customer analysis buying behavior and segment qt i on
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MBA ProMACustomer Analysis, BuyingBehavior and Segmentation
Professor Hossein Dadfar
Professor Hossein Dadfar
Customer Analysis
What do you need to know about yourcustomers?
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Professor Hossein Dadfar
What you need to know
Who buys the product / service
Who uses the product / service
What customers buy
How they use the product/services
Where customers buy
When customers buy How customers choose
Why they prefer a product
How they respond to marketing programs
Will they buy it (again)?
Professor Hossein Dadfar
Who buys and uses product /service
A collection of actors/individuals suchas:
Initiator (identifies need for product /service)
Influencer (provides info or preference)
Decider (decides on spending the money)
Purchaser (makes the purchase)
User
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Professor Hossein Dadfar
Example: Replacement ofproduction machines
Initiator: more convenient and efficientmachines
Influencer: production manager wantgood efficiency and happy employees
Decider: administrator wants low cost
Purchaser: agent wants good contract
User: Operators want reliable andfriendly usage machine
Professor Hossein Dadfar
Example: summer vacation
Initiator: child wants fun
Influencer: cousin wants place he has
found Decider: father wants low cost
Purchaser: mother wants happy family
User: whole family wants to enjoythemselves
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Professor Hossein Dadfar
Expanded 5-W Model forCustomer Analysis
Who are your current and potential customers?
Who are your former customers???
Professor Hossein Dadfar
5-W Model, continued
What do your customers do with yourproducts?
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Professor Hossein Dadfar
5-W model, continued
Where do your customers purchase yourproducts?
Professor Hossein Dadfar
5-W model, continued
When do your customers purchase yourproducts?
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Professor Hossein Dadfar
5-W model, continued
Why (and how) do your customersselect our products?
Professor Hossein Dadfar
Why do they buy from you?Why do they buy from you?
Industrial Buyers MotivationIndustrial Buyers Motivation
Rational motives
Price
QualityTechnology
Knowledge
Service
Continuity of Supply
Reciprocity
Others
Emotional motives
Status and rewards
Perceived risk
Friendship
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Professor Hossein Dadfar
In Short, what you need toknow
What you need to know is buyingbehavior
Professor Hossein Dadfar
THE HEART OF Industrial MARKETING
THE HEART OF Industrial MARKETING
HOWAND WHYORGANIZATIONS BUY AND HOWTHEY CAN BE INFLUENCED
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Professor Hossein Dadfar
Industrial vs. Consumer buyingBehavior?
I INDUSTRIAL. BUYING CONSUMER BUYING
DECISION IS MADE BY A GROUP OF FREQUENTLYPEOPLE (DMU ) ONLY BY ONE PERSON
DIFFERENT NEEDS AND OBJECTIVES MAINLY THE BUYER'SMUST BE FULFILLED NEEDS
PROCEDURES, FORMALITIES ARE NO FORMALITY
COMPLEX SIMPLE
DECISIONS ARE VERY OFTEN STRATEGIC ROUTINE, OFTENHABITUAL
Professor Hossein Dadfar
Important Issues in Ind. BuyingBehavior
Purchase characteristics
Organisational characteristics
.Group characteristics
.Participant characteristics
.Process or stages
.Seller characteristics
.Informational characteristics
.Buyer-Seller relationships
.Environmental characteristics
.Conflict/negotiation tactics
.Communication networks
.Decision rules
Roles stress
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Professor Hossein Dadfar
Business Buying Behavior
Customer Service
Customer Service
Purchasing Ethics/
Rules and regulations
Purchasing Ethics/Rules and regulations
Buying Situations
Buying Situations
Evaluation Criteria
Evaluation Criteria
Buying Centers
Buying Centers
Aspects ofBusinessBuying
Behavior
Aspects ofAspects ofBusinessBusinessBuyingBuying
BehaviorBehavior
Buying process
Professor Hossein Dadfar
Buying Centers
Initiator Decider
UsersGatekeeper
Influencer/Evaluator
PurchaserBuyingCenterRoles
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Professor Hossein Dadfar
Buying Situations
New Buy
New Buy
ModifiedRebuy
ModifiedRebuy
StraightRebuy
StraightRebuy
A si tuation requiring the purchaseof a product for the first t ime.
A si tuation requiring the purchaseof a product for the first t ime.
A situat ion where the purchaser wantssome change in the original good or
service.
A situat ion where the purchaser wantssome change in the original good or
service.
A si tuation in which the purchaserreorders the same goods or services
without looking for new information orinvestigating other suppliers.
A si tuation in which the purchaserreorders the same goods or services
without looking for new information orinvestigating other suppliers.
Professor Hossein Dadfar
Buying Decision GridType ofBuying
Situation
Newness ofthe Problem
InformationRequirements
Considerationof New
Alternatives
New Task High Maximum Important
ModifiedRebuy
Medium Moderate Limited
StraightRebuy
Low Minimal None
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Professor Hossein Dadfar
Buying Situation Implications
Timetakenfordecision
No of people involved in buying centre
Straight
Rebuy
New
Task
Modified
Rebuy
Professor Hossein Dadfar
Buying Decision GridType of Buying
Situation
Newness of the
Problem
Information
Requirements
Consideration
of New
Alternatives
New Task High Maximum Important
ModifiedRebuy
Medium Moderate Limited
Straight Rebuy Low Minimal None
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Professor Hossein Dadfar
New Task (rarest, mostglamorous)
Big DMU (decision-making unit)
lots of people involved in the decision
lots of people indirectly influence the decision
Slower-than-usual process
people think its a risky buy; novelty, precedent
Gather and weight a lot of information
Anyone can win
Your past relationship along wont win the order
Professor Hossein Dadfar
New Task (continued)
Performance matters a lot, price doesnt so much
The most influential people are knowledgeable
users technically competent
They set the specifications & then the game is
75% over
Low ranking experts can be very influential
High ranking non-experts often stand back
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Professor Hossein Dadfar
Effective Salespeople in New Task
Listen, probe
Understand DMU
Understand needs, perceptions of you and of
competitors
In early, influencing specifications & views of the
competitors
Come to be viewed as consultants (creepingcommitment)
Spend lots of time
Analyze a lot
Bring in support troops
Professor Hossein Dadfar
Straight Rebuy
Small DMU (usually one person)
Perceived low risk, hence low priority
In a hurry
Close-minded, arrogant, think they know it all
Go on minimum acceptable quality (better doesnt help)
Then price and assured delivery
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Professor Hossein Dadfar
Straight Rebuy
In Supplier
Out suppliers find it hard to get an appointment, let alone break
in
Pray for the in supplier to screw up noticeably or for
requirements to change (pressure from users, staff)
Professor Hossein Dadfar
Modified Rebuy
A window of opportunity
An aging new task
Or a rejuvenated straight rebuy
Mini-version of new task strategy can make you the in
supplier
Then dont screw-up
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Professor Hossein Dadfar
Ind. Buying Behavior Models
Task Models
Non-Task Models
Process Models
Complex Models
Professor Hossein Dadfar
Ind. Buying BehaviorComplex Models
Bbuying behavior (B) is a function of individual
attributes (I), group factors (G), organizational
characteristics (O), and environmental factors (E) as
expressed in the following equation:
B = f (I,G,O,E)
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Professor Hossein Dadfar
Physical environment
Technologicalenvironment
1 The environment (environmental determinants of buying)
Economic environment
Politicalenvironment
Legal environment
Culturalenvironment
Suppliers Customers G ov er nme nt La bo ur u ni on s Trade
associations
Professional
groups
Other
Business firms
Other social
institutions
Information aboutsuppliers Availabilityof General business Valueand norms
(marketin g commu nication goods a nd services conditions
Organisational
technology
Technology
relevant for
purchasing
Technological
constraints and
technology
available to
the group
Organisational
structure
Organisationof
the buying center
and the purchasing
function
Group
structure
Organisational
goals and tasks
Buying tasks
Group tasks
Organisational
actors
Members of the
buying center
Member
characteristics,
goals and
leadership
2 The organisation (organisational determinants of buying behaviour)
The organisational climate Physical Technological Economic Cultural
3 The buyingcenter (interpersonal determinants of buying behaviour)
Activities Interactions Sentiments Activities Interactions Sentiments
Group processes
4 The individual participants
Motivation Cognitivestructure Personality Learningprocess Perceivedroles
Buying decision process: 1. Individual decision-making unit 2. Group decision-making unit
Buying
Decision
NontaskTask
Webster and Wind
Model
Professor Hossein Dadfar
Organisational Buyer Behaviour Process
Need recognition
Determine specifications (general)
Determine specification (specific)
Search
Evaluation
Selection
Post-purchase evaluation
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Professor Hossein Dadfar
Participants in theBusiness Buying Process
Gatekeepers
Initiators
Buyers
Influencers
Deciders
Users
Approvers
Professor Hossein Dadfar
Figure 8-1: Major Influences onIndustrial Buying Behavior
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Professor Hossein Dadfar
Figure 8-2: Major Influences on
Industrial Buying Behavior
Professor Hossein Dadfar
Dadfar Process ModelIndustrial buying behavior (purchasing process) model
Dimensions
Process TechnicalCommercial(Economic) Social
Initiation/needrecognition
Specificationdevelopment
Search/primary
selection
Negotiation
Final selection
Contracting/establishmentof order
Receipt andacquisition
Evaluation
DECISION-MAK
INGBEHAVIOR
IMPLEMENTATIONBEHAVIOR
(Stages)
Fig. 3.1
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Professor Hossein Dadfar
Issues Frequently Negotiated BetweenIndustrial Buyers and Sellers
Example of variables describing the dimensions of negotiation for purchasing
industrial capital goods.
________________________________________________
1 .Commercial
a. Price
b. Delivery
c. Terms of payment
2. Social:
a. Feeling confidence in the other party
b. To allowing parties to get to know each other
3.Technical
a. Ensuring the product fits with technical need
b. Technical modification
c. Technical training
d. Technical capability of supplier
_________________________________________________
Professor Hossein Dadfar
Variables for dimensions of Buying behaviorExample of variables describing each dimension of buying behavior
____________________________________________________
1. Commercial
a. Price
b. Short delivery time
c. Credit facility
d. Reciprocity of transaction
2. Social
a. Personal feeling of confidence
b. Ease of communication
c. Salesman's personality
d. Friendship with supplier's personnel
e. Equipment not taboo
f. Prestige of dealing with supplier
3. Technical
a. Past experience with the equipment
b. Quality- technical advantages
c. Technical modification of equipmentease of
installation in existing system
e. Ease of operation
f. Ease of maintenance
d.Technical information
g.Training aid
___________________________________________________
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Professor Hossein Dadfar
Dadfars Model for Industrial Buying Selling Interactionand Process
Professor Hossein Dadfar
Webster and Wind, 1972
Models of industrial buying behavior
1. Identification of need
2. Establishing specification &
scheduling the purchase
3. Identifying buying alternatives
4. Evaluating alternative buying
actions
5. Selecting the suppliers
User
Infl
uen
cer
Buy
er
Decid
er
Gatek
eep
er
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Professor Hossein Dadfar
Type of buying situationBUYPHASES TYPE OF BUYING SITUATION
NEW TASK MODIFIED-
REBUY
STRAIGHT-REBUY
1. Anticipation or
Recognition of aproblem (Need) and a
General Solution
Yes Maybe No
2. Determination of
Characteristics andQuantity of Needed item
Yes Maybe No
3.Description ofCharacteristics and
Quantity of Needed item
Yes Yes Yes
4.Search andQualification of
potential Sources
Yes Maybe No
5. Acquisition andAnalysis of Proposals
Yes Maybe No
6. Evaluation ofProposals and Selection
of Supplier
Yes Maybe No
7. Selection of an order
Routine
Yes Maybe No
8. Performance
Feedback andEvaluation
Yes Yes Yes
Complex buying
decisionsPurchasing is Routine
Complex buying
decisionsPurchasing is Routine
Professor Hossein Dadfar
Market Segment
A group of existing or potential
customers sharing some common
characteristic that is relevant in
explaining or predicting their response
to a companys marketing program.
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Professor Hossein Dadfar
Market Segmentation
Identify sub-markets within market
Decide which one(s) to pursue (target)
Design marketing mix(es) to be attractive totargeted segment(s)
Professor Hossein Dadfar
Segmentation Bases
Company size
Company location
Industry Technology (used)
Policies (purchasing)
Product application
Benefits sought
Buying center characteristics
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Professor Hossein Dadfar
Segmentation Bases
Company size
Company location
Industry
Technology (used)
Policies (purchasing)
Product application
Benefits sought
Buying center characteristics
Professor Hossein Dadfar
Business MarketingSegmentation
Geographic
Customer Type
Customer Size
Product UseBusinessMarkets
BusinessBusinessMarketsMarkets
Purchasing Criteria
Purchasing Strategy
Importance
PersonalCharacteristics
Micro-segmentation
Micro-segmentation
Macro-segmentation
Macro-segmentation
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Professor Hossein Dadfar
Macrosegmentation
The process of dividing
business markets into
segments based on general
characteristics such as
geographic location, customer
type, customer size, and
product use.
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Professor Hossein Dadfar
Microsegmentation
The process of dividing
business markets into
segments based on thecharacteristics of decision-
making units within a
macrosegment.
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Professor Hossein Dadfar
Macro Vs. Micro Segmentation
1. Large, Medium or Small
2. Local, National, regional, worldwide
3. Metal industries, Process industries,
construction industries.
4. Defined by product or service
Quallity, delivery, supplier reputaion, price,
Complexity, hierachical
Long, short
New task, straight or modified rebuy
Centraized, decentralized
Macro Segmentation
1. Size of Organization
2. Geographical
3. Industrial Sector
4. End Market served
Micro Segmentation
Choice cheriteria
Structure of decision-making unit
Decision-making process
Buying situation
Type of purchasing org.
ExampleVariable
Professor Hossein Dadfar
Nested Approach
DemographicOperating variables
Purchasing
approaches
Situational factorsPersonal Characteristics
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Professor Hossein Dadfar
Demographic Variables
Industry, Company Size (Large, SMEs) , Location
Operating Variables
Technology, User or Nonuser status (light, medium, heavy users)
Customer requirements (few services or extended requirements)
Purchasing Variables
Purchasing function approach (centralized or decentralized), Power
structure( technology top, finance top, marketing top), Nature of
existing relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)
Situational Factors
Urgency of requirement, size of order
Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
Professor Hossein Dadfar
AwarenessIve heard of you
FamiliarityI know who you are
ImageI know what you stand for
InclinationIll look for you
TrialShow me what you can do
ReinforcementDid I make the right decision
SatisfactionI like you
ReferralIll tell my friends to try you
Quality, Service--ProductPerformance counts!
LoyaltyIll buy your product first
The Consumer Thought Process: Marketing News, August 4, 1997