BAFS Study Notes: Understanding Customer Behaviour
Hi everyone! Ever wondered why you pick one brand of phone over another, or why you suddenly feel the need to buy the latest bubble tea flavour? It's not random! There's a whole science behind it, and that's what this chapter, Customer Behaviour, is all about.
Understanding why and how people buy things is super important for any business. If a company knows what you want, they can create products and services you'll love. So, let's dive in and become experts on what makes customers tick! Don't worry, we'll break it down with lots of easy examples.
Section 1: The Customer's Journey - The Decision-Making Process
Buying something isn't just a single action. It's a journey with several steps. Think about the last time you made a big purchase, like a new pair of sneakers. You probably thought about it for a while, right? Let's explore this journey for both individual consumers (like you) and business customers (like a school or a company).
The Individual Consumer's Decision-Making Process
This is the process you go through almost every day, sometimes without even realising it! It usually involves five steps.
A simple way to remember the steps: "I NEED INFO, BUT WHICH ONE? OK, BOUGHT IT. WAS IT GOOD?"
Step 1: Need Recognition
This is the "Aha!" moment when you realise you have a need or a problem. Your old phone's battery dies too quickly, or you see an ad for a concert and realise you need to go.
Example: Your laptop is getting really slow and can't run the software you need for your school projects. You recognise you need a new one.
Step 2: Information Search
Now you start looking for solutions. You might ask friends for recommendations, search online for reviews (e.g., on YouTube or price.com.hk), or visit stores to see the options.
Example: You start searching online for "best student laptops 2024", read tech reviews, and ask your classmates what they use.
Step 3: Evaluation of Alternatives
You've got your options. Now you compare them. You'll think about things like price, features, brand reputation, and style. Which one is the best fit for you?
Example: You narrow it down to three laptops. Laptop A is powerful but expensive. Laptop B has great battery life but is a bit heavy. Laptop C is cheap but might not last long. You weigh the pros and cons based on what's most important to you (e.g., budget, portability).
Step 4: Purchase Decision
Decision time! You've made your choice and you're ready to buy. You decide what to buy, where to buy it (e.g., online vs. a physical store), and when to buy it.
Example: You decide to buy Laptop B from the Fortress store in your local mall this weekend because they have a student discount.
Step 5: Post-purchase Behaviour
The journey isn't over yet! After you buy the product, you'll decide if you're satisfied. Was it a good choice? If you're happy, you might recommend it to others. If not, you might complain or feel regret (this is sometimes called 'buyer's remorse').
Example: You use your new laptop for a week. It's fast and the battery is amazing! You are very satisfied and tell your friends it was a great purchase.
The Business Customer's Decision-Making Process
Businesses buy things too, but their process is often more formal and involves more people. However, the basic steps are quite similar!
Example Scenario: A secondary school needs to buy 50 new tablets for its library.
1. Problem Recognition: The school librarian realises that students don't have enough devices for e-learning activities.
2. Need Description & Specification: The IT department and teachers create a list of requirements: the tablets must have a 10-inch screen, 8-hour battery life, and be compatible with the school's software.
3. Supplier Search & Evaluation: The school's purchasing manager gets quotes and product details from three different tech suppliers.
4. Purchase Decision (Supplier Selection): A committee (including the principal, IT head, and purchasing manager) reviews the options and chooses the supplier that offers the best value and service.
5. Post-purchase Performance Review: After the tablets are delivered and used for a term, the school evaluates if they met the needs and if the supplier was reliable.
Quick Review Box
Individual Process: Informal, personal, driven by individual needs.
Business Process: Formal, involves multiple people, driven by organisational goals.
Key Takeaway: Whether it's a student buying a laptop or a school buying tablets, the decision process follows a logical path from identifying a need to evaluating the purchase afterwards. Businesses are just more systematic about it.
Section 2: What Influences Our Decisions? Factors Affecting Customer Behaviour
Why did you choose that laptop while your friend chose a different one? Many factors influence our choices. We can group them into different categories.
Factors Affecting Individual Consumers
1. Cultural Factors
These are the broadest influences, learned from your family and society.
- Culture: Shared values and beliefs. For example, in Hong Kong, efficiency and convenience are highly valued, which is why fast food and delivery services are so popular.
- Subculture: Smaller groups with shared values. Think of youth culture, anime fans, or fitness enthusiasts. They have specific preferences for clothes, entertainment, and food.
- Social Class: A person's position in society, often based on income, occupation, and education. This can influence preferences for brands, hobbies, and where they shop.
2. Social Factors
These relate to the people around us.
- Reference Groups: Groups that influence you. Your family is a powerful influence. Your friends influence your choices in fashion and music. You might also be influenced by celebrities or online influencers.
- Roles and Status: Your position in a group. A person might be a manager at work, a parent at home, and a captain of a sports team. They might buy different things to fit each role.
3. Personal Factors
These are unique to you as an individual.
- Age and Life-Cycle Stage: A teenager, a young professional, and a retiree have very different needs and buying habits.
- Occupation: A construction worker needs durable work boots, while an office worker needs formal business attire.
- Economic Situation: Your income and savings affect what you can afford. During an economic downturn, people might cut back on luxury items.
- Lifestyle: How you live your life. Someone with an active, outdoor lifestyle will buy different products than someone who prefers staying home and reading.
4. Psychological Factors
These are the internal, "in-your-head" factors.
- Motivation: The driving force that makes you act. Why are you buying this? Is it a basic need (e.g., food) or for self-esteem (e.g., a luxury watch)?
- Perception: How you interpret information. Two people can see the same advertisement but have completely different opinions about it.
- Learning: Your behaviour changes through experience. If you have a good experience with a brand, you're more likely to buy it again.
- Beliefs and Attitudes: What you believe to be true about a product, and your overall feeling towards it. For example, a belief that "Japanese cars are reliable" can lead to a positive attitude towards buying a Toyota.
Factors Affecting Business Customers
Business buying is also influenced by several factors, but they are more related to the organisation.
- Environmental Factors: The state of the economy, new technology, and what competitors are doing can all influence a company's purchasing decisions.
- Organisational Factors: The company's own objectives, policies, and procedures. Some companies have strict rules about which suppliers they can use or how much they can spend.
- Interpersonal Factors: Business decisions are made by people! The relationships, authority, and influence of the people in the buying group are very important.
- Individual Factors: The personal characteristics of the buyer, such as their age, risk tolerance, and personal preferences, can also play a role, especially in smaller decisions.
Key Takeaway: A consumer's choice is a mix of their culture, social circle, personal situation, and internal psychology. A business's choice is a mix of external events, company rules, and the people involved in the decision.
Section 3: Business Markets vs. Consumer Markets
So, we know that individuals and businesses both buy things, but the "markets" they operate in are very different. Let's start by identifying who the main business customers are.
The Major Types of Business Customers
1. Producers: These are companies that buy goods and services to produce other goods and services.
Example: Vitasoy buys soybeans, sugar, and packaging to produce its soy milk. A construction company buys steel and concrete to build apartments.
2. Resellers: These are businesses that buy finished goods to resell them to others for a profit, without changing the product.
Example: PARKnSHOP buys groceries from suppliers to sell to you. 7-Eleven buys drinks and snacks to sell in its convenience stores. They are middlemen.
3. Governments: This includes all levels of government departments that buy goods and services to carry out their functions.
Example: The Hospital Authority buys medical equipment. The Leisure and Cultural Services Department buys books for public libraries.
4. Institutions: These are non-government organisations like schools, hospitals, and charities that buy goods and services to serve their clients.
Example: The University of Hong Kong buys lab equipment and computers. The SPCA buys pet food and supplies.
Key Differences: Business (B2B) vs. Consumer (B2C) Markets
Let's compare the two markets side-by-side. This is a very common exam topic!
Market Structure
- B2B (Business-to-Business): Fewer but much larger buyers. A company like Boeing might only have a few dozen airline customers, but each one buys millions of dollars worth of planes.
- B2C (Business-to-Consumer): Millions of individual customers who each buy small quantities.
Nature of Demand
- B2B: Derived demand. The demand for business goods is derived from the demand for consumer goods. For example, a bread company only buys more flour if consumers are buying more bread.
- B2C: Direct demand. You buy a product because you want or need it directly.
Buyer Characteristics
- B2B: Professional buyers and purchasing agents who are trained to negotiate and evaluate offers. The decision involves many people.
- B2C: Individual consumers or families. The decision is often made by one or two people.
Decision Process
- B2B: More complex, formal, and often takes a long time. It involves proposals, negotiations, and contracts.
- B2C: Simpler and quicker. You don't sign a contract to buy a bottle of Coke!
Relationships
- B2B: Marketers aim for strong, long-term relationships with their customers. It's all about trust and reliability.
- B2C: Often more impersonal. A company like Coca-Cola has millions of customers and can't have a personal relationship with each one.
Did you know?
The total value of transactions in the B2B market is actually much larger than in the B2C market! Think about all the parts, materials, and services that go into making a single iPhone before it even gets to you.
Key Takeaway: The main thing to remember is that business markets involve fewer, larger, professional buyers with demand driven by consumer markets. Consumer markets involve many individual buyers making simpler, direct-demand purchases.