Consumer & Org Buying Behaviour: Models, Influences & Decision-Making

Core Concepts: What Drives Purchase Decisions?

1. Consumer Buying Behavior: The Individual Perspective

Definition: Consumer buying behavior refers to the process individuals or households go through to select, purchase, use, and dispose of goods/services to satisfy needs. It blends psychology, sociology, and economics.

Key Influences (Visualized):

mindmap
  root((Consumer Buying Behavior))
    Cultural Factors
      Culture
      Subculture
      Social Class
    Social Factors
      Reference Groups
      Family
      Roles & Status
    Personal Factors
      Age & Life-Cycle
      Occupation
      Economic Situation
      Lifestyle
      Personality & Self-Concept
    Psychological Factors
      Motivation
      Perception
      Learning
      Beliefs & Attitudes

How It Works:

• Need Recognition: Triggered by internal stimuli (hunger, boredom) or external (ads, peer pressure).
• Information Search: Internal (memory) vs. external (friends, internet, salespeople).
• Evaluation of Alternatives: Criteria like price, brand, features, and past experience.
• Purchase Decision: Actual buying (or postponement due to unexpected factors).
• Post-Purchase Behavior: Satisfaction/dissatisfaction → loyalty or complaints.

Worked Example: Daraz’s "Lightning Deals"

• Need: A student sees a limited-time 50% off on a laptop.
• Search: Compares Daraz’s deal with other platforms (Amazon, local shops).
• Evaluation: Checks reviews (social proof), delivery time (2-day vs. 5-day), and return policy.
• Decision: Buys if the perceived value > price.
• Post-Purchase: Leaves a review if the product matches expectations (or complains if delayed).

2. Organizational Buying Behavior: The B2B World

Definition: Organizational buying behavior involves purchases made by businesses, governments, or institutions to produce other goods/services, support operations, or resell. Unlike consumers, buyers here are rational, professional, and influenced by multiple stakeholders.

Key Differences from Consumer Buying:

The Buying Center (Visualized):

classDiagram
  class User {"Initiates purchase request"} as Initiator
  class Influencer {"Provides input (e.g., IT dept for software)"}
  class Decider {"Approves budget (e.g., Finance Manager)"}
  class Buyer {"Executes purchase (e.g., Procurement Officer)"}
  class Gatekeeper {"Controls info (e.g., HR for vendor lists)"}
  class User <|-- Influencer : "→"
  User <|-- Decider : "→"
  User <|-- Buyer : "→"
  User <|-- Gatekeeper : "→"
  note for User "Multiple roles per person"

How It Works (Nepali Example: NTC’s Procurement)

1. Need Recognition: NTC identifies a need for new fiber-optic cables.
2. Product Specification: Technical team defines requirements (speed, durability).
3. Supplier Search: Shortlists vendors (e.g., Huawei, local firms) via RFP (Request for Proposal).
4. Proposal Analysis: Evaluates bids based on price, quality, and past performance.
5. Supplier Selection: Negotiates terms (e.g., 10% discount for bulk).
6. Order Routine: Places order; monitors delivery/installation.
7. Post-Purchase Evaluation: Checks if the cables meet performance standards.

3. Models of Consumer Decision-Making

Three dominant models explain how consumers make choices:

A. The Hierarchy of Effects Model (AIDA)

flowchart LR
  A["Awareness"] --> B["Interest"]
  B --> C["Desire"]
  C --> D["Action"]

• Example: A YouTube ad for Himalayan Java coffee creates awareness → desire → action (buying online).
• Limitation: Assumes linear progression; ignores habitual purchases (e.g., buying milk daily).

B. The High-Low Involvement Model

Example:

• High Involvement: Buying a smartphone (research, comparisons).
• Low Involvement: Buying a pack of chips (brand loyalty or impulse).

C. The Consumer Decision Journey (CDJ)

flowchart TD
  A["Consider"] --> B["Evaluate"]
  B --> C["Buy"]
  C --> D["Enjoy/Advocate"]
  D --> A

• Real-World Tie: Khalti’s "Khalti Points" program turns post-purchase users into advocates (referrals).
• Nepali Example: A student considers a laptop (Dell vs. Lenovo) → evaluates specs → buys → enjoys → shares on Facebook (loop restarts).

4. Organizational Buying Models

A. The Buying Center Roles

1. Initiator: Identifies the need (e.g., a school principal needs projectors).
2. Influencer: Provides expertise (e.g., IT teacher recommends brands).
3. Decider: Approves the purchase (e.g., school committee).
4. Buyer: Executes the order (e.g., procurement officer).
5. Gatekeeper: Controls information (e.g., blocks unauthorized vendors).

Example: Daraz B2B for Schools

• Initiator: School headmistress.
• Influencer: Teacher (recommends Epson projectors).
• Decider: School board (approves budget).
• Buyer: Procurement officer (places order on Daraz).
• Gatekeeper: Finance officer (reviews vendor lists).

B. Types of Organizational Buying Decisions

5. Psychological and Social Influences

A. Psychological Factors

1. Motivation: Needs (Maslow’s hierarchy) drive purchases.
   • Example: A Pathao rider buys a helmet (safety need) after seeing an accident.
2. Perception: Selective attention/distortion.
   • Example: Ads for Nabil Bank’s loans are ignored by those who don’t need credit.
3. Learning: Past experiences shape choices.
   • Example: A student buys Himal Books repeatedly after good service.
4. Beliefs & Attitudes: Shape preferences.
   • Example: Vegans avoid KFC due to ethical beliefs.

B. Social Influences

1. Reference Groups: Families, friends, or celebrities.
   • Example: Khalti’s influencer marketing (e.g., "Use Khalti, get cashback").
2. Family: Life stage affects purchases.
   • Example: New parents buy diapers (Unicharm) and strollers.
3. Culture: Values and traditions.
   • Example: Tihar gifts (sweets, clothes) are culturally driven.

6. Organizational Buying Influences

A. Environmental Factors

• Economic: Inflation affects budgets (e.g., Nepal Rastra Bank’s repo rate impacts loans).
• Technological: E-procurement (e.g., Daraz B2B portal for businesses).
• Political/Legal: Government tenders (e.g., NTC’s procurement laws).
• Competitive: Rival bids (e.g., Ncell vs. NTC for corporate clients).

B. Organizational Factors

• Objectives: Profit vs. social responsibility (e.g., Himalayan Java’s fair-trade coffee).
• Policies: Spending limits (e.g., Nabil Bank’s IT budget rules).
• Systems: ERP software (e.g., SAP for procurement).

In the Real World

1. Khalti’s Behavioral Nudges

   • Idea Used: Post-purchase behavior and social proof.
   • How: Khalti rewards users with cashback for referring friends (turning buyers into advocates). The app also shows "Trusted by 10M users" to leverage social proof.

2. Daraz’s Dynamic Pricing for Consumers vs. Businesses

   • Idea Used: Consumer vs. organizational buying.
   • How: Daraz offers discounts to individual shoppers (e.g., "Buy 2, Get 1 Free") but provides bulk pricing and B2B portals for businesses like schools or hotels. The buying process is simplified for consumers (one-click) but formalized for orgs (RFQs, contracts).

3. NTC’s Fiber-Optic Procurement

   • Idea Used: Organizational buying center and modified rebuy.
   • How: NTC’s Engineering Department (influencer) recommends vendors, the Finance Team (decider) approves budgets, and the Procurement Officer (buyer) negotiates terms. When upgrading from 2G to 5G, NTC follows a modified rebuy process, evaluating new suppliers like Ericsson alongside existing ones like Huawei.

Exam Tip

1. Define Key Terms Precisely

   • Differentiate consumer behavior (personal needs) from organizational behavior (business goals).
   • Example: "Organizational buying involves multiple stakeholders, unlike consumer buying which is often individual."

2. Compare Models in Tables

   • The exam may ask to contrast the Hierarchy of Effects vs. Consumer Decision Journey. Use tables to organize differences clearly.

3. Apply to Nepali Contexts

   • Worked examples in answers score high. For instance:
     • "A student buying a laptop (high involvement) vs. a shopkeeper reordering sugar (straight rebuy)."
     • "NTC’s procurement process involves a buying center with roles like the Engineering Dept (influencer) and Finance Manager (decider)."

4. Link Theory to Real Companies

   • Khalti: Post-purchase behavior (loyalty programs).
   • Daraz: Consumer vs. organizational buying (B2C vs. B2B portals).
   • Nabil Bank: Psychological factors (perception of security in ads).

5. Diagrams Are Your Friends

   • Draw mindmaps for consumer influences or flowcharts for organizational buying processes. Label every box with real-world examples (e.g., "NTC’s Procurement Officer" in a buying center diagram).

6. Common Pitfalls to Avoid

   • ❌ Confusing modified rebuy with new task (the latter involves no prior experience).
   • ❌ Ignoring cultural factors in Nepali markets (e.g., gifting in Tihar drives demand for sweets).
   • ❌ Overlooking post-purchase behavior—companies like Khalti and Daraz focus heavily on this stage.

Final Visual: Case Study – Chaudhary Group’s Consumer vs. Org Strategy

mindmap
  root((Chaudhary Group))
    Consumer Strategy
      Branding: "Bhatbhateni" (emotional appeal)
      Promotion: TV ads (cultural ties)
      Distribution: Wide retail network
    Organizational Strategy
      B2B: Bulk sales to hotels (e.g., "Bhatbhateni" for buffets)
      Procurement: Long-term contracts with farmers
      Technology: ERP for supply chain
    Key Difference
      Consumers: Impulse buys (e.g., snacks)
      Orgs: Contracts (e.g., school canteen supplies)