Consumer and Organizational Buyer Behavior

Consumer and organizational buyer behavior are sub-categories of marketing. Research in both fields has enabled manufacturers and distributors to understand the needs, preferences and behavior of buyers, as well as the internal and external factors that influence buyer behavior. Although much has been written about the differences between consumer and organizational buyer behavior, it appears that the demarcations between the two fields are not as clear as they may seem to be.

Keywords Buying Center; Buying Decision Process; Consumer Buyer Behavior; Decision-Making Unit (DMU); Organizational Buyer Behavior

Marketing > Consumer & Organizational Buyer Behavior

Overview

Buyer behavior is concerned with the selection and purchase of Products or services to satisfy a need for individuals or groups. It is focused on the needs of individuals, groups and organizations. Buyer behavior occurs either for an individual consumer on his own; an individual consumer in the context of a group (where others in the group influence how a person behaves); or an organization (where employees make decisions about which products or services the firm should use).

Although economists were the first academic group to offer a theory of buyer behavior, the field of buyer behavior is a subcategory of marketing that blends elements from economics, psychology, sociology, social psychology, anthropology and other sciences, such as physiological psychology, biochemistry, and genetics. The two main areas of buyer behavior are consumer buyer behavior, and organizational buyer behavior.

Consumer buyer behavior has developed, since the 1960s, as a separate discipline within marketing, to enable manufacturers and distributors to research and understand the needs and preferences of the increasingly sophisticated customer, and to respond accordingly. The field of organizational buyer behavior — initially called industrial buyer behavior — also surfaced in the 1960s, but most of the research in this area has taken place since 1980. Progress in this field has led to a new occupation of professional buyers.

Buyer behavior is influenced by many factors, namely the internal mental processes of individuals; external factors; the availability of resources; the characteristics of the product, service or idea required; availability of the requisite skills; and socio-demographic variables.

Further Insights

There are four typical types of buyer behavior based on the nature of the product, service or idea to be purchased. Complex buyer behavior involves a high value brand and involves an intense information search before the purchase is made. Habitual or routinized response buyer behavior is where a product is regularly purchased out of habit, and as such, the buyer needs relatively little information. Variety seeking buyer behavior describes the situation where the buyer shops around and experiments with different products. In some purchases, buyer dissonance is reduced because the purchase is large or infrequent, thus reducing the amount of differences between brands; the buyer becomes more highly involved with the purchase.

Consumer Buyer Behavior

As individuals or as households, consumers undergo various stages in making the decision to purchase. These stages occur in varying degrees, depending on the complexity of the purchase and the buyer’s purchasing behavior (Zahorsky, n.d.). At the most, many experts agree that the consumer buying decision process can have six stages: problem recognition, information search, evaluation of alternatives, purchase decision, purchase, and post-purchase evaluation.

First Stage of Consumer Buying Decision Process

The first stage, problem recognition or need awareness, occurs when a potential buyer becomes aware of a need, which may have been established by encountering a problem or may have been prompted by a company's marketing efforts. Consumer needs are either biological, that is, relating to primary or physiological elements; or psychological, that is, emotional. Needs change as individuals satisfy their basic needs and move along the path towards self-actualization.

Second Stage of Consumer Buying Decision Process

The second stage of buying is the information search. Information often facilitates purchasing. There are two types of information searches: Internal and external. With an internal information search, the consumer searches the information stored in his or her memory. If more information is needed after the internal search, the consumer may consult external information sources such as friends and relatives for word-of-mouth; marketing information; comparison shopping; and public sources. This information search stage is usually bypassed when the consumer is buying out of habit, wants to experiment, or is buying on impulse.

Third Stage of Consumer Buying Decision Process

A successful information search leaves a needy consumer with possible alternatives collectively called the evoked set. Armed with an evoked set, the consumer embarks on the third stage of the buying decision process: Evaluation of alternatives (also known as information evaluation). Here, the consumer may need to establish the criteria for evaluation, such as features of the product or service that the buyer wants or does not want, pricing, and company credibility. The consumer may rank or weight the alternatives to arrive at a choice, or resume searching if a satisfactory choice is not arrived at.

Fourth & Fifth Stages of Consumer Buying Decision Process

The fourth stage in the consumer buying decision process is the purchase decision. Here, the consumer makes the decision to buy; he or she has selected from the available alternatives, making decisions on details such as the specific product or service, its packaging, retail outlet and method of purchase. The fifth stage, which some authors do not recognize as a separate stage, is the purchase, which at times occurs simultaneously with the purchase decision. When the product or service is not readily available, there is likely to be a time lapse between the purchase decision and the actual purchase.

Sixth Stage of Consumer Buying Decision Process

The sixth and last stage in the consumer buying decision process is post-purchase evaluation (also known as post-acquisition evaluation, post-buying behavior, or after-purchase evaluation), which may occur to the buyer consciously or subconsciously. The buyer may look to the media, friends and other sources for reinforcement, to confirm that he or she has made the right decision.

At the end of his or her evaluation, the buyer may experience satisfaction or dissatisfaction. Dissatisfaction, also known as cognitive dissonance or buyer's remorse, may result from many factors, such as unmet brand expectations. Dissatisfaction may also cause the consumer to lodge a complaint. Satisfaction, on the other hand, may result in a customer becoming loyal to a particular brand or retail outlet.

Factors that Affect Consumer Buyer Behavior

Internal Mental Processes & the Consumer

Consumer buyer behavior is affected by internal mental processes such as behavioral intention, past experience, behavior in similar settings, perceptions, habit, and genetic heritage. According to the Theory of Planned Behavior, behavioral intention is the most influential predictor of behavior. According to Pavlou and Fygenson (2006), “Behavioral intentions are motivational factors that capture how hard people are willing to try to perform a behavior” (p. 4). They are derived from attitude, subjective norm (one's desire to act as others act or think one should act) and perceived behavioral control (the perception of how easy or difficult it would be to carry out a behavior). Most consumer behavior is learned from experience, and the lessons learnt from past experience have been found to influence consumer buyer behavior. Consumer buyer behavior is also affected by the way the consumer tends to behave in similar settings; as well as by perceptions, habit and genetic heritage (Pavlou and Fygenson, 2006).

Trust & the Consumer

Trust is another important factor in consumer buyer behavior, since it reduces uncertainty. First of all, “trust is important for getting information, since consumers tend to assess whether the information obtained is valid, credible, and accurate.” Trust is also important for product purchasing, especially in cases such as online purchasing, where consumers tend to be vulnerable, as they cannot see or touch any products or vendors (Pavlou and Fygenson, 2006).

External Factors & the Consumer

The common external factors that influence consumer buyer behavior are: Other people; the setting or situation; one's upbringing, culture and religion; marketing and advertising; and the media. According to Wilson (2000), “many consumer purchasing decisions are probably more accurately seen as collective decisions, in that they are influenced by many others.” As such, purchasing decisions are influenced by family members, friends and other peer groups, reference groups, and other groups.

Reference groups are particular groups of people that an individual looks up to. These groups of people are used as a standard of reference against which individuals compare themselves. Reference groups come in various forms. For example, the aspirational reference group is made up of those others with whom one would like to be compared, such as role models.

Associative reference groups include those who more realistically represent an individual's peers or equals. Specifically, these groups can be coworkers, neighbors, or members of churches, clubs, and organizations. The final group, the dissociative reference group, includes people to whom the individual would not like to be compared. Marketers use the various groups to bring pertinent messages home to their actual and potential consumers.

Reference groups can have different levels of influence on consumer behavior. Primary reference groups are those with the greatest amount of influence on an individual. Secondary reference groups tend to have less influence — they may not enjoy very close relationships with the individual, and therefore their influence on buyer behavior will be minimal.

Another external factor influencing consumer buyer behavior is the setting or situation. A theoretical model known as the Behavioral Perspective, views the actions of customers as determined by the setting or situation in which consumption takes place, rather than by internal mental processes such as attitudes or intentions. According to the behavioral perspective model, behaviors such as product or brand choice are determined by two situational factors: The consumption or purchase setting (including physical surroundings, social surroundings and time) and the sentiments evoked by features of the setting as determined by the consumer's past experience. The consumer's economic environment (for example, whether the consumer has a secure job and regular income to spend on goods) also has an impact on his or her buyer behavior.

Consumers do not exist in a vacuum: They are a part of their society. Consumer attitudes and beliefs are shaped by their upbringing, culture and religion. Marketing, advertising, and the media in general, also constitute important external forces which shape a person's buyer behavior. Consumer buyer behavior is also influenced by the availability of resources, mainly time and money. The consumer requires time to get information about a product, service or idea; and in addition, the consumer must also have the time to be able to use and enjoy the purchase.

Consumer Expertise & Skill

Additionally, the consumer may require personal skills and expertise to undertake a new behavior, and the availability or lack of such skills may influence purchase behavior. Additionally, consumers' socio-demographic status often dictates what and how they buy. Key socio-demographic variables include age, gender, personality, income, marital and family status, type of job, education, and experience with the product, service or idea under consideration.

Product Characteristics & Buyer Behavior

The characteristics of the product, service or idea sought after, also affect consumer buyer behavior. Product value, which is the attractiveness of the combination of quality and price, has a strong impact on buyer behavior. “Product value favorably predisposes consumers by allowing them to expect a high quality product at a low cost” (Pavlou and Fygenson, 2006, p. 15). Likewise, price discounts have been shown to influence purchase intentions.

Organizational Buyer Behavior

Decision Making Units

Much of the buying and selling in advanced economies takes place between organizations. In buying transactions within large organizations, buying decisions tend to be made by a group of people in the organization collectively known as the decision-making unit (DMU) or buying center, rather than by an individual. Those in the DMU share the same objectives and risks in making the purchase.

Webster and Wind (1972) write that, “major purchases typically require input from various parts of the organization, including finance, accounting, purchasing, information technology management, and senior management. Highly technical purchases also require the expertise of technical specialists” (p. 17). Thus, in some cases, the DMU is an informal loose group, but in other situations, it is a more formal group with specific mandates, criteria and procedures.

Roles within Decision Making Units

DMUs include people with different roles. In a general sense, there are five roles within any DMU. These are:

• End users of the item being purchased
• Buyers who are responsible for the contract
• Influencers who try to affect the outcome decision with their opinions
• Deciders who make the final decision
• Gatekeepers who act to prevent or discourage a purchase by controlling the flow of information and/or access to people in the decision-making unit (Webster and Wind, 1972, p. 17).

The various roles are aptly labeled with titles such as 'users,' 'influencers,' 'deciders,' 'policy-makers,' 'purchasers,' 'technologists,' 'analysts,' 'spectators' and 'gatekeepers.' The composition of a DMU varies by organization and also according to the buying situation or item to be purchased (Lewis & Littler, 1999). In addition, “different roles and functional representatives are likely to have varying influence at different stages of the purchasing process” (Wilson, 2000).

Character Profiles of Organizational Buyer Behavior

Research has also revealed seven character profiles of buyer behavior in organizations. These are: The hard bargainer, the sales job facilitator, the straight shooter, the socializer, the persuader, the miscellaneous, and the considerate. The hard bargainer describes buyers with whom salespeople may find it difficult to conduct business and to finalize a sale. A sales job facilitator, on the other hand, is open to salespeople's solicitations and even attempts to make the sales transaction go smoothly. The straight shooter describes industrial buyers who behave with integrity and decency (Dubinsky and Ingram, 1982).

Stages of Organizational Buyer Behavior

The buyer decision making process applied above to consumer buyer behavior can also be applied to organizational buyer behavior. In the need recognition stage it is the initiators in the DMU who recognize a need for new solutions, such as new products, while Buyers are more likely to identify the need to re-purchase products. After a need is recognized, a specifications document may be generated by the DMU, describing the requirements of the product or service.

In the information search stage, the search for alternatives to consider is one of the most important differences between consumer and organizational buying. This is because an organization is motivated to reduce costs, and it is at this stage where professional buyers are most beneficial. They can identify multiple suppliers that meet product specifications. Then, after a screening process, they may offer a select group the opportunity to present their products.

In simple re-purchase situations, the process usually goes from need recognition directly to purchase, with little search activity performed. Once a search has produced options, members of the DMU may choose from the alternatives. In more complicated purchase situations, the DMU may evaluate each option. In Government and Not-For-Profit markets, suppliers must submit bids, and the lowest bidder is awarded the order, providing that their products or services meet the required specifications.

The next stage in the organizational buyer decision making process is the purchase decision, which is sometimes simultaneous with the purchase. Place an order usually requires the completing paperwork (or electronic documents). Getting the necessary approvals can delay the order for an extended period of time. For capital purchases, such as buildings or equipment, financing options may also need to be explored.

In the final stage, Post-Purchase Evaluation, (once the order is received) the organization should review the results of the purchase. This may involve the Buyer discussing product performance with Users. If the product is well received it may be moved to a straight re-purchase status, thus eliminating much of the evaluation process on future purchases (“Business Buying,” n.d.).

Viewpoints

Although much has been written about the differences between consumer and organizational buyer behavior, Wilson (2000) argues for the development of a rigorous theory of buyer behavior that can generally be applied to both consumer and organizational markets. He notes that the demarcations between organizational and consumer buyer behavior are founded on several assumptions:

1. That consumers buy as willful individuals while organizations purchase as a rational group
2. That the same individual behaves differently as a consumer and as an organizational buyer
3. That the same individual behaves differently in a social context and in a professional context.

Wilson explains that “individual consumers purchase not only for themselves, in response to their own perceptions and wishes, but also collectively on behalf of others and under many powerful societal (organizational) influences.” Furthermore, in routine purchasing, which is the case with the majority of organizational purchasing transactions, the more typical pattern is that purchasing managers act as individual decision makers having been delegated to do so within the prescribed limits and cultures of the organization.

The reality, according to Wilson, is that “organizational purchasing is both professional and behavioral, to differing degrees, just as is consumer buying. The professionalism of organizational buying is often put forward as one of the main factors distinguishing it from consumer buying, but it could be argued that this trivializes and underestimates the degree of professionalism that is also involved in consumer buying.”

Wilson also points out that organizations, just like consumers, indulge in therapeutic buying from time to time. They do so to help them recover from bad experiences or to ease undesirable tensions. There are many “examples of organizations spending in order to meet the expectations of involved peer groups or stakeholders, for example, in purchasing elaborate IT systems, corporate jets, landscaping grounds, revamping corporate logos and letterheads, refurbishing offices and premises.” In organizations, such activity is usually presented as rational and commercially sensible, yet paradoxically, similar behavior in individual consumers appears as “self-indulgent, therapeutic, imitative and even conformist” (Wilson, 2000).

Terms & Concepts

Behavioral Perspective: A theoretical model which views the actions of customers as determined by the setting or situation in which consumption takes place, rather than by internal mental processes such as attitudes or intentions.

Buying Center: A group of people who collectively make buying decisions in an organization. Buying centers are also known as decision-making units.

Buying Decision Process: Also known as the decision making process, the buying decision process is comprised of up to six stages, namely: problem recognition, information search, evaluation of alternatives, purchase decision, purchase, and post-purchase evaluation.

Consumer Buyer Behavior: The selection and purchase of products, services, experiences or ideas by individual consumers or a group of consumers.

Decision-Making Unit (DMU): A group of people who collectively make buying decisions in an organization. Decision-making units are also called buying centers.

Evaluation of Alternatives: The third stage in the buying decision process, the evaluation of alternatives sees a buyer analyzing, ranking or weighing a shortlist of products, services, experiences or ideas, to enable a purchase decision to be reached.

Evoked Set: A list of possible alternatives arrived at after an information search, during the buying decision process.

Information Search: The second stage in the buying decision process, where one searches internally and externally for information that will ultimately help satisfy a need to purchase a product, service, experience or idea.

Organizational Buyer Behavior: The selection and purchase of products, services, experiences or ideas by organizations.

Perceived Behavioral Control: The perception of how easy or difficult it would be to carry out a behavior.

Post-Purchase Evaluation: Also known as post-acquisition evaluation and after-purchase evaluation, this is the final stage in the buying decision process. Here, the buyer assesses the extent to which the product, service, experience or idea purchased, meets the original need. post-purchase evaluation may result in satisfaction or dissatisfaction.

Problem Recognition: Also known as need recognition, this is the first stage in the buying decision process, when a buyer becomes aware of a need caused by a difference between the buyer's desired state and actual condition.

Purchase: This is the fourth or fifth stage in the buying decision process, when the buyer acquires the product, service, experience or idea desired.

Purchase Decision: The fourth stage in the buying decision process, the purchase decision is reached when the buyer has evaluated the alternatives and made a choice of product, service, experience or idea to purchase.

Reference Group: A group of people used by an individual as a standard of reference against which to compare himself or herself.

Subjective Norm: One's desire to act as others act or think one should act.

Theory of Planned Behavior: The Theory of Planned Behavior suggests that behavioral intention — the motivation that determines how hard people are willing to try to perform a behavior — is the most influential predictor of behavior: It assumes that a person does what he or she intends to do.

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Suggested Reading

Ward, S. & Webster, F. (1991). Organizational buying behavior. In T. Robertson & H. Kassarjian (Eds.), Handbook of consumer research and theory (pp. 419-58). Englewood Cliffs, NJ: Prentice-Hall.

Wilson, D. (2000). Why divide consumer and organizational buyer behaviour? European Journal of Marketing, 34, 780-796. Retrieved May 21, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3497726&site=ehost-live