Business Markets and Business Buyer Behavior

Chapter 6

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Last Week

Consumer BehaviorWhat is it? Why is it important?

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Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying decision process

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Why Bother?

A business market comprises all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.

The business market is huge, growing globally and involves many dollars and goods.

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

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

These UPS ads target businesses as a supply chain solution

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Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying decision process

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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 or others at a profit.

Characteristics of Business Markets

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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

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Contain fewer, but larger buyers

Contain fewer, but larger buyers

Customers are more geographically concentrated

Customers are more geographically concentrated

Buyer demand is derived from final consumer demand

Buyer demand is derived from final consumer demand

Demand is often more inelastic

Demand often fluctuates more, and more quickly

Characteristics of Business Markets

Marketing Structure and Demand

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Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

Compared to consumer purchases: Involve more buyers in

the decision process More professional

purchasing effort

Characteristics

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Business buying

involves a more

professional purchasing

effort

Characteristics of Business Markets

Business buying

involves more buyers (participants)

Nature of the Buying Unit

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Business Markets

Marketing Structure and Demand

Nature of the Buying Unit

Types of Decisions and the Decision Process

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

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Business buyers

usually face more

complex buying

decisions.

Characteristics of Business Markets

Business buying

process is more

formalized.

Types of Decisions and the Decision Process

In business buying,

buyers and sellers work

more closely together.

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Model of Business Buyer Behavior

The Environment

MarketingStimuli:•Product•Price•Place•Promotion

Other Stimuli:•Economic•Technological•Political•Cultural•Competitive

The Buying Organization

The buying center

Buying decision process

(Interpersonal and individual influences)

(Organizational Influences)

Buyer Responses

Product or service choice

Supplier Choice

Order Quantities

Delivery terms and times

Service terms

Payment

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Major Types of Buying Situations

Straight rebuy Reordering without modification

Modified rebuy Requires modification to prior purchase

New task First-time purchase

Business Buyer BehaviorIn

volv

ed

De

cis

ion

Ma

kin

g

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New Task BuyingNew Task Buying

Involv

ed D

eci

sion

M

aki

ng Modified RebuyModified Rebuy

Major Types of Buying Situations

Straight RebuyStraight Rebuy

Stages of the Buying ProcessStages of the Buying Process

New Modified StraightTask Rebuy Rebuy

Problem recognition Yes Maybe NoGeneral need description Yes Maybe NoProduct specification Yes Yes YesSupplier search Yes Maybe NoProposal solicitation Yes Maybe NoSupplier selection Yes Maybe NoOrder routing specification Yes Maybe NoPerformance review Yes Yes Yes

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Source:Source: Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Industrial BuyingIndustrial Buyingand Creative Marketingand Creative Marketing (Boston: Allyn & Bacon, 1967), p.14. (Boston: Allyn & Bacon, 1967), p.14.

Stages of the buying process Buying SituationsStages of the buying process Buying Situations

Business-to-Business CompanyDuPont Chemicals

Established in 1802 with gunpowder as its first product

In 1910 moved away from explosives with the first non-leather material, which was snatched up for upholstery and automobile parts

Today, the firm delivers science-based solutions that make real differences in people's lives around the world in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation

Revenue of $27 billion

Business-to-Business CompanyDuPont Chemicals

Examples of B2B markets and products: Heath Care - Medical fabrics to provide comfort and safety to

surgeons Automobile – airbag fibers and engineering plastics for safety Dental – filaments for toothbrushes Glass – technology to reduce glare and noise, save energy,

protect against breakage Footware – flexibility for rubber, strength of plastic Farming – pesticides Guitar manufacturers – DuPont product give the look of

vintage lacquer

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Business Buyer Behavior

Systems SellingBuying a packaged solution to a problem from

a single seller.Often a key marketing strategy for businesses

seeking to win and hold accounts.Customization ????

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Business Buyer Behavior

Buying CenterThe decision-making unit of a buying

organization Includes all individuals and units that

participate in decision making

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Participants in the Business Buying Process

Gatekeepers

Initiators

Buyers

Influencers

Deciders

Users

Approvers

Discussion QuestionDiscussion Question

What are the advantages and disadvantages of

buying from single suppliers versus multiple

suppliers?

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Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying-decision process

4. Compare the institutional and government markets and explain how they make their buying decisions

Major Influences on Business Buyers

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Major Influences on Business Buyers

Environmental

Organizational

Interpersonal

Individual

Economic trends Supply conditions Technological,

political and competitive changes

Culture and customs

Key Factors Key Factors

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Major Influences on Business Buyers

Environmental

Organizational

Interpersonal

Individual

Objectives Policies Procedures Organizational

structure Systems

Key Factors Key Factors

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Major Influences on Business Buyers

Environmental

Organizational

Interpersonal

Individual

Influence of members in the buying center Authority Status Empathy Persuasiveness

Key Factors Key Factors

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Major Influences on Business Buyers

Environmental

Organizational

Interpersonal

Individual

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

Key Factors Key Factors

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Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying decision process

Stages in the Business Buying Process

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Business Buying on the Internet

E-procurement is growing rapidly Business buyers may purchase

electronically by: Electronic data interchange links (EDI) The Internet

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

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Benefits and Problems Created by Buying on the Internet Benefits:

Shave transaction costs Reduce time between

order and delivery Create more efficient

purchasing systems Forge more intimate

relationships Level the playing field

Problems: Cut purchasing jobs Erode supplier-buyer

loyalty Create potential

security disasters

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Public ReviewPublic Review Red Tape is Common

Red Tape is Common

Government MarketsGovernment Markets

NoneconomicCriteria

NoneconomicCriteria

NegotiatedContracts

NegotiatedContracts

Some BuyingOnline

Some BuyingOnline

Institutional and Government Markets

Low BudgetsLow Budgets Captive PatronsCaptive Patrons

Institutional MarketsInstitutional Markets

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Learning Goals

1. Define the business market and how it differs from consumer markets

2. Identify the major factors that influence business buyer behavior

3. List and define the steps in the business buying decision process