Chapter 6 Analyzing Business Markets and Buyer Behavior

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Chapter 6 Analyzing Business Markets and Buyer
Behavior

• Shelby Emerson

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Part II Analyzing Marketing OpportunitiesChapter
5 Analyzing Consumer Markets and Buyer
BehaviorChapter 7 Dealing with the
CompetitionChapter 6 Analyzing Business
Markets and Buyer Behavior
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• Over 13 million business, institutional, and
  government organizations in the U.S. alone
  represent a huge lucrative buying market for
  goods and services purchased from both domestic
  and international suppliers. The business buyers
  of these organizations all have different goals.
  Some buyers are looking to make money, reduce
  operating cost and satisfying social or legal
  obligations.

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What is Organizational Buying?

• Organizational buying is the decision making
  process by which formal organizations establish
  the need for purchased products and services and
  identify, evaluate and choose among alternative
  brands and suppliers. Business sellers work hard
  to distinguish organizations buying needs and
  develop marketing strategies for reaching them.

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What is the business market and how does it
differ from the consumer market?
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The business market consists of all of the
organizations that acquire goods and services
used in their production of other products or
services that are sold, rented or supplied to
other customers
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Specialized Organizational Markets

• Institutional market- schools, hospitals, nursing
  homes, prisons and other institutions that
  provide goods and services to people in their
  care
• Government Market- government organizations are a
  major buyer of goods and services.

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Over 20 million
individual contract actions are processed every
year. Government organizations usually require
suppliers to submit bids. Due to public
review of spending decisions, government
organizations require considerable documentation
from suppliers. The U.S. government is ADI
Technology Corporations most important client,
accounting for 90 of its 6 million annual
revenues. But managers are often frustrated with
all the work that goes into winning contracts
with the government. A comprehensive bid
proposal could run between 500-700 pages. ADI
has estimated that the firm has spent as much as
20,000 mostly in worker hours in preparation of
a single bid proposal.
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What buying situations do organizational buyers
face?

• Straight re-buy situation in which the
  purchasing department reorders on a routine
  basis. Buyer chooses from an approved list of
  suppliers. These suppliers make an effort to
  maintain product and service quality. The out
  suppliers attempt to offer something new or
  exploit dissatisfaction with a current supplier.

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• Modified re-buy situation in which buyer wants
  to modify product specifications, prices,
  delivery requirements or other terms. In this
  situation, in-suppliers may get nervous and feel
  as if they have to protect their account
  out-suppliers see this as an opportunity to gain
  some business.

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New task buying situation in which a
purchaser buys a product of service for the first
time. Stages of new task buying
1.awareness 2.interest
3.evaluating 4.trial
5.adoption New task
situation requires the buyer to make the most
decisions, therefore it is the business
marketers greatest opportunity and challenge.
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Systems Buying and Selling

• Systems buying- buy a total solution to their
  problem from one seller
• Example Auto parts manufacturers now sell
  whole systems such as seating systems, braking
  systems, or door systems.
• One type of systems selling is systems
  contracting in which a single supply source
  provides the buyer with all required
  MRO(maintenance, repair, and operating) supplies.

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Who participates in business buying and what are
the influences on buying decisions?

• The buying center of an organization is the
  decision making unit of a buying organization. It
  is composed of all those individuals and groups
  who participate in the purchasing decision-making
  process.

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• Small sellers normally concentrate on reaching
  the key buying influencersLarge sellers go for
  multi-level in depth selling to reach as many
  buying center participants as possible.Buyer
  center participants often change. Business
  marketers need to periodically review their
  assumptions about who is participating in buying
  decisions.

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The members of the buying center play seven
roles

• Initiators those who make request for purchase
  Users those who will use the product
  Influencers Influence buying decisions,
  including technical personnel Deciders
  decide on product requirements or suppliers
  Approvers authorize the proposed actions of
  deciders or buyers Buyers have authority to
  select supplier and arrange purchase terms
  Gatekeepers people who have power to prevent
  sellers or information from reaching members of
  the buying center.

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Major influences on business buying

• Environmental factors interest rates and levels
  of production, investment and consumer spending
• Organizational factors purchasing objectives,
  political procedures, organizational structures
  and systems

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Business Marketers need to be aware of
organizational trends in purchasing .

• Purchasing department upgrading
• Cross functional roles
• Centralized purchasing
• Decentralized purchasing
• Internet purchasing
• Long term contracts
• Purchasing performance evaluation and buyers
  professional development
• Lean production

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How do business buyers make their decisions?
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Purchasing /Procurement Process

• Eight stages for a typical new task situation
• 1. Problem recognition
• 2. General need description
• 3. Product specification
• 4. Supplier Search
• 5. Proposal solicitation
• 6. Supplier selection
• 7. Order-routine specification
• 8. Performance review

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The End.Questions?