.
action by complaining to the company, going to a lawyer, or complaining
directly to other groups (such as business, private, or government The business market consists of all the organizations that acquire goods
agencies) or to many others online. Private actions include deciding to and services used in the production of other products or services that are
sold, rented, or supplied to others. Any firm that supplies components for Business marketers need to send well-trained sales representatives and
products is in the business-to-business marketplace. teams to deal with these equally well-trained buyers.

Business marketers contrast sharply with consumer markets in some • Multiple sales calls. A study by McGraw-Hill found that it took four to
ways, however. They have: (Keller and Kotler, 2015). four-and-a-half calls to close an average industrial sale.

• Fewer, larger buyers. The business marketer normally deals with far Derived demand. The demand for business goods is ultimately derived
fewer and much larger buyers than the consumer marketer does, from the demand for consumer goods.
particularly in such industries as aircraft engines and defense weapons.
Inelastic demand. The total demand for many business goods and
The fortunes of Goodyear tires, Cummins engines, Delphi control
systems, and other automotive part suppliers depend in large part on services is inelastic—that is, not much affected by price changes.
getting big contracts from just a handful of major automakers. Buying Situations
• Close supplier–customer relationships. Because of the smaller customer The business buyer faces many decisions in making a purchase. How
base and the importance and power of the larger customers, suppliers many depends on the complexity of the problem being solved, newness
are frequently expected to customize their offerings to individual of the buying requirement, number of people involved, and time
business customer needs. required. Three types of buying situations are the straight rebuy,
• Professional purchasing. Business goods are often purchased by trained modified rebuy, and new task. (Robinson et. al 1967).
purchasing agents, who must follow their organizations’ purchasing Straight rebuy. In a straight rebuy, the purchasing department reorders
policies, constraints, and requirements. Many business buying items like office supplies and bulk chemicals on a routine basis and
instruments—for example, requests for quotations, proposals, and chooses from suppliers on an approved list. The suppliers make an effort
purchase contracts—are not typically found in consumer buying. Many to maintain product and service quality and often propose automatic
professional buyers belong to the Institute for Supply Management (ISM), reordering systems to save time. “Out suppliers” attempt to offer
which seeks to improve the profession’s effectiveness and status. This something new or exploit dissatisfaction with a current supplier. Their
means business marketers must provide greater technical data about goal is to get a small order and then enlarge their purchase share over
their product and its competitive advantages. time.
Multiple buying influences. More people typically influence business Modified rebuy. The buyer in a modified rebuy wants to change product
buying decisions. Buying committees that include technical experts and specifications, prices, delivery requirements, or other terms. This usually
even senior management are common in the purchase of major goods.
requires additional participants on both sides. The in-suppliers become Next, the buyer determines the needed item’s general characteristics and
nervous and want to protect the account. The out-suppliers see an required quantity. For standard items, this is simple. For complex items,
opportunity to propose a better offer to gain some business. the buyer will work with others—engineers, users—to define
characteristics such as reliability, durability, or price. Business marketers
New task. A new-task purchaser buys a product or service for the first can help by describing how their products meet or even exceed the
time (an office building, a new security system). The greater the cost or buyer’s needs.
risk, the larger the number of participants, and the greater their
information gathering—the longer the time to a decision (Bunn, 1993). The buying organization now develops the item’s technical specifications.
Often, the company will assign a product-value-analysis engineering team
Stages in the Buying Process to the project.
The seven stages in the buying process as explained by Keller and Kotler Supplier Search
(2015).
The buyer next tries to identify the most appropriate suppliers through
Problem Recognition trade directories, contacts with other companies, trade advertisements,
The buying process begins when someone in the company recognizes a trade shows, and the Internet. The move to online purchasing has far-
problem or need that can be met by acquiring a good or service. The reaching implications for suppliers and will change the shape of
recognition can be triggered by internal or external stimuli. The internal purchasing for years to come. Companies that purchase online are
stimulus might be a decision to develop a new product that requires new utilizing electronic marketplaces in several forms:
equipment and materials or a machine that breaks down and requires • Catalog sites. Companies can order thousands of items through
new parts. Or purchased material turns out to be unsatisfactory and the electronic catalogs, such as W. W. Grainger’s, distributed by e-
company searches for another supplier or lower prices or better quality. procurement software.
Externally, the buyer may get new ideas at a trade show, see an ad,
receive an e-mail, read a blog, or receive a call from a sales representative • Vertical markets. Companies buying industrial products such as plastics,
who offers a better product or a lower price. Business marketers can steel, or chemicals or services such as logistics or media can go to
stimulate problem recognition by direct marketing in many different specialized Web sites called e-hubs. [Link] allows plastics buyers to
ways. search the best prices among thousands of plastics sellers.

General Need Description and Product Specification

• Spot (or exchange) markets. On spot electronic markets, prices change Before selecting a supplier, the buying center will specify and rank
by the minute. IntercontinentalExchange (ICE) is the leading electronic desired supplier attributes, often using a supplier-evaluation model.
energy marketplace and soft commodity exchange with billions in sales.
To develop compelling value propositions, business marketers need to
• Private exchanges. Hewlett-Packard, IBM, and Walmart operate private better understand how business buyers arrive at their valuations (Flint, et
exchanges to link with specially invited groups of suppliers and partners al. 2002). Researchers have identified eight different customer value
over the Web. assessment (CVA) methods. Companies tended to use the simpler
methods, though the more sophisticated ones promise a more accurate
• Barter markets. In barter markets, participants offer to trade goods or picture of CPV.
services.
The choice of attributes and their relative importance vary with the
• Buying alliances. Several companies buying the same goods can join buying situation. Delivery reliability, price, and supplier reputation are
together to form purchasing consortia to gain deeper discounts on important for routine-order products. For procedural-problem products,
volume purchases. TopSource is an alliance of firms in the retail and such as a copying machine, the three most important attributes are
wholesale food-related businesses. technical service, supplier flexibility, and product reliability. For political-
Proposal Solicitation problem products that stir rivalries in the organization (such as the choice
of a computer system or software platform), the most important
The buyer next invites qualified suppliers to submit written proposals. attributes are price, supplier reputation, product reliability, service
After evaluating them, the buyer will invite a few suppliers to make reliability, and supplier flexibility.
formal presentations. Business marketers must be skilled in researching,
writing, and presenting proposals as marketing documents that describe Order-Routine Specification
value and benefits in customer terms. Oral presentations must inspire After selecting suppliers, the buyer negotiates the final order, listing the
confidence and position the company’s capabilities and resources so they technical specifications, the quantity needed, the expected time of
stand out from the competition. delivery, return policies, warranties, and so on. Many industrial buyers
Proposals and selling efforts are often team efforts that leverage the lease heavy equipment such as machinery and trucks. The lessee gains a
knowledge and expertise of coworkers. number of advantages: the latest products, better service, the
conservation of capital, and some tax advantages. The lessor often ends
Supplier Selection up with a larger net income and the chance to sell to customers that
could not afford outright purchase.
For maintenance, repair, and operating items, buyers are moving toward roles and statuses), and personal (age, stage in the life cycle, occupation,
blanket contracts rather than periodic purchase orders. A blanket economic circumstances, lifestyle, personality, and selfconcept). Research
contract establishes a long-term relationship in which the supplier into these factors can provide clues to reach and serve consumers more
promises to resupply the buyer as needed, at agreed-upon prices, over a effectively.
specified period of time. Because the seller holds the stock, blanket
contracts are sometimes called stockless purchase plans. They lock
suppliers in tighter with the buyer and make it difficult for out-suppliers
to break in unless the buyer becomes dissatisfied.

Performance Review

The buyer periodically reviews the performance of the chosen supplier(s)

using one of three methods. The buyer may contact end users and ask for
their evaluations, rate the supplier on several criteria using a weighted-
score method, or aggregate the cost of poor performance to come up
with adjusted costs of purchase, including price.

The performance review may lead the buyer to continue, modify, or end
a supplier relationship. Many companies have set up incentive systems to
reward purchasing managers for good buying performance, leading them
to increase pressure on sellers for the best terms.

Summary

A thorough knowledge and understanding of customers is an essential

element in developing an effective value proposition. For business-to-
consumer companies this means learning about how and why consumers
buy products and services.

Consumer behavior is influenced by three factors: cultural (culture,

subculture, and social class), social (reference groups, family, and social