Business Buyer Behavior & Product Issues

Business Buyer Behavior

• Resale to others

• Direct use in the production of other products• Consumed in the normal course of business

What are the three reasons businesses produce a product?

Business Buyer Behavior

The Buying Decision Process has five stages: • Problem Recognition

• Develop Product Specifications to Solve Problem• Search & Evaluation Alternative Products and

Suppliers• Select both Product & Supplier, the Order Product

• Evaluate Product and Supplier Performance

Business Buyer Behavior

What are the major Influences on the buying decision process?

Business Buyer Behavior

What are the major Influences on the buying decision process?

• Environmental

• Organizational• Interpersonal

• Individual

Business Buyer Behavior

• Producer

• Reseller• The Government

• Institutional

What are the four types of business markets?

Business Buyer Behavior

• Wide array of industries

• Highly concentrated• Raw Materials

• Components

Producer Markets

Business Buyer Behavior

• Distribution Channels

� Wholesalers� Retailers

• Touch the end-user• Highly sensitive to market demand

Reseller Markets

Business Buyer Behavior

• Federal, State, County and Local (city)

• Roughly 1/5 of total goods and services sold• Complex purchasing process

• Often bid basis

Government Markets

Business Buyer Behavior

• Education, Non-Profits, etc.

• Specialized or niche marketing• Highly cost-sensitive

Institutional Markets

Business Buyer Behavior

• Longer sales process, more complex

• Relationships more important, larger “jury”• Key Product Attributes include:

� Quality� Availability� Service� Price and Terms

Important Aspects of the B-to-B Transaction

Business Buyer Behavior

• Different purchasing procedures- Sampling - Inspection- Description - Negotiation

• Understanding the Demand- Derived - Inelastic- Joint - Fluctuating

Important Aspects of the B-to-B Transaction

Product Issues

A Product Life CycleP

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Pro

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Profit/unitSales

Life cycleextension

GrowthCompetitiveturbulence

Maturity Decline orextension

Time (years)

Introduction

Product Concepts

What is a Product?

• Goods• Services

• Ideas

Product Concepts

What are the major Product categories?

• Consumer Products• Business Products

Product Concepts

Consumer Products• Convenience Products• Shopping Products

• Specialty Products• Unsought Products

Product Concepts

Business Products• Installations• Accessory Equipment

• Raw Materials• Components

• Process Materials• Maintenance, Repair & Operating (MRO) items

Key Product Definitions

• Product Item – specific version of the product

• Product Line – a collection of closely related product items that can be considered a unit

• Product Mix – all the products that are sold • Width – the number of product lines offered• Depth – the average number of different

products offered in each product line

Generalized Product Life CycleP

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Pro

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Life cycleextension

GrowthCompetitiveturbulence

Maturity Decline orextension

Time (years)

Introduction

Common Product Life-Cycle Curves

Unitsales

Unitsales

Unitsales

Unitsales

Time Time

Time Time

I. Growth-decline-plateau II. Cycle-recycle

IV. ClassicalIII. Innovative-maturity

Intr

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Mat

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Dec

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Expected Characteristics and Responses by Major Life-Cycle Stages

Stagecharacteristics

Introduction Stage in Product Life Cycle

Market growth rate (constant dollars)

Technical change in product design

Segments

Competitors

Profitability

Moderate

High

Few

Small

Negative

Firm’s Normative Responses

Stimulate demand

Quality

Narrow

Skimming vs. penetrationSelective

High

Strategic marketing objectives

Product

Product line

Price

Channels

Communications

Expected Characteristics and Responses by Major Life-Cycle Stages

Stagecharacteristics

Growth Stage in Product Life Cycle

Market growth rate (constant dollars)

Technical change in product design

Segments

Competitors

Profitability

High

Moderate

Few to many

Large

High

Firm’s Normative Responses

Build share

Continue to improve quality

Broad

Reduce

Intensive

High

Strategic marketing objectives

Product

Product line

Price

Channels

Communications

Expected Characteristics and Responses by Major Life-Cycle Stages

Stagecharacteristics

Shakeout Stage in Product Life Cycle

Market growth rate (constant dollars)

Technical change in product design

Segments

Competitors

Profitability

Leveling off

Limited

Few to many

Decreasing

Low

Firm’s Normative Responses

Build share

Rationalize

Rationalize

Reduce

Intensive

High

Strategic marketing objectivesProduct

Product line

Price

Channels

Communications

Expected Characteristics and Responses by Major Life-Cycle Stages

Stagecharacteristics

Mature Stage in Product Life Cycle

Market growth rate (constant dollars)

Technical change in product design

Segments

Competitors

Profitability

Insignificant

Limited

Few to many

Limited

High for Market share

leaders

Firm’s Normative Responses

Hold share

Concentrate on featuresHold length of lineHold or cut selectively

Intensive

High to declining

Strategic marketing objectivesProduct

Product line

Price

Channels

Communications

Expected Characteristics and Responses by Major Life-Cycle Stages

Stagecharacteristics

Decline Stage in Product Life Cycle

Market growth rate (constant dollars)

Technical change in product design

Segments

Competitors

Profitability

Negative

Limited

Few

Few

Low

Firm’s Normative Responses

Harvest

No change

Cut length of lineReduce

Selective

Reduce

Strategic marketing objectivesProduct

Product line

Price

Channels

Communications

Product Development & Management

• Most new products fall into this category- Closely related - Serve a niche- Lower risk - Less expensive to develop

• Aggressive tactic to capture more market share

• Can also cause cannibalization of core product

Line Extensions

Product Development & Management

• Quality

• Functional• Aesthetic

Product Modifications

New Product Development

• Generate the ideas

• Screen for the good ones/eliminate the others• Conduct concept testing research

• Build the business case• Complete the product development analysis

• Test market the product• Go to commercialization

Product Differentiation

• Product Quality– Level

– Consistency

• Product Design & Features– Physical appearance (style)– Functional characteristics

• Product Support Services

Dimensions of Product Quality

• Performance

• Durability

• Conformance with specifications

• Features

• Reliability

• Serviceability

• Fit and finish

• Brand name

How well does the washing machine wash clothes?

How long will the lawn mower last? What is the incidence of product defects?

Does an airline flight offer a movie and dinner?

Will each visit to a restaurant result in consisten t quality?

What percentage of the time will a product perform satisfactorily?

Is the product easy to service?Is the service system efficient, competent, and

convenient?Does the product look and feel like a quality produ ct?

Is this a name that customers associate with qualit y?What is the brand’s image?

.

Product Differentiation

Features• Product attributes

• Less quantifiable• Often vague or

ambiguous

Benefits• Tangible

• Measurable• Clearly identifiable to

end-user• Results-oriented

• Specific consequence