Business Markets and Business Buyer Behavior

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Business Markets and Business Buyer Behavior

• Chapter 6

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Learning Goals

• Define the business market and how it differs
  from consumer markets
• Identify the major factors that influence
  business buyer behavior
• List and define the steps in the business buying
  decision process
• Compare the institutional and government markets
  and explain how they make their buying decisions

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Case StudyUPS

• Customer Needs
• Consumers need fast, friendly, low-cost package
  delivery
• Business needs are more complex
• Shipping part of complex logistics process
  including purchasing, inventory, order status,
  invoices, payments, returns

• Services
• Its 360,000 people and 88,000 vehicles offer
  ground, air, freight worldwide
• Helps customer navigate the complexities of
  international shipping
• Offers a wide range of financial services
• Provides consulting services to improve logistics
  operations

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Definition

• Business Buyer Behavior
• The buying behavior of organizations that buy
  goods and services for use in the production of
  other products and services that are sold,
  rented, or supplied to others.
• Also included are retailing and wholesaling
  firms that acquire goods for the purpose of
  reselling or renting them to others at a profit.

Goal 1 Define the business market
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Characteristics of Business Markets

• Sales in the business market far exceed sales in
  consumer markets.
• Business markets differ from consumer markets in
  many ways.
• Marketing structure and demand
• Nature of the buying unit
• Types of decisions and the decision process

Goal 1 Define the business market
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Business Markets

• Compared to consumer markets
• Business markets
• have fewer but larger customers
• Business customers
• are more geographically concentrated
• Demand is different
• Demand is derived
• Demand is price inelastic
• Demand fluctuates more

Characteristics

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

Goal 1 Define the business market
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Business Markets
Characteristics

• Compared to consumer purchases
• Involve more buyers in the decision process
• More professional purchasing effort
• Intel Lilly IBM Boeing

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

Goal 1 Define the business market
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Business Markets

• Compared to consumer purchases
• More complex buying decisions
• The buying process is more formalized
• Buyers and sellers work more closely together and
  build long-term relationships

Characteristics

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

Goal 1 Define the business market
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Business Buyer Behavior

• Major Types of Buying Situations
• Straight rebuy
• Reordering without modification
• Modified rebuy
• Requires modification to prior purchase
• New task
• First-time purchase

Goal 1 Define the business market
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Business Buyer Behavior

• Systems Selling
• Buying a packaged solution to a problem from a
  single seller.
• Often a key marketing strategy for businesses
  seeking to win and hold accounts.

Goal 1 Define the business market
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Business Buyer Behavior

• Buying Center
• The decision-making unit of a buying organization
• Includes all individuals and units that
  participate in the decision making

Goal 1 Define the business market
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Business Buyer Behavior
Members of the Buying Center

• Users
• Buyers

• Influencers
• Deciders

Gatekeepers
Goal 1 Define the business market
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Major Influences on Business Buyers
Key Factors

• Economic trends
• Supply conditions
• Technological, political and competitive changes
• Culture and customs

• Environmental
• Organizational
• Interpersonal
• Individual

Goal 2 Identify the major factors that
influence business buyer behavior
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Major Influences on Business Buyers
Key Factors

• Objectives
• Policies
• Procedures
• Organizational structure
• Systems

• Environmental
• Organizational
• Interpersonal
• Individual

Goal 2 Identify the major factors that
influence business buyer behavior
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Major Influences on Business Buyers
Key Factors

• Influence of members in the buying center
• Authority
• Status
• Empathy
• Persuasiveness

• Environmental
• Organizational
• Interpersonal
• Individual

Goal 2 Identify the major factors that
influence business buyer behavior
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Major Influences on Business Buyers
Key Factors

• Personal characteristics of members in the buying
  center
• Age and income
• Education
• Job position
• Personality
• Risk attitudes
• Buying styles

• Environmental
• Organizational
• Interpersonal
• Individual

Goal 2 Identify the major factors that
influence business buyer behavior
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Stages in the Business Buying Process

• Stage 1 Problem Recognition
• Stage 2 General Need Description
• Stage 3 Product Specification
• Value analysis helps to reduce costs
• Stage 4 Supplier Search
• Supplier development

Goal 3 List and define the steps in the
business buying decision process
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Stages in the Business Buying Process

• Stage 5 Proposal Solicitation
• Stage 6 Supplier Selection
• Stage 7 Order-Routine Specification
• Blanket contracts are often used for
  maintenance, repair and operating items.
• Stage 8 Performance Review

Goal 3 List and define the steps in the
business buying decision process
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Business Buying on the Internet

• E-procurement is growing rapidly
• Online auctions and online trading exchanges
  (e-marketplaces) account for much of the online
  purchasing activity
• E-procurement offers many benefits
• Access to new suppliers
• Lower purchasing costs
• Quicker order processing and delivery

Goal 3 List and define the steps in the
business buying decision process
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Institutional and Government Markets

• Institutional Markets
• Consist of churches, schools, prisons, hospitals,
  nursing homes and other institutions that provide
  goods and services to people in their care.

Goal 4 Compare the institutional and government
markets
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Institutional and Government Markets

• Institutional Markets
• Often characterized by low budgets and captive
  patrons.
• Marketers may develop separate divisions and
  marketing mixes to service institutional markets.

Goal 4 Compare the institutional and government
markets
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Government Markets

• More than 82,000 buying units in the U.S.
• Require suppliers to submit bids and often give
  job to lowest bidder
• Favor domestic suppliers
• Much red tape can exist

Goal 4 Compare the institutional and government
markets