Chapter 2: Theoretical Framework
2.4 Diffusion process and consumer behavior
2.4.2 The multistage process of consumer adoption
There are five stages in the adoption process of consumers: awareness, interest, evaluation, trial, and adoption. At the first stage, consumer is exposed to the product innovation through the input information about this innovation. The stimuli about the innovation could come from the marketing sources or non-marketing sources. However, it leads to the second stage of interest eventually. At this stage, consumers will search for more information about innovation before evaluating the innovation. When the consumer feels that the innovation fit his need, he comes to the trial stage, at which the consumer starts purchasing with a limited basis. Similar to the post purchasing feedback in consumer behavior model, the outcomes of trial can be positive and negative. Next, these outcomes will lead to the rejection or adoption of the consumer for a new product. The flowcharting approach of consumer adoption stage is criticized to some extent. First, consumers play the passive roles in the market of new product when no stage for need or problem recognition. Second, the evaluation stage can occur at many stages instead of after interest formation. Third, even though consumers decide to adopt the new product, the learning process can continue after adoption. Schiffman and Knuk (2007) developed the enhanced model of consumer adoption as the following figure:
Post adoption
Post purchase evaluation Pre-existing problem Or Need
Awareness
Interest
Evaluation
Trial
Adoption Rejection
Evaluation Rejection
Discontinuation Or rejection
Rejection Discontinuation Or rejection
Figure 2.10 An enhanced adoption Process model
Source: Schiffman and Kanuk, Consumer Behavior, Nine ed. 2007, Pearson Prentice Hall
2.5 Organizational buying behavior model 2.5.1 Theory on organizational buying
The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others (Kotler, 2003, p.216)
The business markets have several characteristics that different from the consumer markets:
Fewer buyers; Larger buyers; Close supplier-customer relationships; Inelastic demand; Volatile demand;Professional purchasing through trained purchasing agents; Multiple sales calls; Direct purchasing; Reciprocity: Duality of relationship; Leasing
Buying situation: Three types of buying situation include the straight rebuy, modified rebuy, and new task (Robinson, 1967).
Straight rebuy is a buying situation in which the purchasing department reorders on a routine basis. The buyer chooses from suppliers on an “approved list”. The out-suppliers attempt to offer something new or to exploit dissatisfaction with a current supplier. Out-suppliers try to get a small order first and then enlarge their purchase shares over time.
Modified rebuy: The modified rebuy is a situation in which the buyers want to modify product specifications, price, delivery requirements, or other terms. The modified rebuy usually involves additional decision participants on both sides. The in-suppliers become nervous and have to protect their positions while the out-suppliers see an opportunity and propose a better offer to gain the business.
New task: the new task is the buying situation in which a purchaser buys a product or service for the first time. The greater the cost or risk, the larger the number of decision participants and the greater information gathering, and long time to complete the decision (MacQuiston, 1989).
New-task buying process: awareness, interest, evaluation, trial, and adoption (Ozanne &
Churchill, 1971). The effectiveness of communication tools is different at each stage. At the first stage, mass media are most important; salesperson for the second one, and technical source are the most important factor at the evaluation stage. At the new-task situation, the buyer has to do:
product specification, order quantities, acceptable suppliers, and the selected suppliers. The new task situation is the marketer’s great opportunity and challenge.
The participants in the business buying process
Purchasing agents are influential in straight-rebuy and modified-rebuy situations while other department personnel are more influential in new-buy situations.
The buying center is composed of “all those individuals and groups who participate in the purchasing decision-making process”, who share some common goals and the risks arising from the decision.”(Webster & Win, 1972). There are seven roles in the purchases decision process:
(1) Initiators: Someone requests that something be purchased
(2) Users: those use the product or services. In many cases, the users initiate buying proposal and help define the product requirements
(3) Influencers: people who influence the buying decision. They often help define specifications and also provide information for evaluating alternatives. Technical personnel are important influencers.
(4) Deciders: People who decide on product requirements or on suppliers (5) Approvers: People who authorize the proposed actions of deciders or buyers
(6) Buyers: people who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications, but they play the major role in selecting vendors and negotiating.
(7) Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying center.
The main questions for business marketers:
(1) Who are the major decision participants?
(2) What decisions do they influence?
(3) What is their level of influence?
(4) What evaluation criteria do they use?
Figure 2.11 Major determinants of industry buying behavior (Webster and Win, 1972) 2.5.2 The buying process
The purpose of buyers is to gain the high ratio between perceived benefits to costs-the greater perceived value. There are three organizational orientations (Anderson & Narus, 1998)
(1) Buying orientation: the purchasers’ focus in short-term and tactical. Buyers are awarded on their ability to obtain the lowest price from suppliers for a given level of quality and availability.
(2) Procurement orientation: the buyers obtain two purposes including quality improvement and cost reduction through long-term contracts with strategic suppliers.
(3) Supply chain management orientation: The role of purchasing is broaden to the whole chain from raw materials to the end-users to optimize the performance of each linkage.
The type of purchasing processes
There are four product-related purchasing processes (Kraljic, 1993):
(1) Routine products: these products have low value and cost to the customers and involve little risks. Customers will seek the lowest price and emphasize routine ordering.
External factors -Level of demand -Economic outlook -Interest rate -Rate of technology change
-Political and regulatory development -Competitive developments -Social responsibility concerns
Internal factors
Organizational level -Objectives
-Policies -Procedures -Organizational structures -Systems
Interpersonal level
-Interests -Authority -Status -Empathy -Persuasiveness
Individual -Age -Income -Education -Job position -Personality -Risk attitude -Culture
(2) Leverage products: These products have high value and cost to the customers but involve little risk because the intensity of competition. The suppliers need to show that its offering minimize the total costs of customers
(3) Strategic products: These products have high value and cost to the customers but contain high risk for suppliers. The customers want a well-known and trusted supplier and will be willing to pay more than the average price. The supplier should develop the strategic collaboration with customers.
(4) Bottleneck product: The products have low value and cost to the customers but they involve some risk. Customers will want a supplier who can ensure the stable supply. The supplier should focus on the delivery and tracking system as well as supporting team.
The supplier selection
The final decision of supplier selection is make after supplier evaluation based on some criteria.
Lehmann and O’Shaughnessy (1974) indicated that the importance of each attribute in vendor selection varied by the product related purchasing situations. The main factors could be price, supplier reputation, product reliability, service reliability, and supplier flexibility. Among a buck of determinants, price is the key factor that purchasing agents use to select suppliers (Mullin, 1997).