Organizational Buying Behaviour

Organizational buying behavior is a choice making procedure by which formal associations build up the requirement for products and services and recognize, assess and pick among available options of brands and suppliers.

The organizational purchasing procedure is completely different as compared to the consumer purchasing procedure. While purchasing choices are made moderately effortlessly and rapidly by individual clients, authoritative purchasing includes exhaustive and profound examination. Associations buy items extending from profoundly complex hardware to little parts.Organisational purchasing is vigorously affected by derived demand, that is, demand for a product or service sold by the purchaser's clients. As in our product Cadbury, various elements are used in different chocolates for example cocoa , milk , dried fruits, nuts , caramel etc .Then for the packaging also different products are used,So to buy all these products the organization has a specific set of suppliers.

The buying decision mainly include the following stakeholders (with reference to Cadbury)::

• Initiators are the ones who request for the product or service to be purchased.For example, if any product used in manufacturing like milk caramel etc or in packaging is to be bought, then the request will come from either the manufacturing department or the packaging department.
• Users are the ones who will use the product purchased.Users will be people who will use those products that are been requested for manufacturing or packaging.
• Influencers are people who influence the buying process by evaluating alternatives or defining the specifications.People of this category
• Deciders are the people who decides on product requirement or suppliers. These people decide what to bought and from which supplier. For example, if Cadbury wants to buy nuts for a specific chocolate,these people decide from where to buy.
• Approvers are the ones who authorize the proposed action.
• Buyers are the people who have formal authority to arrange the purchase terms. They play a major role in selecting vendors and negotiating.They are the one who officially deal with the vendors and decide the price and quantity of the particular product needed.
• Gatekeepers are the ones who have the power to prevent sellers or information reaching members of buying center. For example, the purchasing agents, receptionists etc.

The Organizational Buying Process :

• In NEED RECOGNITION the organization recognizes a problem or need that can be met by acquiring a good or service. For example for making chocolates different ingredients are needed. So at this stage the need would be established.
• In NEED DESCRIPTION buyer determines the needed item’s general characteristics and required quantity. Here the characteristics and quantity of the item required for making the specific chocolate is registered. for example the amount of caramel needed to make 5 Star.
• In PRODUCT SPECIFICATION buyer develops a technical specifications of the product to be purchased.
• In SUPPLIER SEARCH the buyer identifies the most suitable supplier through trade directories, contacts with other companies, trade advertisements, trade shows and the internet.At this stage the suitable members of Cadbury will search for the supplier of the element needed for example if cocoa is needed, the members of the team will search for cocoa suppliers.
• In PROPOSAL SOLICITATION the buyer invites qualified suppliers to submit proposals.At this particular stage the shortlisted suppliers of cocoa will be called to submit there proposals.
• In SUPPLIER SELECTION the buyer selects a supplier according to the needs of the organization and attributes of the supplier. The final selection of the supplier will be done at this stage.
• In ORDER ROUTINE SPECIFICATION the buyer negotiates the final order with the supplier, listing the technical specifications, quantity needed, expected time of delivery, return policies, warranties etc.
• In PERFORMANCE REVIEW the buyer periodically reviews the performance of the chosen supplier .

Factors Influencing Buying Behavior::

Consumer behavior

Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. Consumer behavior would refer to one of the essential tools which would help the marketers to understand the perspective of the consumers keeping in mind the various concepts & theories of the same.

Consumer Behavior in the real world draws evidences from various aspects of Marketing and Economics. To start with, let us first take the Marketing Mix Stimuli into account and relate it to Cadbury chocolates.

Product: The product refers to the commodity which the consumer wants to buy in order to satisfy his/her needs. The chocolate centric products offered by the consumer brand i.e. Cadbury’s are a wide range of chocolate bars namely, Dairy Milk, Fruit & Nut, Silk Dairy Milk, Crackle, Bourneville etc.

Price: Price refers to the second marketing stimulus which affects the buying behavior of the consumers. Price can be referred to as one of the main elements, because it is this factor which determines the profit or loss for a particular enterprise. The pricing strategy used by Cadbury takes into consideration the pocket of each consumer. This is the reason the price has been kept extremely flexible - from 5 to upwards of 120.

Promotion: The third marketing stimulus which has to be kept in mind is the promotional aspect i.e. the means of communication to be used. Based upon the type of product, the promotional strategy as well as the tool for communication is selected. The various means of communication which have been used by Cadbury in order to attract more number of customers are advertisements on radio, television, banners, magazines, internet, etc.

Place: Place refers to the last marketing mix stimulus which refers to the location where the product would be readily available for sale. Place plays one of the crucial elements while deciding upon the purchase for a particular product. The organization decides on using any/some of the following strategies such as franchisee, intensive distribution, exclusive distribution or selective distribution. The products offered by Cadbury are readily available at the small-scale neighborhood grocery stores as well as big grocery stores such as Reliance, Big Bazaar etc.

Now, let us try to relate the consumer behavior of our product based on Cultural, Social and Personal factors.

Cultural factors: Cultural factors comprise of set of values and ideologies of a particular community or group of individuals. It is the culture of an individual which decides the way he/she behaves. Cultural factors have a significant effect on an individual’s buying decision. Every individual has different sets of habits, beliefs and principles which he/she develops from his/her family status and background. What they see from their childhood becomes their culture. From that point of view, it can be said that though the Indian psyche was not exposed to chocolate at all till after a substantial period after the attainment of independence (thanks to the glorious, rich legacy of the multitudes of traditional Indian sweets which have been, are and will be revered irrespective of any other product which might try to displace/replace them), gradually the taste for chocolate started seeping in through the layers of rapid globalization. From the 1980s, the Indian population gladly took to consumption of chocolates and Cadbury had a big role to play in the phenomenon. From then till now, the market has seen a sea change and today, there is a dedicated market only for chocolates. Cadbury has its huge assortment of chocolates which rules the roost in the market at around 70% of the market share.

Social factors: Human beings are social animals. We need people around to talk to and discuss various issues to reach better solutions and ideas. Social Factors influencing consumer buying decision can be classified under Reference Groups, Immediate Family Members, Relatives, Role in the Society, Status in the society etc. Cadbury’s brilliant marketing campaigns made sure that consumers got their insights and recommendations about their purchase decisions and preferences from all of those sources and did not narrow it down to any particular arena. While the chocolates offered by Cadbury are a huge hit among children, it can be noticed that it has developed a huge market for teenagers and young adults by extending its product line into more diverse flavors and also by marketing them through ads which are appealing to the young audiences. Some of their campaigns exclusively focused on Indian traditions and customs such as ‘Kuch meetha ho jaaye’ and ‘Shubh aarambh’, thereby sealing the recipe of success.

Personal Factors: They play an important role in affecting consumer buying behavior, and are characterized by the factors such as occupation, age, economic condition, lifestyle, and personality. Cadbury in its journey made sure that it covered all of these bases and utilized the variety involved in it by designing its product line and campaigns accordingly. The sheer versatility of the pricing across the product line took care of the occupational and economic differences across consumers, while the variety in flavor and packaging did the job as far as age and lifestyle are concerned. As far as personality goes, they went an extra step by fashioning the silk ads in such a way that most people will relate to them, and effectively so with recall value.

One more factor that we can include in this discussion is the Cognitive consumer response as far as the product is concerned. One of the main issues which can be studied within the cognitive psychology refers to the study of memory. The memory of the consumers can be divided into three parts i.e. Sensory Memory, Short Term Memory & Long Term Memory.

Sensory memory: The first stage which would be taken into consideration to discuss the cognitive response will be the sensory memory. It involves the information that enters the senses of the consumers. This would be practiced primarily with the advertisements being aired on televisions, radio, banners, etc. The memory which would be created within the minds of the customer will last for approximately 3 seconds of hearing, ½ second of vision etc. In case of Cadbury chocolate or toffees or milk powder, the color of the tin pack or the wrappers would attract the attention of the customers. The dark blue cover of the wrappers will grasp the attention of the consumers which will have a long lasting effect.

Short-term memory: The aspect within this model would keep in mind a temporary storage facility. The use of the tag line (e.g. “Kuch meetha ho jaaye” “Pappu paas ho gaya”, aaj pehli tareekh hai”) has acted as one of the best ways with which the consumers relate to the brand.

Long-term memory: The last stage to judge the cognitive response of consumers would be to have a long term memory. The long term memory with regards to Cadbury chocolates can be seen with respect to the information flown regarding the brand and the recall value associated. It can be judged when the customer prefers/suggests others to buy a bar of Cadbury as opposed to the substitutes available in the market.

Distribution decisions

Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel. They are basically a set of pathways that a product or a service follows after production, culminating in purchase and consumption by the final user. Channels of all types play an important role in the success of a company and affect all other marketing decisions. Therefore , while building a marketing channel system , it is required of the marketer to judge them in the context of the entire process by which their products are made , distributed, serviced and sold. Cadbury is present in more than 200 countries. The distribution network of Cadbury is absolutely fantastic and, needless to say,  widespread, so much so that it  comprises of 2100 distributors and some abut 4,50,000 retailers! Channel Design: Distribution structure- No. of levels & Selection criterion for channel partner.


Criterion for selection of channel members: Business capacity and salesmanship           Experience and previous expertise Credit Worthiness Financial and social status. 
Market Segments Changes during PLC Training and Support Required Channel Member Management: I. Rewards: Monetary:-General trade distributor margin is around 4.75% and 1% is activity based ( completion of Monthly sales target)Modern Trade distributor margin is around 4.5% and 0.5%. Super stockiest margin is around 2% and 1% or market value.Retail margins: For instance, Bournvita has 9%, Oreo 13%, Chocolates worth Rs 5- 20, 10% and so on and so forth. Non – monetary:-Foreign trips to super stockiest based on performance.-Visi-coolers can be given only in food stores and chemist shops where sales is more than 3000 per week.

II. Target setting and Monitoring:-Monthly targets are set separately for general and modern trade distributor. Incentives, are therefore, given only after surpassing targets. -Monitoring is done by “Analyzing Invoices” generated by the distributor and through company sales force. III. Training and Capacity building: -Training program is organized, once in a year, arranged and paid by Cadbury itself, to train the new sales force and the under-performing lot in the existing sales force, both from the company and the distributors. IV. Cash Flow:-Distributor makes payment to the company on a weekly basis. The cash cycle varies from 1- 7 days. In Modern trade cash cycle, however, it varies from 16 days to one month.

                               

Branding and Brand Management

What is branding? The process involved in creating a unique name and image for a product in the consumer's' mind, mainly through advertising campaigns with a consistent theme. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.

And what is brand management? It includes developing a promise, making that promise and maintaining it. It means defining the brand, positioning the brand, and delivering the brand. Brand management is nothing but an art of creating and sustaining the brand. Branding makes customers committed to your business. A strong brand differentiates your products from the competitors. It gives a quality image to your business. Brand equity also provides value to customers. It enhances the customer’s ability to interpret and process information, improves confidence in the purchase decision and affects the quality of the user experience. The fact that it provides customer value showcases brand equity as one of the major components of modern marketing alongside the marketing concept, segmentation, and several others.

Brand equity is a set of brand assets and liabilities linked to a brand name and symbol, which add to or subtract from the value provided by a product or service. Brand equity has four dimensions—brand loyalty, brand awareness, brand associations, and perceived quality, each providing value to a firm in numerous ways. Once a brand identifies the value of brand equity, they can follow a brand equity roadmap to manage that potential value.

Brands play an important role in generating and sustaining the financial performance of businesses. With high levels of competition and excess capacity in virtually every industry, strong brands help companies differentiate themselves in the market and communicate why their products and services are uniquely able to satisfy customer needs.The past 20 years have witnessed a dramatic shift in the sources of value creation from tangible assets (such as property, plant, equipment and inventory) to intangible assets (such as skilled employees, patents, business systems and brands).

Cadbury dairy Milk has been trying to get out of the image of ”just another chocolate” and position itself as something special in the minds of the people. The campaign has successfully created a picture in the mind of the customers that Cadbury is not just a chocolate but a means of celebrations.
There are two main sources of Brand Equity, and they are:
Brand Awareness: It is the extent to which consumers are familiar with the qualities or image of a particular brand of goods or services.
Brand Image: It is the consumer’s perception of a particular goods or services.

Cadbury’s not only enjoys high levels of Brand Awareness but also unaided Brand Recall. This level of recall is generated especially when Dairy Milk enjoys the top of the mind effect. The brand image of Cadbury Dairy Milk plays an important role in building the brand equity of Dairy Milk through the medium of unique brand associations. Right from the "Kuch Meetha Ho Jaye" campaign to the recent “Shubh Aarambh”, Dairy Milk has managed to create strong, unique, and favorable brand associations in the minds of the consumers which is commendable.



Another  important sources of Brand Equity is:
Emotional Connect: Dairy Milk is considered as a replacement to traditional Indian sweets (Mithai) which people exchange with their near and dear ones on these occasions. Using Amitabh Bachchan as a brand ambassador is just a stroke of genius on Cadbury’s part.  Cadbury India's managing director Bharat Puri has been quoted in the media. "Moreover, Bachchan has a universal appeal that extends to everyone from six years to 60, just as our chocolates do." His appeal cuts across socio-economic and age strata. This is exactly what Cadbury needs. Our generation has grown up on Bachchan, while his current popularity ensures that today's generation is also growing up on him.

When a company is sold, it seeks to obtain a value over and beyond that of its tangible assets. Historically this has been referred to as `goodwill' and was taken to mean the value of the loyalty of the firm's customers. This is an interesting concept as loyalty is an important component of branding - so already it is clear that there is a strong link between goodwill and brands. After all, a good brand is one which customers insist on by name and for which they are prepared to pay a premium.

Product Mix Decisions and New Product Development

Marketing planning begins with formulating an offering to meet target customers’ needs or wants. To achieve market leadership Cadbury has offered products of superior quality that provide unsurpassed customer value. To reach this status Cadbury has perfectly designed its product mix. Cadbury worldwide has a very strong brand presence and an even stronger product range.

However, in India alone, Cadbury has not unleashed its entire product line. It has selected its few mega-brands and released them to gain an appreciable market share. The product mix of Cadbury in India includes Chocolates, Beverages, Biscuits, Candy and Gum. Cadbury chocolates as a product line is the most successful in India and has a huge product width too.

Segmentation

One notable form of customer segmentation that Cadbury utilizes is behavioural segmentation, which is based on actual customer decision-making processes towards Cadbury’s products. Once dividing these customers by that base, they target them by providing specific product offerings. The relevant segments are the following: The Break Segment, Impulse Segment and Take-home Segment.

In the Break segment it is placed as a snack which people can eat at tea-time or as a dessert substitute. As an Impulse segment product it is strategically placed at eye level or counters where the consumer would buy it at an impulse. Both the Cadbury dairy milk block-size and bite-size could be purchased on impulse, depending on its packaging and its presentation. The take-home segment would include Cadbury celebrations which have to be consumed at home due to its sheer size.

Cadbury has introduced various products for different customer segments so that every customer segment has different expectations of price from the product. Therefore maximizing the returns includes maintaining right price level for each segment and then increasing moving through them.

To this extent Cadbury was successful in developing its products for the rural market. It came out with the RS. 5 dairy milk packing and the same for 5-star too, the two of its most popular products. Another rural success for Cadbury was through its Perk chocolate that specialised in high glucose content, perfect for the rural folk and priced at just RS. 5.

Cadbury modified its chocolate product line not just for the rural folk but also for the urban areas. It came out with the relatively expensive Temptations and Bournville and a new variant of Dairy Milk in the form of Silk. These products further have variants in different flavours. Where there is a perk available for RS. 5 there is also a Silk available for RS. 180.

Line Modernization, featuring and pruning

Product Lines need to be modernized. Companies plan improvements to encourage customer-migration to higher-valued, higher-priced products. Modernization should also not appear too early (damaging sales of the current line) or too late (giving the competition time to establish a strong reputation). To this extent Cadbury brought in Silk at the perfect time when Dairy Milk was already a well-established brand and there was nothing more they could have done with regards to its promotions. We all must have noticed how the promotion focus of Cadbury has shifted from “Kuch meetha ho Jaye” for Dairy Milk to “Miss me Kiss me” for Silk. They are now featuring this new modernized product which would earn them a lot more in terms of revenue. Which is also why this new product is priced higher than the old one.

Pruning of product lines is also something that Cadbury has done from time to time. We all remember the snack Cadbury bytes that we can no longer see in the market. Same goes the case for Cadbury Chokie and Cadbury Wowie. These products were discontinued as opportunity costs to promote the newer better products like Bournville.

Packaging

Cadbury successfully uses its packaging as a marketing tool. It performs many sales tasks: attract attention, describe the product’s features, create consumer confidence and make an overall favourable impression. The Cadbury Logo Brand names act as a simple perceptual cue that identifies a product as one people are familiar with or one they associate with particular attributes or features. The famous Cadbury white/purple script logo is unique and original, yet simple, familiar and somehow approachable. There is some element of a guarantee about the product created by the signature logo.

The appetizing visual of two glasses pouring milk into the signature is also well known and provides a pictorial heuristic for the perceived benefit of “a glass and a half of full cream dairy milk. Cadbury is also instantly recognisable because of its iconic purple packaging. Colour has emotional significance and can prompt swifter recognition to packaging than either written words or imagery. Cadbury uses colour for quick brand recognition across its many forms of marketing communications, for example, in outdoor advertising and television advertising.

Cadbury’s particular shade of purple has also long had associations with royalty and luxury. Cadbury’s signature colour is considered so valuable to the company for brand recall and brand recognition that it has spent millions of dollars in legal fees attempting to prevent other chocolate companies such as Darrel Lea from using purple in their marketing communications.

After the Cadbury worm controversy the company took extreme measures to ensure the consumer of their safe packaging. The new Purity Sealed packaging was launched and investment worth RS. 15 crores was made towards new packaging. The new metallic poly-flow used was costlier by 15%. Double wrapping was used to reduce infestation possibility.

With the help of above all activities Cadbury makes a place inside the heart of Indian people. And Indian Customer thinks that there is no substitute of Cadbury chocolates. It takes a long time to build up this kind of a relationship with customers and it has lead to the capturing of 70% of chocolate market in India.

Product Life Cycle

Product life cycle essentially means:

1. Products have a limited life.
2. Product sales pass through distinct stages, namely – Introduction, Growth, Maturity, and Decline.
3. Profits rise and fall at different stages.
4. Products require different strategies in each life cycle.

As far as Cadbury Chocolates (now under Mondelez India Foods Private Limited) are concerned, let us have a look at how the company has strategized its market presence and growth, from the angle of product life cycle. Mondelez India Foods Private Limited has been in India for over 6 decades, having started in 1948 as an importer of chocolates. Ranked 3rd amongst India’s Most Admired Companies by Fortune India in 2013 and headquartered in Mumbai, Mondelez India Foods Private Limited has sales offices in New Delhi, Mumbai, Kolkata and Chennai and six manufacturing facilities at Thane, Bengaluru, Hyderabad, Induri (Pune), Malanpur (Gwalior) and Baddi (Himachal Pradesh).

Since Cadbury Dairy milk is what we can refer to as the ‘star product’ of the brand, we can focus on it for the ease of understanding. Let us look at each stage of Product Life Cycle individually and relate it to Cadbury Dairy Milk:

Introduction: This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. Even though 1948 was the year when Cadbury began its operation in India, Cadbury Dairy Milk was strongly repositioned in the market as ‘the perfect expression of love’ in the 1980s.

• Cadbury embraced the new wave of advertising from that point onward and started taking over the market gradually by communicating that it was ‘the real taste of chocolate’ in the 1990s.
• The country lived through a lot of memorable introductory campaigns by the brand which eventually proved to be path breaking campaigns, like the ‘real taste of life’ campaign in 1994, which helped the brand redefine itself and anchor itself effectively in the consumer consciousness.
• The strategy implemented by Cadbury paid off tremendously as sales volumes grew by over 50%.

Growth: The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. Once Cadbury successfully etched its image in the consciousness of the consumers as well as in the market, it was time for it to venture into more aggressive and tricky arenas – keeping the brand value alive and kicking while making it grow further.

• The year 1998 saw the next stage of the brand growth – which was done with a no holds barred aggressive approach of making its way into the hearts, rather, habits of the biggest chunk of consumers – the great Indian ‘middle class’. So began the journey of popularizing the brand in a more social context, using traditional occasions and festivities such as weddings and the multitudes of other festivals that India is all about.
• Right after that came the infectious, catchy ‘Khaane walon ko khaane ka bahaana chahiye’ campaign along with its happy jingle that took the nation by storm. All one could hear on television and radio was this one jingle, which was more than just a song. It was actually successful in making people increase their chocolate consumption habits.
• After that came the award winning ‘Kuch khaas hai’ campaign, which actually achieved the company’s goals of increasing penetration levels and ended up penetrating smaller towns successfully this time, increasing the sales volumes by 40%.

Maturity: During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up.  After Cadbury successfully captured the market and reached the maturity stage, it was time for it to keep the position afloat by reintroducing the brand image in consumers’ psyche.

• Cadbury resorted to the fail-safe option of making Mr. Amitabh Bachchan the brand ambassador and came up with the ‘Kuch meetha ho jaaye’ campaign that till date enjoys the status of one of the most successful and memorable campaigns in India. The campaign can also be termed as fiercely ambitious because now it started taking on the great Indian ‘Mithaai’ market, even though the products are vastly different.
• More innovative campaigns started – such as the ‘Pehli taareekh’ campaign, which is extremely suited to the Indian sensibilities of treating your loved ones to something sweet on the day of your salary payment.
• Another barrage of ads with the tagline ‘Shubh Aarambh’ started which capitalized on the Indian belief system that having something sweet before embarking on something important yields success. It became hugely successful.
  

Decline/Introduction of new product: Eventually, the market for a product will start to shrink, and this is what is known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product.  Though the sales never really went down, as a brand that knows its strategies, Cadbury decided to reinvent itself without waiting for a pitfall.

• A whole new range called ‘Silk’ was introduced, which appealed enormously to the consumers because of its attractive packaging and decadently shot ads.
• Despite the success of the existing flavors of Silk (Fruit and nut, Orange Peel, Regular etc.) Cadbury introduced interesting news flavors like the ‘Caramello’.
• Cadbury went one step further and went on to experiment with textures as well, and introduced the new Silk ‘Bubbly’ recently.