Analyzing Organisational Markets and Buyer Behaviour

Organizational buying is defined in this chapter as; "the decision-making process by which formal organizations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers."

Kotler goes on to say; "no two companies buy in the same way, yet the seller hopes to identify enough uniformities in organizational buying behaviour to improve the task of marketing strategy planning."

As we know, the b2b market is very different to the b2c market, in terms of buyer behaviour. The buying decision is often not made by one person but in many cases, a committee of people - making it very complex for the marketer to understand the target and how best to market to them. 

The time line for decision making is also very much longer and there are often many steps in the process - all of which need to be understood and appropriate marketing strategy put in place.

A third difference can be geography, buyers in the b2b sector can be located in a different country from where the product & services will be used.

This complexity must be fully understood if today's marketer is to be successful in the b2b sector - again, we have a chapter from Kotler, that understood this and the relevance today is even more so - with digital marketing becoming an important part of the marketers tool kit, this makes the process of marketing in this sector even more complex and therefore it's even more important for the marketer to put the customer at the centre of their business.

Analyzing Consumer Markets and Buyer Behaviour

"Understanding the buying behavior of the target market is the essential task of marketing managers under the marketing concept". Ref: Kotler

He goes on to say that marketers find it useful to segment consumer groups & to develop products & services for these groups. If a segment is large enough, it maybe effective to implement focussed marketing programmes to these groups. The question is; how do you know if the segment is large enough ? The answer lies in the area of cost v benefit - if the benefit is greater than the cost, then it maybe worth creating tailored marketing programmes to segmented groups.

Marketers should seek to understand the buyer behaviour and in particular, how consumers respond to "marketer-controlled stimuli" - if marketers understand this relationship, then it can be used to maximise ROI of valuable resources. This level of understanding will also help develop competitive advantage and help with growth in market share.

The consumer buyer behaviour is influenced by a range of factors; cultural, social, personal and psychological. This chapter explores all of these in great detail and I believe can still be useful for today's marketer seeking to gain the best understanding of their target segment as possible.

Kotler goes on to talk about the process the buyer actually goes through and talks about the buying decision, the type of buying decision involved and the steps in the buying process.

An effective marketing programme must show an understanding of the consumer buying behaviour and how groups respond to marketing messages and also allow for the buying process itself and allow for the steps in the buying process.

Since 1988, the world has become even more complex and for us marketers, the task of understanding our consumers has become even harder. But, if we are to be successful, we must understand our buyers, the buying behaviour and how outside factors influence them in choosing a brand and once the brand choice has been made, what factors will affect the buying process.

Another chapter full of very insightful thoughts and very practical ideas for today's marketer.

Another way !

I booked a taxi to collect me and my wife from Bristol

Airport to take us home to Bath – I am amazed that taxi firms still exist that appear to have some form of monopoly and offer such a bad service.

The car was not too old or too dirty but it had about three of those air freshener trees hanging from the inside rear mirror – I hate the smell and it makes my wife feel sick. I nearly asked the drive to stop and throw them away!

The driver had also been smoking so we had the stale smell of smoke as well.

The driver had the radio on and without asking turned the music up so it felt as though I was in some club !

His driving was ok but they do insist on driving very quickly – presumably so that they can get to the next job as quickly as possible.
Now, if there is a taxi company wanting to develop a service led proposition based on what the customer would like, I’d love to be able to help.

Providing new or relatively new, clean and comfortable cars, discussing with the customer their requirements for the journey, e.g. radio on or off, air con on or off, preferred route ?, making sure the passenger(s) are comfortable before setting off ……………

I’m convinced there is a gap in the market – any takers ?

Setting price

If you follow that you are in business to make a profit, the following model helps explain how your business works;

The manufacturer is the maker of the product and supplies this product to the market, i.e. the buyers, at a set price. If the price is set at the correct level and there are enough buyers, then the manufacturer makes a profit - simple !

But, if a manufacturer sets the price at a level where no profit is generated, who actually wins ? The buyers may get a good deal in the short term but their chosen manufacturer will eventually go out of business. But the buyer then moves onto a new manufacturer and the cycle starts again.

Setting the correct price is not easy but manufacturers must build their business on the premise that their product(s) will achieve some brand loyalty that will generate the profit levels required and keep them in business over the longer term.

Too many manufacturers set their price at a level where they believe the buyers will be happy to pay - this is a false starting point and will only lead to one end. Manufacturers must commence their business planning by answering some fundamental questions; why are they in business ? what levels of profit do they want to achieve ? what product(s) will they offer the market ? how will these generate brand loyalty ? 

I have come across too many companies setting price at a level to match what they believe to be the competition and what they believe their customers will pay. Often, these companies are very busy but make no profit ! Some even sale very little and also make no profit.

Clearly, buyers will not pay any price, they do want to feel ripped off or feel as though their tight budget is being squeezed by a greedy manufacturer.

Setting price at the correct level is one of the most important tasks of any company - get it right and the company will make a profit.

Analyzing the Marketing Environment

"We have repeatedly emphasized that excellent companies take an outside-inside view of their business".

Kotler goes on to say that these companies have an excellent system for monitoring and evaluating the environment that the company competes within and then makes decisions based on this knowledge that gives the company the best opportunity to survive and grow - adapting to a changing environment.

How many times have we comes across organizations that do something just because they have always done it that way ! In some cases, it is very difficult to change the product offering etc and in others, e.g. service companies, it is very quick and easy to change.

Kotler covers both the micro-environment and the macro-environment and provides examples of what should be included in both. He also provides some examples where companies have systems for monitoring the marketing environment and the impact it is likely to have on the organization.

This is clearly another area that is as important to successful companies today as it was back in 1988 and most likely was before and will be for the future.
 

Learning from sport

We have witnessed some remarkable sporting achievements recently – Roger Federer winning Wimbledon for the 7th time, Spain winning the Euro 2012 Championships and Bradley Wiggins winning the Tour de France.

All of these achievements, and many more not mentioned, are remarkable because if somebody had said they would happen, not many people would of believed them.

Why, because they all go against the pattern of what has gone before and they seem impossible.

This reminds me of what we are tasked to do in business planning – we set business objectives based on what we need to achieve and what we believe is possible.

But, is there a role for setting business objectives that seem impossible ? Can we learn from sport and how teams plan for the impossible.

Let’s remember that before 2008, Spain had not won a major football tournament – they are now the European Champions, World Cup Holders and then if you look below the surface, they are the under 21 European champions, Under 19 European champions.

Before Bradley Wiggins won the 2012 Tour de France, there has never been a British winner of this race.

No doubt somebody started the dream for both Spain and a British winner of the Tour de France.

One key lesson to learn is that it’s not just about having a dream – it’s also about having a plan to achieve the dream.

British Cycling and Sky put together a team and then planned for success. Spanish Football set out a way to play football to conquer the world.

Both of these achievements seemed impossible but with a dream and well developed strategy and implementation plan, these dreams became reality.

What business dream do you have ?

Marketing Information Systems and Marketing Research

Clearly companies & brands do not operate within a vacuum. They operate within a market.

Defining the market and how your company/brand fits within the market is one area where marketing information systems and marketing research can help.

Kotler says that "marketing information is a critical element in effective marketing" - we probably have all experienced working with companies that have too much of the wrong information and/or information that is so badly collected that it provides an inaccurate view of the market and where each brand sits within it.

Spending time on this area of the business is I believe essential - how can you possibly know what to do next if your understanding of the current situation is flawed. Setting realistic business goals/objectives and then developing sound strategies and implementation plans is dependent upon having accurate information.

Kotler outlines four key systems - systems is an interesting word that suggests that marketing information and intelligence should be collected systematically and then analysed using a system of established techniques.

Far too many times I have come across organisations that base business and marketing decisions upon data where the source of the information has not been taken into account. I have actually heard a senior manager say that they think competitor X has a market share of Y because he read a trade press article saying so - this may be accurate but how do you know. Surely, there would be a more accurate way to obtain market share data, especially if you are about to base a strategic plan on stealing some of that share - it may not exist !

So, marketing information systems and marketing research are still important today as they were back in 1988. The way markets have become more complex, you can easily argue that they are even more important.