Chapter
7
Understanding Local Buyers
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Outline
 Local Buyer Behavior Basics
 The Consumer Decision Process
 Local Market Research
 The B2B Industrial Buyer
 Three Market Environments
 Takeaways.
Culture and Buyer Behavior
 Marketing and Materialism
 Marketing actions are basically undertaken in the belief that
more and better goods will bring an increase in consumers’
standard of living, an increase in their satisfaction, and perhaps
even more happiness
 However, when anticipating customers’ reactions to new
products and increased product choices, it is important to note
the limits on the relationship between material affluence and
personal happiness
 “Money can’t buy you love.”
Local Buyer Behavior
External
Influences
“Models of Man”
Product choice
Culture
Economics
Technology
Politics
Buyer Choices
Buyer
characteristics
Buyer
decision
process
Brand choice
Store choice
Supplier choice
Local
Marketing
Effort
Local Buyer Behavior
• James Duesenberry - Relative Income hypothesis –
consumer’s well-being is a function of how much income they
have relative to their peer groups, not the actual income
• Milton Friedman – Permanent income, defined as the
regularly expected income, is what determines an individual’s
consumption
• Thorstein Veblen – Conspicuous consumption – the notion
that people make purchases of expensive brands & products
in order to display their ability to afford them
Local Buyer Behavior
•What does the product/service do for the buyer?
• How does it fit into the consumption and use
pattern of the buyer?
• What are the core benefits?
• What is the perceived risk and how high is it?
The CORE BENEFIT often differs between local markets.
The generic function of a product depends more on the
local environment than on innate individual preferences.
• Remember: Buyers are GOAL-ORIENTED –
they buy for a reason. Point is to
understand what that reason is.
The Buyer Decision Process
Problem
recognition
Search
Evaluation
of
alternatives
Choice
Outcomes
The Buyer Decision Process
 Problem Recognition
 A problem is when an individual perceives a difference
between an ideal and an actual state of affairs
 New products often lead to tension and a recognized
“problem”
 For the local marketer it is important to recognize that
education about the core benefits might be necessary in
order to create a demand for the product
The Buyer Decision Process
 Search
 A consumer’s search for alternative ways to solve the
problem is closely related to his or her level of involvement
with the product category
 For product with which involvement is high, search tends to
be more comprehensive and time consuming
 For convenience and habit purchases, the decision process is
shorter, with little need for extensive searches or alternative
evaluations
 Search intensity is dependent on the perceived availability
of the alternative
 One advantage for product with high global brand awareness
is that initial distrust is easier to overcome
The Buyer Decision Process
 Evaluation of Alternatives
 When a new product or service is in the “consideration set”
 A highly involved individual will process the available
information matching the pros and cons of the alternatives
against preferences
 Consumers can deal with multi-attribute evaluations in
several ways:
 They can use gradually less-important features to successively
screen out alternatives
 A “hierarchical” decision rule
 They can consider all features simultaneously:
 A “compensatory” rule – hard to do.
Fishbein’s Multi-attribute Model
Multi-attribute
evaluation
(ΣBI)
Social
forces
Preference
Social
norms
Motivation
to comply
Behavioral
intent
Situational
factors
(P-O-P)
Choice
B = beliefs about product attributes; I = importance of the beliefs; P-O-P =
point of purchase
The Buyer Decision Process
 Choice
 The final choice of which alternative to select or try is
typically influenced by social norms and by situational
factors
 Social Norms
 Where group pressures to comply are strong social norms
influence is expected to override multiattributed evaluation
 The social norms can be usefully analyzed by the
extended Fishbein model
 The social norms involve two aspects
 Social forces
 Motivation to comply
The Buyer Decision Process
 Outcomes
 The main question about the outcomes revolves around the
degree of customer satisfaction.
 Customer satisfaction is particularly important in mature
markets where choices are many and the needs are already well
met.
 Satisfaction engenders loyalty to the brand and to the company.
 Because buying is typically a risky choice between different
brands, the marketer has to make sure that the customer does not
encounter cognitive dissonance, a sense of possibly making the
wrong choice.
 One approach is to get satisfied customers to endorse the product,
a common strategy in advertising.
A Strong Brand Simplifies the
Decision Process

-- REDUCES INFORMATION SEARCH

-- REDUCES PERCEIVED RISK

-- PLACES A BRAND IN THE EVOKED
CONSIDERATION SET MORE EASILY

-- BRAND LOYALTY MEANS DECISIONS GO FAST.

A GLOBAL BRAND CAN FOCUS ON:

-- ATTITUDES

-- NORMS

-- P-O-P (Point-of-Purchase Promotions)
The Local Market Research Process
Problem
definition
Research
design
Secondary data
Exploratory
Qualitative
research
Descriptive
Consumer
surveys
Causal
Measurement/
scaling
Trade surveys
Observation
Questionnaire
construction
Experiments
Causal Models
Sampling
Fieldwork
Data
analysis
Local Market Research
FOCUS GROUPS
Focus groups have become standard for initial exploratory
research
•
In foreign markets, focus groups have the advantage of
being relatively inexpensive, can be completed quickly, and
can reach local pockets of the market
•
Unfortunately, they can also constitute an unrepresentative
sample because typical screening criteria are incorrect in the
new environment or are not implemented correctly
•
Local Market Research
SURVEY RESEARCH
Consumer Surveys
Surveys of large (n = 500 and above) random samples drawn from a
sampling frame of representative product users are of central
importance in marketing research
Cultural problems involved in the typical consumer survey:
In high context cultures especially, one cannot fully understand
consumers from their responses to standard survey questions.
•
At the same time, informal face-to-face interviews are prone to bias
because of demand characteristics
•
However, even if surveys are afflicted by a number of problems in
many foreign markets, they can still be useful if care is taken.
•
Local Market Research
TRADE SURVEYS
Trade surveys of distribution channels and trade associations can
provide a good starting point for further data gathering and analysis
•
In the U.S., the use of middlemen for information about consumers is
usually limited to the sales and scanner records of retailers and
wholesalers
•
In countries with less social mobility and less diversity than the U.S.,
key informants in the trade are good sources of information about
buyers.
•
Local Market Research
MEASUREMENT & SCALING
•In
•
attitude scaling, very basic factors can create
difficulties
The cognitive and emotional concepts measured
might not be equivalent across cultures.
•This
means measurement equivalence is
questionable.
Local Market Research
QUESTIONNAIRE CONSTRUCTION
•The
questionnaire employed in the typical consumer survey
needs to be carefully pre-tested & translated into the foreign
language.
It should then be back-translated for verification and
adjustment.
•
•
In high context cultures the questionnaires are typically much
longer because of the need to establish the proper context for
the questions.
Local Market Research
SAMPLING
Lack of comprehensive and reliable sampling frames has
long been a problem for marketing researchers in many
countries.
Emergence of firms that specialize in developing lists for
direct marketing and survey research is gradually resolving
this problem.
•
Still sampling equivalence can be questionable because the
appropriate profiles differ (e.g. “high” income in one country
might not be“high” in another).
•
Local Market Research
FIELDWORK
Typically handled by a subcontracting marketing
research firm, sometimes a full-service advertising
agency
As economic growth occurs, mature markets with
differentiated demand requiring formal and
scientific market research applications will emerge
in many countries.
•
Understanding Industrial Buyers
 The Business-to-Business (B2B) Marketing Task:
 The marketer should help the buying organization succeed.
 Industrial Buyers are influenced by the same forces as
individual consumers, but also conditioned by the
organizational culture in which they operate.
 The organizational culture reflects company policies and ways
of making decisions.
 The industrial buying process involves several stages from
problem recognition to performance review.
Industrial Buying Process
Problem recognition
Product specification
Search for suppliers
Proposal solicitation
Supplier selection
Order specification
Performance review
Industrial Buyers: Building Relationship
 “Relationship Marketing” is important in B2B.
 The term is applied to a marketing effort involving
 Various personalized services
 Creation of new and additional services
 Customizing a company’s offering to the needs of a special
buyer
 Takes a long-term view
 Since without it, the effort required to build a relationship is
not worth it.
Relationship Marketing
THINGS A MARKETER CAN DO TO CREATE A
WORKABLE RELATIONSHIP:
• ADOPT THE BUYER’S VIEWPOINT.
• ACCEPT AND DEMAND TRANSPARENCY.
• GROW WITH THE RELATIONSHIP.
• BE PROACTIVE.
Always consider how the culture of the nation and the culture of
the organization affect relationship marketing.
Three Market Environments
EMERGING
NEW GROWTH
MATURE
Dominant Market Features
Feature
Emerging
New growth
Mature
Life cycle stage
Intro
Growth
Mature
Tariff barriers
High
Medium
Low
Nontariff barriers
High
High
Medium
Domestic competition
Weak
Getting stronger
Strong
Foreign competitors
Weak
Strong
Strong
Financial institutions
Weak
Strong
Strong
Consumer markets
Embryonic
Strong
Saturated
Industrial markets
Getting stronger
Strong
Strong
Political risk
High
Medium
Low
Distribution
Weak
Getting stronger
Strong
Media advertising
Weak
Strong
In-store
promotion
Dominant Marketing Tasks
task
marketing analysis
research focus
primary data sources
customer analysis
segmentation base
marketing strategy
strategic focus
competitive focus
product line
product design
new product intro
pricing
advertising
distribution
promotion
service
emerging
product/market situation
new growth
mature
feasibility
visits
needs
income
economics
middlemen
aspirations
demographics
segmentation
respondents
satisfaction
life style
market development
lead/follow
low end
basic
rare
affordable
awareness
build-up
awareness
extra
participation in growth
domestic/foreign
limited
advanced
selective
status
image
penetrate
trial
desired
compete for share
strengths/weaknesses
wide
adapted
fast
value
value-added
convenience
value
required
Takeaway
Understanding local markets involves conceptual skills &
imaginative rethinking more than new analytical
marketing skills.
The core benefit of a product or service can vary
considerably across countries because of differing
environmental conditions surrounding product usage.
Takeaway
Consumer behavior concepts and models are useful tools
when examining buyers in foreign markets, but underlying
cultural assumptions have to be reconsidered.
Takeaway
Local market research is difficult because of lack of data,
language problems, & cultural differences in how people
respond to surveys, but can be done with proper adaptation.
Takeaway
In B2B the local marketer should help the buying
organization succeed, and make the buyer look good
•
•
Firms must take into account the culture of the purchasing
agent and the culture of the organization
Takeaway
It is useful to distinguish between three market environments:
1. The MATURE market, where share and customer
satisfaction define the strategies
2. The NEW GROWTH market, where the global marketer
needs to participate & “all boats rise with the tide”.
3. The EMERGING market, where the aim is market
development with a long time horizon.