Customer in Marketing by David Mercer

Decision-Making Process AIUAPR AWARENESS UNDERSTANDING ATTITUDES PURCHASE

REPEAT_PURCHASE ENHANCED_AIUAPR

THE_THREE_PILLARS_OF_THE_PURCHASING_PROCESS

Evaluation_of_Alternatives What_Factors_Specifically_Influence_Customers

Price Economic_Factors Age_and_Life-cycle

Geography Social_Class Occupation

Peer_Pressure Life-style

AIO_(Activities,_Interests,_Opinions)

VALS_(VAlue_Life-Styles)

Psychological_Factors Maslows_hierarchy_of_needs

Cognitive_dissonance Organizational_purchasing

Derived_demand Decision-makers_and_influencers

Interaction Diffusion_of_Innovation USAGE_AND_LOYALTY The_Customer_Franchise

Brand_Value Models_of_Consumer_Behaviour

Organizational_Behaviour

Adopting the customer's viewpoint is the essence of sound marketing. The focus of this chapter, therefore, is that customer or consumer. In particular, it is about how the customer makes

his or her buying decisions; what the processes (awareness, trial and repeat, for instance) and the factors which influence them (traditional or cultural) may be. We also look at the organizational factors in industrial markets, and the diffusion processes (as well as the related elements of brand loyalty and so on) in all markets, as well as specific models of consumer

Once more, it has to be stressed that each individual product or service evokes a specific, and possibly unique, response from its set of customers. Indeed, 'each ' buying situation is unique; a uniqueness which those employing face-to-face selling can exploit -- this being the essential strength of such selling -- while those in mass markets will have to deal in terms of groups

and averages. All of these suppliers will need to recognize what their customers' 'specific needs and wants ' are.

Inevitably, in this section we will attempt to categorize, or `pigeon-hole', groups of customers or the factors which influence them. Despite the earlier reservations, such categories -- even

when they are clearly based on largely artificial distinctions -- are useful to the marketer, because they can still serve as a `reminder list' when he or she is building the specific framework for his or her own brands. Once more, though, do recognize the dangers which are inherent in such simplistic categorizations.

Think back to some of your own recent purchases. Choose several of them, including a consumer durable as well as a repeat purchase food item and some form of service. For each of these purchases 'write down ' how you came, in the first instance,

to purchase that product or service, and then how you came to choose the particular `brand'. Some questions you might like to consider are:

Was it an automatic or impulse purchase; or did you give it considerable thought?

Where did you obtain the information necessary to take the decision? Was it instinctive, or was it from experience, or was it from advertising, or was it from friends?

Was the choice of `brand' simply a result of it being all that was available, or the best of a very limited range, or did you go out of your way to find a match to exactly what you wanted?

How important was it that it not only worked, but also suited your `life-style'?

It is possible that you found that the decision-making process was quite varied; ranging from an almost intuitive reaction to shopping for food through, perhaps, to a quite extended process

in the case of the consumer durable. The process is, indeed, complex and individual -- often uniquely so. Keep this in mind when you read the next section, on the 'theory ' of how the consumer chooses.

This theory can provide a theoretical framework, and justification, for much of the rest of marketing, particularly in the design of advertising strategies, which agencies sometimes

feel needs such legitimization. It has, indeed, become a major focus of research, in the hope that one or more simple models can be found, upon which all subsequent marketing can be based. However, it is, generally speaking, the least useful in terms of practical marketing. It is included in

this book because you should be aware that it exists. It may also offer some insight into what motivates your customers.

The first question to ask is: `How do customers make their decisions?' This is more difficult to answer than one might at first expect. Customers do not come to each buying decision with

conveniently blank minds, and then rationally consider the options; even though much of economic theory, and not a negligible proportion of marketing theory, is predicated on such

an approach. According to such theory, often the only significant variable to be considered is the price.

In reality, the decision-making process is an extended, complex and often confused one. Even in the apparently simple case of buying a tin of baked beans, a purchaser in a supermarket, faced

There are a range of alternative models, but of these I believe that of AIUAPR, which most directly links to the steps in the marketing/promotional process is the most generally useful;

AWARENESS - before anything else can happen the potential customers must become aware that the product or service exists. Thus, the first task must be to gain the attention of the target audience. All the different models are, predictably, agreed on this first step. If the audience never hears the message they will not act on it, no matter how powerful it is.

INTEREST - but it is not sufficient to grab their attention. The message must interest them and persuade them that the product or service is relevant to their needs. The content of the message(s) must therefore be meaningful and clearly relevant to that target audience's needs, and this is where marketing research can come into its own.

UNDERSTANDING - once an interest is established, the prospective customer must be able to appreciate how well the offering may meet his or her needs, again as revealed by the marketing research. This may be no mean achievement where the copywriter has just fifty words, or ten seconds, to convey everything there is to say about it.

ATTITUDES - but the message must go even further; to persuade the reader to adopt a sufficiently positive attitude towards the product or service that he or she will purchase it, albeit as a trial. There is no adequate way of describing how this may be achieved. It is simply down to the magic of the copywriters art; based on the strength of the product or service itself.

PURCHASE - all the above stages might happen in a few minutes while the reader is considering the advertisement; in the comfort of his or her favourite armchair. The final buying decision, on the other hand, may take place some time later; perhaps weeks later, when the prospective buyer actually tries to find a shop which stocks the product.

REPEAT PURCHASE - but in most cases this first purchase is best viewed as just a trial purchase. Only if the experience is a success for the customer will it be turned into repeat purchases. These repeats, not the single purchase which is the focus of most models, are where the vendors focus should be, for these are where the profits are generated. The earlier stages are merely a very necessary prerequisite for this!

This is a very simple model, and as such does apply quite generally. Its lessons are that you cannot obtain repeat purchasing without going through the stages of building awareness and then obtaining trial use; which has to be successful. It is a pattern which applies to all repeat purchase products and services; industrial goods just as much as baked beans.

This simple theory is rarely taken any further - to look at the series of transactions which such repeat purchasing implies. The consumer's growing experience over a number of such transactions is often the determining factor in the later - and future - purchases. All the succeeding transactions are, thus, interdependent - and the overall decision-making process may accordingly be much more complex than most models allow for.

Accordingly I will, for once, appear to complicate matters! But, fortunately, the additional complexity has a logic to it. In the single dimension which the original model inhabits from top to bottom there is a growin' involvement of the customer with the product or service. The 'Enhanced AIUAPR Model' takes this and adds a further dimension which specifically reflects on one side the attempts by the vendor to influence this process - which were implicit in the original model. It shows, however, the way in which the vendor's involvement changes from the most impactful advertising at the start of the process to the highest quality support at the end - a progression which is not fully described in less complex models.

On the other side, though, it also shows the involvement of the customer with his or her peer group; whose influence is not even hinted at in the original version;

Rule #65 - ENHANCED AIUAPR -

PEER SUPPORT CONSUMER PROGRESS VENDOR SUPPORT

SUSCEPTIBILITY - even before you can build awareness, the consumer's mind has to have been opened up to the concept behind the product or service. In line with the theories we will look at later, this acceptance of a new need may have emerged from the workings of the opinion leaders in the consumer's peer group. On the other hand, this is also the stage where the supplier has to accept some form of market (or segment) building role; often making use of public relations as much as advertising.

It should be noted, however, that the seemingly distinct steps often, indeed usually, overlap. Thus, some sections of the population - the opinion leaders say - could be well into the repeat purchasing stage while other sections are only just beginning to perceive the need. Accordingly, promotion and advertising often will have to meet the requirements of a number of stages at the same time - a complex demand which is one reason why very successful advertising campaigns are so rare!

AWARENESS - you have already seen how this works in the original model; though the role of high impact advertising (or prospecting in industrial markets) was there implicit rather than being a formal part of the model as here. The main difference, though, is that research shows that the stimulus is as likely to come from an opinion leader in the peer group. These offer a hidden, and potentially very powerful, 'sales force' on behalf of the product or service; albeit that they in turn have necessarily been recruited by advertising (or by public relations activities - often a neglected medium, which is especially important in reaching this group).

INTEREST/UNDERSTANDING - these two are coupled together, since it is difficult to conceive of one happening without the other being at least in part also involved; though they may offer very different challenges to the advertiser. Again, however, it is members of the peer group, already users, who may be most likely to be able to proffer the 'demonstration' of the product (or the results of the service) to the prospective consumer.

ATTITUDE/LEGITIMACY - although one further stage is added, that of 'legitimacy' (persuading the prospective purchaser that, backed by his or her favourable attitudes, a purchase may be justified), this is merged with the attitude building process; and both may be dependent on the 'reference' support from members of the peer group who are already loyal users as much as traditional advertising.

PURCHASE DECISION - this should be, by this stage of the process, almost automatic; and, for once, the consumer is probably alone in making this particular decision. A key element, also featured in the original model but often (wrongly) taken for granted, is that the product or service must be easily available for the consumer to achieve that purchase.

EXPERIENCE - one stage ignored by the original model is that which happens when the consumer tries the product or service for the first time. This may, or may not, be a favourable experience; but whichever end of the spectrum it lies it still represents a major discontinuity in the model. At this point the nature of the accompanying processes changes. In the case of the vendor's promotional activities the emphasis switches abruptly from recruitment to support (perhaps still involving advertising, but mainly by conventional support services). This is perhaps best illustrated by the switch from new account selling before to account management afterwards, in face to face selling. At the same time the consumer switches from being a recipient of advice to one who can, from experience, give it to his or her peer group. This is hopefully of a positive nature, since a bad experience is typically reported to many more peers than a good one!

REPEAT PURCHASE - in this development of the original model this becomes almost a technicality.

LOYALTY - more important is the final step, that of creating a loyal user; based upon successive positive experiences (backed by sound customer support). These loyal users become, in turn, the 'references' for new users (or even the 'opinion leaders' which feature so strongly in this enhanced model).

Having made the model necessarily complex - to explain the underlying processes - I will now offer a much more practical, condensed version of this - THE THREE PILLARS OF THE PURCHASING PROCESS;

This embodies, in much simpler form, most of the essentials of the process. Thus, the central pillar (the consumer's progress) highlights the tentative nature of the first stages as the consumer moves from 'susceptibility' to the actual 'purchase'; and then the no less important subsequent stages as confidence builds into loyalty.The break point, at the time of the first (trial) purchase, is reflected in the vendor's pillar by the switch from promotion to support (though this aspect is rarely emphasised in theory). It is even more obvious in the 'peer' pillar in the switch from 'taker' (of advice) before first purchase to 'giver' (as a loyal referee) after purchase.

Whilst this model is especially useful in providing a framework which most effectively handles the new consumers progress over time, even it does not really do full justice to the richness of the interaction of the individual consumer with the whole community, not just the direct peer group, and the 'inertia' which this may lead to. Added to this is the wealth of (personal and community) experience built up over time, which multiplies the problems of access by the marketer - and often slows down the rate of structural change so that it occurs over the decades measured by the sociologist rather than the months in the marketer's plan.

For most products or services there are likely to be a number of competing brands in the market, ranging from internationally distributed brands, such as Coca-Cola, down to those that can only be obtained in a few local shops. The process of choosing between these can be represented as the result of a number of `filtering' processes, some of which are under the consumer's control and some under the producer's:

'Availability '. The first consideration is whether the consumer has access to the product or service. This is mainly under the control of the producers and their distribution chains, which is why producers put so much emphasis on obtaining high

levels of distribution. How far the consumer is prepared to venture in search of a difficult-to-obtain product is, of course, dependent upon the characteristics of the market. The tin of beans may have to be on the specific supermarket shelf just when needed. On the other hand, some consumers will wait several months and travel hundreds of miles to see a star-studded show.

'Awareness '. If the consumer is not aware of the brand it will not be on the shopping list. Again, awareness is to a large degree in the control of the supplier, and reflects the amount spent and the success of the promotional strategy.

'Suitability '. Not all of the brands will be identical (except in pure commodity markets), at least in terms of how the various suppliers have presented them. Some of them will clearly

be more suitable, at least in the consumer's eyes, while some will seem definitely unsuitable. The producer may, for instance, use `segmentation' (discussed in a later chapter) as a means of

targeting the brand on a specific segment of the market. This device matches the brand specification to the needs of that segment, so it is seen to be more suitable -- but in the process

this probably makes it 'less ' suitable to buyers in other segments of the market.

'Consumer choice '. It is perhaps at this stage that the consumer's choice is asserted, to select from the brands that remain after the previous filtering stages. The consumer is not totally at the mercy of the advertiser; and will make his or her choice on the basis of whatever reasons he or she chooses. To the consumer at that time the choice is absolutely rational; the brand best meets his or her perceived needs.

What decision-making processes does your organization assume that your customers go through? What decision-making processes do

How does this compare with the 3 Pillars? How does it differ at each stage, and why? (Look hard for differences. No model is perfect, and much of the benefit to be derived from the study of marketing comes from the experience of

trying to match the framework offered by the theory to the practicality of real life -- and often they do not match.) How does it compare with your own experience, which you documented in

What are the differences between your organization's model and the real-life experiences you described in that activity, and

What factors most influence your customers' decisions? Are these factors product-oriented?

It is arguable that in taking their final decision, and indeed throughout the whole process, customers are influenced by a wide range of factors, and not just those relating to the obvious

Some of these may represent a direct (measurable) influence on buying decisions. Others are less tangible factors, from which patterns of buying behaviour may only be inferred.

The examples given earlier in this chapter, however, illustrate just how diverse the various influences on consumers may be.

Price, the traditionally given basis for choice, is just one factor of many that might apply; it is often a relatively unimportant one. In many markets, even those for industrial goods, intangible factors (which can often be broadly described as the `image' of the product) may be important. Hence consumer behaviour may be perfectly rational to the consumer, but not to

Attitudinal factors are often seen as the most important. They are the subject of much market research, to ensure that the advertising (for example) conveys exactly the right messages.

For many of the more theoretical marketers, especially those coming from the economic disciplines, the main influence is seen

The influence of economic factors appears first of all in terms of the economic `well-being' of the consumers. Put simply, this means that if they receive more money they are likely to spend

more money. One of the methods of categorization of consumers, therefore, is by income group.

This behaviour is modified by the overall economic climate. If the climate is optimistic and a boom is under way, the domestic consumer will be likely to spend more money. Sometimes, by means of borrowing, he or she will spend more than he or she earns. The industrialist will also spend more, investing in new capacity to take advantage of the boom.

For many economists and not a few marketing theorists, price is by far the single most important factor. This is the reason for its elevation to become one of the 4 Ps. An even larger group of

marketers, on the other hand, would contend that there may be many other factors that, depending on the situation, are even more important.

The demands of individuals and families vary over time. William D. Wells and George Gubar - 4 - identified a number of stages in an adult's life, each of which has characteristic patterns of earning and consumption:

These stages may have important implications for marketing strategies. Stage 1 individuals, for example, are recreation-oriented, and hence are prospective customers for providers of entertainment. Those in stage 2 have high joint incomes and spend it; among them are the yuppies beloved of the suppliers of luxury goods. In stage 3 are the typical first-time house buyers (who at

the same time also buy all the other durables and household goods that become part of a home). Those in stages 3 and 4 are often the target of the mass consumer advertisers; they represent the

archetypal housewife with a family to feed. By stage 5 the pattern of buying may have become more selective as income increases. Those in stages 6 and 7 are once more able to spend on

luxuries, although of a different type. Finally, stages 8 and 9 pose different support requirements.

Clearly, each marketer in the consumer field will target those age groups that are most relevant to his or her product or service. Financial service organizations selling insurance, for example, may perhaps tend to ignore stages 1 and 2, in order to

However, the demography of these age groups is not static, and there are peaks and troughs. Most notable, in recent years, was the `baby boom' of the 1960s, which was reversed in the 1970s,

when there was a comparable drop in birth rates. These changes had significant marketing impacts.

Marketers are understandably attracted by a booming market, not least because this allows more opportunities for new brands. A falling market is more difficult to enter, with the existing brands very much on the defensive.

Thus, in the 1960s suppliers to the baby market had a field-day, and in the UK the Mothercare retail chain blossomed. By the early 1980s, however, the numbers of babies had fallen by a third or more, and Mothercare's performance looked less dynamic. On the other hand, the boom babies were then reaching their twenties and

becoming yuppies, with a consequent benefit to manufacturers of luxury goods for this age group and the builders of `starter homes'. In the early 1990s, though, marketers are already starting to look to the over-50s, the `empty nest' stage, for the next big boom in spending.

For the record, some important research work by O'Brien and Ford, - 5 - in a study that measured product penetration (the percentage of consumers `using') across a range of 20 typical consumer items, found that, in the UK at least, `life-stage'

(defined in broadly the same age group terms as those above) was the best discriminator of all the factors normally used to classify consumers.

For some products or services, geographical variations may be quite significant. Much has been made recently of the `North-South divide' in the UK, but there may also be fundamental differences in taste between regions. For a number of decades the Scots preferred lager to other beers, whereas the English shunned it; this is a pattern that has, however, now been broken

(paradoxically by the introduction of Australian lagers). This illustrates the lesson that such factors can change dramatically over time. More prosaically, the North prefers white pickled

onions (and shops for such groceries on weekdays), while the South prefers brown ones (and does its shopping over the weekend). The variations are, of course, even greater when the

Much more closely targeted geographical segments have been offered by the MOSAIC and PROFILES systems in the UK. The most

widely used, though, is ACORN --A Classification of Residential Neighbourhoods. Based the range of census data available

(including obvious categories such as occupation, household size and composition --together with some unexpected ones, such as mode of travel to work and household facilities), these cluster the

'UK Population '. The analysis was used to derive 36 categories of neighbourhood types.

These were subsequently further reduced to a simpler set of 11 types. These 11 types are now used to map the locations where certain types of people are likely to live in the UK. - 6 -

Each of these categories can be subdivided, so that the marketer can target a mailing or door-to-door delivery exactly where it will be most productive. It has perhaps been most effectively

used by market researchers who wish to select very specific samples (for mini-test markets, for example), and by the retail trade (for optimizing the siting of retail outlets).

The traditional `pigeon-holing' mainstay of much of the advertising industry has been that of social class. This, although it revolves around occupation (usually that of the head of the household), is based on more than just income groups alone.

It used to be assumed that the upper classes were the first to try new products, which then 'trickled down ' (the name of the theory) to the lower classes. Historically, there may have been some justification for this. The refrigerator, the washing

machine, the car and the telephone were all adopted first by the higher social classes. Recently, however, as affluence has become

more widespread, the process has become much less clear. It is now argued that the new `opinion leaders' come from within the same social class.

The class groupings which have been traditionally used by the advertising agencies are:

This approach has been reported to be of decreasing value in recent decades. Whereas some four decades ago, when these groupings were first widely used, the numbers in each of the main

categories (C, D and E) were reasonably well balanced, today the C group in total (although now usually split to give C1 and C2) forms such a large sector that it dominates the whole classification system and offers less in terms of usable concentration of marketing effort. In addition, increased affluence has meant that consumers have developed tastes that are

based on other aspects of their life-styles, and class-related behaviour appears to have decreased in terms of purchasing patterns.

The occupation of the individual, or the head of the household, can sometimes significantly affect his or her way of life. This is, once more, less important than when there was the great split between manual (blue-collar) and clerical (white-collar) jobs. Even so, a manager in a high-tech industry may still have a different set of values from, on the one hand, those of a worker on a production line in a declining industry and, on the other, from those of a university teacher.

Which of these traditional `predictors' (geography, age, class and so on) applies to your organization's customers or clients?

How do they apply? What use can be made of this in concentrating marketing effort?

The last sections lead to two conclusions. The first is that the overall culture is another, increasingly important, factor. It is most noticeable in terms of nations. The culture of the UK, with its persisting class-consciousness, differs in many ways from that of the USA, with its money-consciousness. The Mediterranean way of life, in the sun, may be quite different from the Nordic, in the cold. But the second conclusion is that cultures change; and much of marketing has yet to recognize the fact.

'subcultural ' groupings, which have their own distinctive values. These are perhaps most obvious in ethnic or religious groupings, which attract their own specialist suppliers. But they may also be as diverse as yuppies in the major financial centres or football hooligans, each of which groups holds a very strong set of cultural values --and each of which may be targeted by specialist marketers, supplying Porsche cars or team colours.

Within these cultures and subcultures, there is a powerful force at work requiring members to conform to the overall value of the group. These `reference groups' are sometimes referred to as

`membership groups', when the individual is 'formally ' a member (of, for example, a political party or trade union). Individuals may also have `aspiration groups' (social cliques, say, such as yuppies) to which they would like to belong. They

may also recognize `dissociative groups' with which they would 'not ' wish to associate (thus drinkers may go to great lengths to avoid being associated with `lager louts'). This `peer pressure' can sometimes be used to great effect by marketers. If they can sway the few `opinion leaders' in the reference group they will capture the whole group.

Perhaps the most influential `peer group' is that of the family. Indeed, it is often the family, rather than the individual, that is the focus of the marketer's activities.

In the past decade or so, increasing affluence has resulted in spending patterns that may now vary quite considerably, even within the same age and class groups; they now reflect individual

A number of life-style classifications have been proposed by researchers, including the following:

'AIO (Activities, Interests, Opinions) '. This approach seeks, via long questionnaires (such as those proposed by Joseph T. Plummer - 11 - ), to measure respondents' positions on a number of dimensions spread across these categories (as well as the more usual demographic groupings). Based on their responses, they are then allocated (using sophisticated computer analysis techniques) to the AIO (life-style) groups.

'VALS (VAlue Life-Styles) '. Arnold Mitchell - 12 - (of SRI International) has developed similar groupings. He drew up four main categories subdivided into nine life-styles, again based on

According to this framework, the outer-directed groups, `belongers' (conventional, conservative and so on), `emulators' (ambitious, upwardly mobile and so on) and `achievers' (leaders

who make things happen and so on) account for two-thirds of the US population. Thus the 'Times ' newspaper, to take a UK example, might expect to target `achievers', and possibly to address a larger total market segment than the 'Guardian ', which might be looking to the `societally conscious' for its most ardent supporters. Less widely reported is that the VALS typology also suggests that there is a possible progression within the life-styles --from `survivors' through to `integrated'.

Life-styles can apparently even be used by a range of non-profit organizations. One Wisconsin blood centre reportedly turned a deficit of 7000 donors into a surplus of 7000, by concentrating its attentions on people who were affluent, busy and had close-knit families.

A number of psychological factors are also proposed; from the widely reported teachings of Freud through to Herzberg's - 14 - discussion of `dissatisfiers' (characteristics of a product that

will veto its purchase for a given customer) and `satisfiers' (which will positively persuade the customer to choose that brand).

In the context of marketing, however, perhaps the most widely quoted approach is that of Abraham Maslow, - 15 - who developed a hierarchy of `needs', ranging from the most essential, immediate physical needs to the most luxuriously inessential.

Maslow's contention was that the individual addresses the most urgent needs first, starting with the physiological. But as each is satisfied, and the lower-level physical needs are (at least amongst the affluent) soon satiated, attention switches to the next higher level, resulting ultimately in achievement of the level of self-actualization. It is argued that marketers are increasingly required to address their attentions to the two highest levels; and, even in the near future, almost exclusively

Which of these `cultural' predictors (peer pressure, families, life-style, psychological and so on) applies to the customers or clients of your organization? How important are they? Is their

There is one more interesting effect on consumer behaviour, to be found immediately after a purchase has been made. This was predicted by Leon Festinger in 1957, as his cognitive dissonance theory, which states that, where there were dissonant elements in the original decision to buy (the negative aspects of the product purchased, and the positive elements of the alternatives not purchased) there would, post-purchase, be tension in the consumer's mind. Festinger's prediction was that buyers would

read promotional material even more avidly 'after ' purchase than before in order to justify their decisions and to displace the dissonant elements by concentrating on those aspects of the

However, later work has not tended to be very supportive. Nevertheless, there is an implication for marketers that they need to recognize the role, of their promotion in general and of their advertising in particular, in the post-purchase period as well as in the build-up to the sale.

What allowance (in terms of post-purchase promotion) does your organization make for cognitive dissonance?

Different pigeon-holes are often applied to the industrial products that are sold to industrial businesses and institutional or government buyers, to be incorporated in their own products, resold or used within their organizations. These buying processes are often categorized, at the most basic level, by the broad product type:

manufacturer). These are usually sold on a contractual basis to a tight specification. Sales are often achieved by competitive pricing, credit terms and delivery reliability.

'component markets ' (such as radiators). These differ from basic materials because of their wider variation. Product quality and reliability become extremely important.

'capital goods markets ' (such as lathes). These are normally dominated by high technical capability on both sides.

'maintenance, repair and operating goods ' (such as detergents for floor cleaning). These are consumable items, usually of low unit value, often sold through distributors.

One clear difference about much of the demand for industrial products or services is that it is a `derived demand'. The industrial marketer (selling steel, say) may be just as concerned about the demand for the ultimate consumer product (such as the automobile). In recent years this has led to the relationship between some industrial sellers and their customers being more akin to a `partnership', both sides being in the same boat. The concept of `customer partnership' is explored in more detail in chapter 13, in the section on purchasing.

`Joint demand', which is rather different, occurs when the demand for two or more products (or services) is interdependent, normally because they are used together. The demand for razor blades may depend upon the number of razors in use; this is why razors have sometimes been sold as `loss leaders', to increase demand for the associated blades.

In the context of industrial goods marketing, it is perhaps the `organizational' factors which predominate. There is much theory, and even more opinion, expressed about how the various `decision-makers' and `influencers' (those who can only influence, not decide, the final decision) interact. Decisions are frequently taken by groups, rather than individuals, and the official buyer

Robert B. Miller and Stephen E. Heiman, - 17 - for example, offer a more complex view of industrial buying decisions (particularly in the area of `complex sales' of capital equipment). They see three levels of decision-making:

'economic buying influence ' --the decision-maker who can authorize the necessary funds for purchase

'user buying influences ' --the people in the buying company who will use the product and will specify what they want to purchase

'technical buying influence ' --the `experts' (including, typically, the buying department) who can veto the purchase on technical grounds

Webster and Wind, - 18 - in a similar vein, identify six roles within the `buying centre':

'gatekeepers ' --those who have the power to stop the sellers reaching other members of the `buying centre'

One generally ignored aspect of the organizational purchase is its interactive nature, although the International Marketing and

Purchasing Group (IMP), a pan-European group of researchers, have investigated it in some detail.

In practice, 'both ' sides contribute to the purchasing process. It would be foolish to assume that the buyer has a purely passive role. Thus, the discussions and meetings --which may extend over a considerable period --are designed to achieve

a `negotiated' outcome which is satisfactory to both sides. Miller, Heiman and Tuleja - 19 - hint at this when they say that 'both ' sides must `win' (see `win-win', described in chapter 13). It is also at the heart of `customer partnership' and `relationship management' (again described in chapter 13).

What organizational factors are important in your marketing to your customers? How are they handled?

One particular aspect of consumer behaviour that has attracted considerable interest is that relating to the way new products, or new ideas, are taken up. As Gatignon and Robertson - 20 - suggest:

The diffusion process can be characterized in terms of three dimensions; the rate of diffusion, the pattern of diffusion, and the potential penetration level. The 'rate ' of diffusion

reflects the speed at which sales occur over time. The diffusion 'pattern ' concerns the shape of the diffusion curve ...

Typically, the curve showing only decreasing returns and the S-shaped or sigmoid curve have been represented by exponential and logistic forms, respectively. The 'potential penetration

level ' is a separate dimension indicating the size of the potential market --i.e. the maximum cumulative sales (or adoption) over time.

A final complication of the consumer decision-making process is that the adoption of new products is not necessarily uniform throughout the population. Everett Rogers, - 21 - for example,

concluded that there were five separate groups of consumers, each of which showed different rates of new product adoption. They were, proceeding from the quickest adopters through to the

The innovators are seen by him to be venturesome, willing to take risks, while the early adopters are the main opinion leaders in their community. This classification suggests that the marketer should perhaps take a particular interest in these two leading groups when a product launch is contemplated.

From the point of view of many marketers, it is the outcome of all these processes which is most important, and that shows in the customer's response to the `brand':

'Usage status '. Philip Kotler - 25 - groups `users' into a number of categories: non-users, ex-users, potential users, first-time users and regular users.

'Usage rate '. Most important of all, in this context, is usually the 'rate ' of usage, to which the Pareto 80:20 Rule applies. Kotler's `heavy users' are likely to be disproportionately important to the brand (typically, 20 per cent

of users accounting for 80 per cent of usage -- and of suppliers' profit). As a result, suppliers often segment their customers into `heavy', `medium' and `light' users; as far as they can, they target `heavy users'.

'Loyalty '. A third dimension, however, is whether the customer is committed to the brand. Philip Kotler, - 26 - again, defines four patterns of behaviour.

Switchers -- with no loyalty (possibly `deal-prone', constantly looking for bargains or `vanity prone', looking for something different).

In industrial markets, organizations will regard the `heavy users' as `major accounts', to be handled by senior sales personnel and even managers; whereas the `light users' may be

Once more, though, life may be much more complex. For example, Andrew Ehrenberg, of the London Business School says that consumers buy 'portfolios of brands'. They switch regularly between brands, often simply because they want a change. Thus, 'brand penetration' or 'brand share' reflects only a statistical chance that the majority of customers will buy that brand next time as part of a portfolio of brands they favour! It does not guarantee that they will stay loyal.

Influencing the statistical probabilities facing a consumer choosing from a portfolio of preferred brands, which is required in this context, is a very different role for a brand manager; compared with the - much simpler - one traditionally described, of recruiting and holding dedicated customers. The concept also emphasises the need for managing continuity - by rules such as the Competitive Saw.

On the other hand, one of the most prominent features of many markets is their overall stability - or inertia, whichever description you find most useful. Thus, in their essential characteristics they change very slowly, often over decades - sometimes centuries - rather than over months.

This stability has two very important implications. The first is that if you are a clear brand leader you are especially well placed in relation to your competitors, and should want to further the inertia which lies behind that stable position. This will, however, still demand a continuing pattern of minor changes, to keep up with the marginal changes in consumer taste (which may be minor to the theorist, but will still be crucial in terms of those consumers' purchasing patterns - markets do not favour the over-complacent!). But these minor investments are a small price to pay for the long term profits which brand leaders usually enjoy. Only farm-hands make a career out of milking cows, and only fools jeopardise the investment contained in an established brand leader!

The second, and more important is that if you want to overturn this stability, and change the market (or significantly change your position in it), then you must expect to make massive investments to succeed! Even though stability is the natural state of markets, however, sudden changes can still occur and the environment must be constantly scanned for signs of these.

One of the most positive ways of consolidating the consumer as the most important focus of the organisation is to look on this relationship as a prime asset of the business; one that has been built up by a series of marketing investments over the years As with any other asset, this investment can be expected to bring returns over subsequent years. On the other hand, also like any other asset, it has to be protected and husbanded.

At one extreme it may come from the individual relationship developed face to face by the sales professional. At the other it is the cumulative image, held by the consumer, resulting from long exposure to all aspects of the product or service, and especially to a number of advertising and promotional campaigns.

In some markets the customer franchise may be so strong as to be exclusive; in effect giving the supplier a monopoly with those customers.

Even though, Andrew Ehrenberg's work on brand portfolios has shown that consumers may regularly switch brands - for variety - they may still retain an image of the brand; which will swing the balance when their next purchase decision is taken. It may thus still have a value (upon which the advertiser can build) even if the current purchasing decision goes against it. A later decision may, once again, swing in its favour.

The customer franchise is, therefore, a very tangible asset, in terms of its potential effect on sales; even if it is intangible in every other respect.

It is based, though, on an accumulation of impacts over time. Unfortunately, too many marketers - particularly those in creative departments within advertising agencies - signally fail recognise the importance, and long-term nature, of this investment. They treat each new campaign as if it could, and should, be taken in isolation - no matter how it meshes with previous messages which have been delivered to the consumer. The evidence is that the consumer, on the other hand, does not view the advertising and promotion in such lofty isolation; instead he or she incorporates it into their existing image - to good or bad effect, depending upon how well the new campaign complements the old.

The Consumer Franchise is, to all practical intents, the external alter ego of the brand. The brand is how the producer typically sees the (internal) investment. The Customer Franchise is the outcome of that internal investment; the counterbalancing entry with the customers.

In the late 1980s there was a fashion for hostile takeovers of organizations owning major brands, particularly where the book value and the market capitalization did not reflect the real

Nestle bid of $2.5 billion for Rowntree -- a bid of six times Rowntree's reported asset value -- and the leveraged buyout of RJR Nabisco for $25 billion. As a result, to make such takeovers that much more difficult, some organizations with

especially strong brands wrote a corresponding (goodwill) valuation into their balance sheets. Ranks Hovis McDougall, for

instance, put a balance sheet value on their brands of $678 million, and Grand Metropolitan one of $588 million.

This practice has since been discouraged by the various accounting bodies; indeed, the Accounting Standards Committee in the UK has called a halt to it.

How does the diffusion process work for the new products and ideas deployed by your organization? How does your organization

allow for this? How important is customer loyalty to your marketing efforts? What value would you write into the accounts to cover this?

The first two questions are the same as those you answered in audit 3.2. Answer them again, in the light of what you have just

What factors most influence your customers' decisions? Are these factors product-oriented?

How does your answer differ from that which you gave before you read this section, and why? (This question is asked for two main reasons. First, it should help you appreciate the learning process you are undergoing. The second reason is rather contrary, because it is quite possible that your first answer was more accurate, or at least more practical, since it was not distorted by the `artificial' models which the theoreticians have now forced on you!)

To what extent does each of the main factors discussed have an impact on your customers:

What factors are important? Which are the most important influences overall? Which factors does your organization believe are most important? Which does it act on?

This is the second major exercise. Its brief is deceptively simple: Produce a customer/client profile. All that is required is that you produce a picture of who your customers and clients

are, and where they may be found. Needless to say, the exercise is not as simple as it appears, and involves the use of all aspects of marketing which have been described so far. For instance: Who, statistically, are your customers or clients? What

does the 80:20 Rule say about their importance to you? Which of the traditional or cultural or organizational factors which are supposed to influence them actually do -- and how?

The last question may, as you should realize by now, open up a number of avenues. The important aspect of the exercise, therefore, is that you explore these avenues -- though the time

In this chapter we have looked at a number of factors that may have an impact on behaviour. However, these factors do not act in isolation. The effect is often the result of their combined

One of the best known of the explanatory models that have been developed to explain these interactions is the Howard and Sheth Model, - 27 - the simplified version of which is given in

figure 3.6. This contains a deal of common sense, although, as is often the case with such models, the rather obscure terminology makes it appear more confusing than it really is. It is divided

The 'inputs ' (stimuli) that the consumer receives from his or her environment are:

significative -- the `real' (physical) aspects of the product or service (which the consumer will make use of)

symbolic -- the ideas or images attached by the supplier (for example by advertising)

social -- the ideas or images attached to the product or service by `society' (for example, by reference groups)

The 'outputs ' are what happens, the consumer's actions, as observable results of the input stimuli.

Between the inputs and outputs are the 'constructs ', the processes which the consumer goes through to decide upon his or her actions. Howard and Sheth group these into two areas:

perceptual -- those concerned with obtaining and handling information about the product or service

The Engel-Kollatt-Blackwell - 28 - model, for one further example, follows a slightly more `mechanistic' approach, but one which is also based on the parameters examined in this chapter.

Such models can help theorists to explain consumer behaviour better, but it can be more difficult to put them to practical use.

Models have also been produced to explain the complexities of the organizational buying process. The best known of these is probably that of Webster and Wind - 29 - (figure 3.7). This

follows the buying process inwards from the external environment, through the organizational environment to the 'buying centre' (the group concerned in the buying decision) to the

It is useful for illustrating the variables and the complexities which may be involved. Once more, however, it is difficult to relate to practical decisions.

Choose whichever of the above models applies most closely to your organization. How closely does it apply? What does it tell you about your customers?

(Do not spend too much time on this exercise. The models can be very complex to use. The exercise is intended to give you only a very general feel for how they might apply.)

Competing models in this field include that of Sheth, - 30 - which concentrates more on the information flows to achieve a more dynamic model.

There are a number of very specialized books, such as that by Webster and Wind, by Sheth or by Engel 'et al '. These, however, tend to be somewhat indigestible for all but the most

avid enthusiasts. In any case, the models of consumer behaviour are usually well summarized in the major marketing textbooks: Lancaster and Massingham, in particular, give very good coverage (as does the 'Consumer Market Research Handbook ').

Organizational purchasing is subject to a rather different set of influences, not least because it is usually based on 'derived demand ', but also because it is often a group decision, split

At a more general theoretical level there are the models of consumer behaviour (Howard and Sheth) and of organizational buying (Webster and Wind).

1. What are the three generally accepted stages of repeat purchasing? How does Philip Kotler's model differ?

2. What specific factors, at the time of purchase, may affect the buying decision?

3. What general factors may affect consumer buying behaviour? How does social class compare with age as a predictor of behaviour? How may residential neighbourhoods be used?

4. What are the two main models of life-style? How do these compare with the various psychological approaches?

5. Who are generally believed to the two main categories of contributors to the organizational buying process? How do Miller and Heiman expand these categories, and why?

6. What is diffusion of innovation? How does the customer franchise relate to customer usage and loyalty?

- 1 - A. S. C. Ehrenberg and G. J. Goodhart, 'How Advertising Works ' (JWT/MRCA, 1980).

- 4 - W. D. Wells and G. Gubar, Life-cycle concepts in marketing research, 'Journal of Marketing Research ' (November 1966).

- 5 - S. O'Brien and R. Ford, Can we at last say goodbye to social class?, Paper presented to the 31st Annual Conference of the Market Research Society, 1988.

- 6 - A. Lunn, Segmenting and constructing markets, 'Consumer Market Research Handbook ', ed. R. Worcester and J. Downham (McGraw-Hill, 1986).

- 11 - J. T. Plummer, The concept and application of life-style segmentation, 'Journal of Marketing ' (January 1974).

- 16 - A. Benjamin, 'IT Futures ... IT Can Work ' (National Economic Development Office, 1987).

- 18 - F. E. Webster and Y. Wind, 'Organizational Buying Behavior ' (Prentice-Hall, 1972).

- 20 - H. Gatignon and T. S. Robertson, A propositional inventory for new diffusion research, 'Journal of Consumer Research ', vol. 11 (March 1988).

- 22 - Gatignon and Robertson, A propositional inventory for new diffusion research.

- 23 - R. Amara, What we have learned about forecasting and planning, 'Futures ' (August 1988)

- 24 - V. Mahajan, E. Muller and F. M. Bass, New product diffusion models in marketing: a review and directions for research, 'Journal of Marketing ', vol. 54 (1990).

- 27 - J. A. Howard and J. N. Sheth, 'The Theory of Buyer Behavior ' (Wiley, 1969).

- 28 - J. Engel, D. Kollatt and R. Blackwell, 'Consumer Behaviour ' (Dryden Press, 1978).

- 30 - J. N. Sheth, A model of industrial buyer behaviour, 'Journal of Marketing ', vol. 37 (October 1973).