Buyer Decision Making

Dr. Brian Monger

The buyer’s purchase decision is a natural follow-up to the selection of alternatives.  Whether the choice is based on insufficient facts and inadequately thought out, or carefully chosen, the point is that there can be no purchase without recognising that one alternative is preferred over all others.

Individual buyers have a variety of wants but limited means to satisfy them.  Buyers therefore choose to satisfy some wants, to put off some, and to leave some unsatisfied.  The buyer decision refers to the process of choosing the most desirable alternative from among those available (and known).

The buyer decision implies that buyers can order their preferences from among product, store, and method of purchase alternatives.  A buyer may have preferences for some products required immediately and preferences for products long before entering the market.  Buyers may even have preferences for products that they never intend to purchase.  Further a buyer’s preferences may change several times before he or she actually enters the market.

If this ability to specify what is desired did not exist, then no buyer would ever purchase.  It is difficult to imagine a person entering into a purchase agreement when wants are not known, when the mind cannot be made up between desired products, or when there is indifference to the alternative products offered for sale.  The very act of sale is evidence that the buyer, at that moment, would rather spend money on the designated product than on any other thing.  This is what scaling of preferences means.

A buyer may be in any of four possible decision states where a particular problem is concerned. They are: (1) rejected, (2) undecided, (3) partially decided, and (4) decided.

A solution is rejected when the buyer consciously decides not to pursue that course of action.  This state, more than any other, may cause the individual to seek a different solution.  A person is undecided when he or she has no preference for a solution among the alternatives offered.  In this state, the buyer cannot make up his or her mind.  A person may have decided to buy an iron but be undecided as to which brand to purchase.  A buyer in this state will not act.  Indecision is a signal to obtain more information about the problem.

A partially decided state covers a wide range of possibilities, from practically undecided to practically decided.  A person is partially decided when there is a tendency to accept one solution.  The buyer may be “sold” on most of the product but feel that the price is just a little high.

The buyer’s decision would be much simpler to determine if only the individual’s interest were involved.  Often this is the case, but there are many situations in which others participate in the decision.  Thus the buyer decision can be divided into two separate types of situations.  One situation involves the individual buyer buying personal requirements that involve no others.  The other situation occurs when the individual participates in establishing priorities for products that affect others, such as the household or others who will be participating in its use

Individual Buyer Decision Making

Economics have made a significant contribution to buyer behaviour in the area of choice.  The concept of marginal utility analysis necessarily deals with product choices.

Choices determined by marginal utility

Marginal analysis specifies that products with more utility (usefulness) and value to the individual are higher in order of purchases.  Utility is the ability to satisfy a human want.

Marginal utility could be described as the extra satisfaction derived from having one more incremental unit of the product.

Modification in Utility Concept of Choice

The economic concept of marginal utility is a fair approximation of how buyers order preferences.  However, several modifications must be explained in order to relate the concept to the real world.’

First, under marginal utility analysis, the individual always attempts to maximise dollar satisfaction between products using cold logic.  In practice, buyer emotions get in the way of logic.  The buyer may order preferences based on such non-monetary factors as beauty, comfort, or uniqueness.  A lack of sufficient information may often make it impossible to maximise.  The buyer may be able to do no better than to optimise preference ranks.  Furthermore, the ranking is much less factual than found in economics.  The buyer simply says, “We are going to buy a new floor polisher this month, and next month we can see about new clothes for the kids.”

Second, most products are not made in infinitely small increments.  The buyer must always choose between whole products which are often expensive.  That is to say, buyers deal in discrete rather than incremental values.  If a car, refrigerator, shoes, or other items could be purchased in one-cent increments, these items could rank high on many individuals’ preferences who cannot even consider the outlay of hundreds of dollars for the items as actually sold.  The only choice in reality is to go without.

Third, marginal analysis is based on an explicit comparison of products.  Often in the real world, the individual doesn’t even think in terms of comparisons.  The only consideration absolutely necessary to make a decision is that the buyer be able to say, “I want that.”  Such a statement ranks the desired product first, and all other products collectively second.

Fourth, marginal analysis does not consider the reasons that lie behind the decision.  Both individual and environmental factors do influence the decision.  These factors are considered more completely below.

Factors Affecting Individual’s Decision

Each individual buyer is responsible for ranking personal preferences, but there are always external influences that affect the decision.  The internal factors affecting decision making are the physiological and psychological considerations that, taken together, summarise what the person is.  External influences may be derived directly from search, as discussed in the previous topic, or may be the result of normal human interaction.  Even though individuals make up a household, each person’s external influences differ in some respects.

Personal Needs

Need is an important consideration to the buyer in decision making.  Every individual has some needs different from others.  A certain proportion of income must always go to fulfil physical needs for such items as nutritious food and basic clothing.  However, emotional needs can be just as strong. Therefore, the choices include provision for “pretty” clothes and “desirable” food along with the warmth and nutrition provided by these products.

Intended Use

Scales of personal preference cannot be separated from the buyer’s attitude toward the intended use of the product.  Individuals get more pleasure out of some activities than others, and select those products or brands in their assortment for which the use is compatible with their desires.  A camera ranks higher than a new lawn mower on the scale of preferences of a keen photographer.

Intensity of Motivation

The relative intensity of the buyer’s motives plays an important part in decision making.  No product or brand is included in the assortment scale until the motivation for it reaches a sufficient intensity level.  What the individual is motivated toward is also important to the ranking.  The level and direction vary among people and between products for the same person.  In effect, each product offers interference to the ranking of all other products.  The longer a desire is postponed, the higher the product is placed on our preference scale.  Also, a product toward which buyers have a more positive motivation tends to be ranked higher.

Experience with Product

Past product experience is important for buyer decision making.  Past experience with products or brands may involve known satisfaction or it may involve known dissatisfaction.  Both types of experience affect current decisions.  If buyers cannot find their first preference they may decide to choose the next best brand in their assortment; but the second choice may rank lower on their preference scale than the original choice.  As a result, the buyer may put off the purchase.

Price/Value

Price, or more importantly what has to be paid, is also a factor that influences buyer decisions related to value perceptions.  The importance of price rests on its effect on buyer income and other resources.  Buyers may wish to rank many types of products or brands high on their preference list, but what needs to be paid (e. g, money, time) makes this prohibitive.  Extra income and or other resources can push some products, which could not be afforded before, up on the buyer’s preferences.

Logic of External Information

Buyers can be persuaded to select certain products by the logic of external information when it is received.  Buyers may not always recognise sound and logical information when it is received, but they do react to perceived logic.  If the logic is sound it can cause a re-evaluation of buyer internal needs and motivation.  The buyer may seek information from a business, but, if it does not make sense, the buyer will discount or discard it.  Even information from a trusted friend is discounted if the buyer does not perceive it as “sound.”

Logical external information may be discarded by a buyer when choosing products if it is not compatible with the buyer’s own logic.  On a given product choice, the buyer may receive a great deal of information, some sought and some unsought.  The facts are filtered through the individual’s thought processes, and that which is incompatible is either not used or not given the weight of other data.  Of course, sufficient sound external information may cause the buyer to reassess his or her own position.

Brian Monger is the Executive Director of MAANZ International and a Principal Consultant with The Centre for Market Development.  His profile can be found on LinkedIn.

He is available for consulting tasks and speaking engagements

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MAANZ International website http://www.marketing.org.au

Contact – info@marketing.org.au

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