Chapter

7
Understanding Local Buyers

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved

 Outline
Local Buyer Behavior Basics
The Consumer Decision Process
Local Market Research
The B2B Industrial Buyer
Three Market Environments
Takeaways.
 Culture and Buyer Behavior
Marketing and Materialism
Marketing actions are basically undertaken in the belief that
more and better goods will bring an increase in consumers’
standard of living, an increase in their satisfaction, and perhaps
even more happiness
However, when anticipating customers’ reactions to new
products and increased product choices, it is important to note
the limits on the relationship between material affluence and
personal happiness
“Money can’t buy you love.”
 Local Buyer Behavior

External
Buyer Choices
Influences “Models of Man”
Product choice
Culture
Buyer Buyer Brand choice
Economics decision
characteristics Store choice
Technology process
Supplier choice
Politics

Local
Marketing
Effort
 Local Buyer Behavior
• James Duesenberry - Relative Income hypothesis –
consumer’s well-being is a function of how much income they
have relative to their peer groups, not the actual income

• Milton Friedman – Permanent income, defined as the

regularly expected income, is what determines an individual’s
consumption

• Thorstein Veblen – Conspicuous consumption – the notion

that people make purchases of expensive brands & products
in order to display their ability to afford them
 Local Buyer Behavior
•What does the product/service do for the buyer?
• How does it fit into the consumption and use
pattern of the buyer?
• What are the core benefits?
• What is the perceived risk and how high is it?
The CORE BENEFIT often differs between local markets.
The generic function of a product depends more on the
local environment than on innate individual preferences.

• Remember: Buyers are GOAL-ORIENTED –

they buy for a reason. Point is to
understand what that reason is.
 The Buyer Decision Process

Evaluation
Problem
Search of Choice Outcomes
recognition
alternatives
 The Buyer Decision Process
Problem Recognition
A problem is when an individual perceives a difference
between an ideal and an actual state of affairs
New products often lead to tension and a recognized
“problem”
For the local marketer it is important to recognize that
education about the core benefits might be necessary in
order to create a demand for the product
 The Buyer Decision Process
Search
A consumer’s search for alternative ways to solve the
problem is closely related to his or her level of involvement
with the product category
For product with which involvement is high, search tends to
be more comprehensive and time consuming
For convenience and habit purchases, the decision process
is shorter, with little need for extensive searches or
alternative evaluations
Search intensity is dependent on the perceived availability
of the alternative
One advantage for product with high global brand awareness
is that initial distrust is easier to overcome
 The Buyer Decision Process
Evaluation of Alternatives
When a new product or service is in the “consideration set”
A highly involved individual will process the available
information matching the pros and cons of the alternatives
against preferences
Consumers can deal with multi-attribute evaluations in
several ways:
They can use gradually less-important features to successively
screen out alternatives
A “hierarchical” decision rule
They can consider all features simultaneously:
A “compensatory” rule – hard to do.
 Fishbein’s Multi-attribute Model
Multi-attribute
evaluation
(ΣBI)

Social
forces Preference
Social
norms

Motivation Behavioral
to comply intent
Situational
factors
(P-O-P)
Choice

B = beliefs about product attributes; I = importance of the beliefs; P-O-P =

point of purchase
 The Buyer Decision Process
Choice
The final choice of which alternative to select or try is
typically influenced by social norms and by situational
factors
Social Norms
Where group pressures to comply are strong social norms
influence is expected to override multiattributed evaluation
The social norms can be usefully analyzed by the
extended Fishbein model
The social norms involve two aspects
Social forces
Motivation to comply
 The Buyer Decision Process
Outcomes
The main question about the outcomes revolves around the
degree of customer satisfaction.
Customer satisfaction is particularly important in mature
markets where choices are many and the needs are already well
met.
Satisfaction engenders loyalty to the brand and to the company.
Because buying is typically a risky choice between different
brands, the marketer has to make sure that the customer does not
encounter cognitive dissonance, a sense of possibly making the
wrong choice.
One approach is to get satisfied customers to endorse the
product, a common strategy in advertising.
 A Strong Brand Simplifies the
Decision Process
 -- REDUCES INFORMATION SEARCH

 -- REDUCES PERCEIVED RISK

 -- PLACES A BRAND IN THE EVOKED

CONSIDERATION SET MORE EASILY
 -- BRAND LOYALTY MEANS DECISIONS GO FAST.

 A GLOBAL BRAND CAN FOCUS ON:

 -- ATTITUDES

 -- NORMS

 -- P-O-P (Point-of-Purchase Promotions)

The Local Market Research Process
Problem Secondary data
definition
Exploratory Qualitative
research
Research Descriptive Consumer
design
surveys
Causal Trade surveys
Measurement/
scaling
Observation
Questionnaire
construction Experiments

Sampling Causal Models

Data
Fieldwork analysis
 Local Market Research

FOCUS GROUPS
•Focus groups have become standard for initial exploratory
research

•In foreign markets, focus groups have the advantage of

being relatively inexpensive, can be completed quickly, and
can reach local pockets of the market

•Unfortunately, they can also constitute an unrepresentative

sample because typical screening criteria are incorrect in the
new environment or are not implemented correctly
 Local Market Research
SURVEY RESEARCH
Consumer Surveys
Surveys of large (n = 500 and above) random samples drawn from a
sampling frame of representative product users are of central
importance in marketing research
Cultural problems involved in the typical consumer survey:
•In high context cultures especially, one cannot fully understand
consumers from their responses to standard survey questions.
•At the same time, informal face-to-face interviews are prone to bias
because of demand characteristics
•However, even if surveys are afflicted by a number of problems in
many foreign markets, they can still be useful if care is taken.
 Local Market Research

TRADE SURVEYS

•Trade surveys of distribution channels and trade associations can

provide a good starting point for further data gathering and analysis
•In the U.S., the use of middlemen for information about consumers is
usually limited to the sales and scanner records of retailers and
wholesalers
•In countries with less social mobility and less diversity than the U.S.,
key informants in the trade are good sources of information about
buyers.
 Local Market Research

MEASUREMENT & SCALING

•In attitude scaling, very basic factors can create

difficulties
• The cognitive and emotional concepts measured
might not be equivalent across cultures.
•This means measurement equivalence is
questionable.
 Local Market Research

QUESTIONNAIRE CONSTRUCTION

•The questionnaire employed in the typical consumer survey

needs to be carefully pre-tested & translated into the foreign
language.
•It should then be back-translated for verification and
adjustment.

• In high context cultures the questionnaires are typically much

longer because of the need to establish the proper context for
the questions.
 Local Market Research

SAMPLING

Lack of comprehensive and reliable sampling frames has

long been a problem for marketing researchers in many
countries.
•Emergence of firms that specialize in developing lists for
direct marketing and survey research is gradually resolving
this problem.
•Still sampling equivalence can be questionable because the
appropriate profiles differ (e.g. “high” income in one country
might not be“high” in another).
 Local Market Research

FIELDWORK

Typically handled by a subcontracting marketing

research firm, sometimes a full-service advertising
agency
•As economic growth occurs, mature markets with
differentiated demand requiring formal and
scientific market research applications will emerge
in many countries.
 Understanding Industrial Buyers
The Business-to-Business (B2B) Marketing Task:
The marketer should help the buying organization succeed.
Industrial Buyers are influenced by the same forces as
individual consumers, but also conditioned by the
organizational culture in which they operate.
The organizational culture reflects company policies and ways
of making decisions.
The industrial buying process involves several stages from
problem recognition to performance review.
Industrial Buying Process
Problem recognition

Product specification

Search for suppliers

Proposal solicitation

Supplier selection

Order specification

Performance review
 Industrial Buyers: Building
Relationship
“Relationship Marketing” is important in B2B.
The term is applied to a marketing effort involving
Various personalized services
Creation of new and additional services
Customizing a company’s offering to the needs of a special
buyer
Takes a long-term view
Since without it, the effort required to build a relationship is
not worth it.
 Relationship Marketing
THINGS A MARKETER CAN DO TO CREATE A
WORKABLE RELATIONSHIP:

• ADOPT THE BUYER’S VIEWPOINT.

• ACCEPT AND DEMAND TRANSPARENCY.

• GROW WITH THE RELATIONSHIP.

• BE PROACTIVE.

Always consider how the culture of the nation and the culture of
the organization affect relationship marketing.
Three Market Environments

EMERGING NEW GROWTH MATURE

 Dominant Market Features
Feature Emerging New growth Mature

Life cycle stage Intro Growth Mature

Tariff barriers High Medium Low

Nontariff barriers High High Medium

Domestic competition Weak Getting stronger Strong
Foreign competitors Weak Strong Strong
Financial ins titutions Weak Strong Strong
Consumer markets Embryonic Strong Saturated
Industrial markets Getting stronger Strong Strong
Political risk High Medium Low
Distribution Weak Getting stronger Strong
Media advertising Weak Strong In-store
promotion
 Dominant Marketing Tasks
product/market situation
task emerging new growth mature
marketing analysis
research focus feasibility economics segmentation
primary data sources visits middlemen respondents
customer analysis needs aspirations satisfaction
segmentation base income demographics life style
marketing strategy
strategic focus market development participation in growth compete for share
competitive focus lead/follow domestic/foreign strengths/weaknesses
product line low end limited wide
product design basic advanced adapted
new product intro rare selective fast
pricing affordable status value
advertising awareness image value-added
distribution build-up penetrate convenience
promotion awareness trial value
service extra desired required
 Takeaway

Understanding local markets involves conceptual skills &

imaginative rethinking more than new analytical
marketing skills.

The core benefit of a product or service can vary

considerably across countries because of differing
environmental conditions surrounding product usage.
 Takeaway

Consumer behavior concepts and models are useful tools

when examining buyers in foreign markets, but underlying
cultural assumptions have to be reconsidered.
 Takeaway

Local market research is difficult because of lack of data,

language problems, & cultural differences in how people
respond to surveys, but can be done with proper adaptation.
 Takeaway

•In B2B the local marketer should help the buying

organization succeed, and make the buyer look good

• Firms must take into account the culture of the purchasing

agent and the culture of the organization
 Takeaway

It is useful to distinguish between three market environments:

1. The MATURE market, where share and customer

satisfaction define the strategies
2. The NEW GROWTH market, where the global marketer
needs to participate & “all boats rise with the tide”.
3. The EMERGING market, where the aim is market
development with a long time horizon.