business markets and business buyer behavior

Business Markets and Business Markets and Business Buyer Business Buyer

BehaviorBehavior

Chapter 7Chapter 7

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Objectives

• Be able to define the business Be able to define the business market and explain how market and explain how business markets differ from business markets differ from consumer markets. consumer markets.

• Know the major factors that Know the major factors that influence business buyer influence business buyer behavior.behavior.

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Objectives

• Understand the steps in the Understand the steps in the business buying decision business buying decision process.process.

• Understand institutional and Understand institutional and government markets and government markets and how buyers in these markets how buyers in these markets make their buying decisions.make their buying decisions.

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• Sells jets Sells jets exclusively for exclusively for corporate usecorporate use

• 300 – 500 300 – 500 customers customers worldwideworldwide

• Rational, Rational, objective, and objective, and human factors human factors influence business influence business buyer’s decisionsbuyer’s decisions

• Multiple people are Multiple people are involved in the involved in the decisiondecision

• Buying influences Buying influences include the CEO, include the CEO, pilot, board pilot, board members, even members, even spousesspouses

• Company has been Company has been highly successfulhighly successful

Gulfstream AerospaceGulfstream Aerospace

Case Study

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Definition

• Business Buyer Behavior:Business Buyer Behavior: The buying behavior of The buying behavior of

organizations that buy goods and organizations that buy goods and services for use in the production services for use in the production of other products and services or of other products and services or for the purpose of reselling or for the purpose of reselling or renting them to others at a renting them to others at a profit.profit.

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• Characteristics of Business Characteristics of Business MarketsMarkets Sales in the business market far exceed Sales in the business market far exceed

sales in consumer markets.sales in consumer markets. Business markets differ from consumer Business markets differ from consumer

markets in many ways.markets in many ways.Marketing structure and demandMarketing structure and demandNature of the buying unitNature of the buying unitTypes of decisions and the decision processTypes of decisions and the decision process

Business Markets

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Business Markets

• Marketing Marketing Structure and Structure and DemandDemand

• Nature of the Nature of the Buying UnitBuying Unit

• Types of Decisions Types of Decisions and the Decision and the Decision ProcessProcess

• Compared to Compared to consumer markets:consumer markets: Business markets Business markets

have fewer but larger have fewer but larger customerscustomers

Business customers Business customers are more geographically are more geographically

concentratedconcentrated Demand is differentDemand is different

Demand is derived Demand is derived Demand is price Demand is price

inelasticinelastic Demand fluctuates more, Demand fluctuates more,

and changes moreand changes more quicklyquickly

CharacterisCharacteristics tics

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Business Markets




• Compared to Compared to consumer purchases:consumer purchases: Business purchases Business purchases

involve more buyers involve more buyers in the decision in the decision process.process.

Purchasing efforts are Purchasing efforts are undertaken by undertaken by professional buyers.professional buyers.


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Business Markets




• Compared to Compared to consumer purchases:consumer purchases: Business buyers face Business buyers face

more complex buying more complex buying decisions.decisions.

The buying process is The buying process is more formalized.more formalized.

Buyers and sellers Buyers and sellers work more closely work more closely together and build together and build long-term long-term relationships.relationships.


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• Major Types of Buying SituationsMajor Types of Buying Situations Straight rebuyStraight rebuy

Reordering without modificationReordering without modification Modified rebuyModified rebuy

Requires modification to prior Requires modification to prior purchasepurchase

New taskNew task First-time purchaseFirst-time purchase

Business Buyer Behavior

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• Systems Selling:Systems Selling: Buying a packaged solution to a Buying a packaged solution to a

problem from a single seller.problem from a single seller. Convenience is a major benefitConvenience is a major benefit

Often a key marketing strategy Often a key marketing strategy for businesses seeking to win for businesses seeking to win and hold accounts.and hold accounts.


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Participants in the Participants in the Business Buying ProcessBusiness Buying Process


• UsersUsers

• BuyersBuyers

• InfluencersInfluencers

• DecidersDeciders• GatekeepersGatekeepers

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Major Influences on Business Buyers

• EnvironmentalEnvironmental

• OrganizationalOrganizational

• InterpersonalInterpersonal

• IndividualIndividual

• Economic trendsEconomic trends• Supply conditionsSupply conditions• Technological changeTechnological change• Regulatory and Regulatory and

political political environmentsenvironments

• Competitive Competitive developmentsdevelopments

• Culture and customsCulture and customs

Key Factors Key Factors

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• ObjectivesObjectives• PoliciesPolicies• ProceduresProcedures• Organizational Organizational

structurestructure• SystemsSystems


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• AuthorityAuthority

• StatusStatus

• EmpathyEmpathy

• PersuasivenessPersuasiveness


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• AuthorityAuthority• AgeAge• EducationEducation• Job positionJob position• PersonalityPersonality• Risk attitudesRisk attitudes


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• Eight Stages:Eight Stages: Stage 1: Problem RecognitionStage 1: Problem Recognition Stage 2: General Need DescriptionStage 2: General Need Description Stage 3: Product Specification Stage 3: Product Specification

Value analysis helps to reduce costsValue analysis helps to reduce costs Stage 4: Supplier SearchStage 4: Supplier Search

Supplier development Supplier development

Business Buying Process

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• Eight Stages:Eight Stages: Stage 5: Proposal SolicitationStage 5: Proposal Solicitation Stage 6: Supplier SelectionStage 6: Supplier Selection Stage 7: Order-Routine Stage 7: Order-Routine

Specification Specification Blanket contracts are often used for Blanket contracts are often used for

maintenance, repair and operating maintenance, repair and operating items.items.

Stage 8: Performance ReviewStage 8: Performance Review


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• Business Buying on the Business Buying on the InternetInternet E-procurement is growing rapidly.E-procurement is growing rapidly. Reverse auctions account for much of Reverse auctions account for much of

the online purchasing activity.the online purchasing activity. E-procurement offers many benefits:E-procurement offers many benefits:

Access to new suppliersAccess to new suppliers Lower purchasing costsLower purchasing costs Quicker order processing and deliveryQuicker order processing and delivery


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• Institutional MarketsInstitutional Markets Consist of churches, schools, Consist of churches, schools,

prisons, hospitals, nursing prisons, hospitals, nursing homes and other institutions homes and other institutions that provide goods and services that provide goods and services to people in their care.to people in their care.

Institutional and Government Markets

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• Institutional MarketsInstitutional Markets Often characterized by low Often characterized by low

budgets and captive patrons.budgets and captive patrons. Marketers may develop Marketers may develop

separate divisions and separate divisions and marketing mixes to service marketing mixes to service institutional markets.institutional markets.


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• Government MarketsGovernment Markets Governmental units – federal, Governmental units – federal,

state, and local – that purchase state, and local – that purchase or rent goods and services for or rent goods and services for carrying out the main functions carrying out the main functions of government.of government.


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• Government MarketsGovernment Markets More than 82,000 buying units.More than 82,000 buying units. Require suppliers to submit bids.Require suppliers to submit bids. Favor domestic suppliers.Favor domestic suppliers. Extensive paperwork is required Extensive paperwork is required

from suppliers.from suppliers.


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• Government MarketsGovernment Markets Government buyers often favor:Government buyers often favor:

Depressed business firms and areasDepressed business firms and areas Small businessesSmall businesses Minority-owned businessesMinority-owned businesses Firms which practice non-Firms which practice non-

discriminatory practicesdiscriminatory practices


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• Government MarketsGovernment Markets Most firms that sell to government Most firms that sell to government

buyers are not marketing oriented.buyers are not marketing oriented. Some companies have separate Some companies have separate

government marketing government marketing departments.departments.

Much of government buying has Much of government buying has migrated online.migrated online.


business markets and business buyer behavior

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