business markets and objectives business buyer behavior of marketing 06... · business markets and...

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Business Markets and Business Markets and Business Buyer Business Buyer

BehaviorBehavior

Chapter 7Chapter 7

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.

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

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

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

cGulfstream AerospaceGulfstream Aerospace

Sells jets Sells jets exclusively for exclusively for corporate usecorporate use300 300 –– 500 buyers 500 buyers worldwideworldwide

Multiple people are Multiple people are involved in the involved in the decisiondecisionBuying influences Buying influences include the CEO, include the CEO, pilot, boardpilot, board

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

pilot, board pilot, board members, even members, even spousesspousesCompany has been Company has been highly successfulhighly successful

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Definition

Business Buyer Behavior:Business Buyer Behavior:The buying behavior The buying behavior of organizations that of organizations that buy goods and buy goods and services for use in services for use in the production ofthe production of

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the production of the production of other products and other products and services or for the services or for the purpose of reselling purpose of reselling or renting them to others at a profit.or renting them to others at a profit.

Business Markets

Characteristics Characteristics of Business of Business MarketsMarkets

Sales in the Sales in the business marketbusiness market

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business market business market far exceed sales far exceed sales in consumer in consumer markets.markets.

Business Markets

Characteristics of Business MarketsCharacteristics of Business MarketsBusiness 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 unit

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Nature of the buying unitNature of the buying unitTypes of decisions and the decision Types of decisions and the decision processprocess

Business Markets

Compared toCompared toCharacteristicsCharacteristicsMarketing Marketing Structure and Structure and DemandDemandNature of the Nature of the Buying UnitBuying Unit

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 concentrated are concentrated

CharacteristicsCharacteristics

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Buying UnitBuying UnitTypes of Types of Decisions and Decisions and the Decision the Decision ProcessProcess

geographicallygeographicallyDemand is differentDemand is different

Derived demandDerived demandPrice inelasticPrice inelasticFluctuates more, and Fluctuates more, and changes more quicklychanges more quickly

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Business Markets

Compared toCompared toCharacteristicsCharacteristicsMarketing Marketing Structure and Structure and DemandDemandNature of the Nature of the Buying UnitBuying Unit

Compared to Compared to consumer consumer purchases:purchases:

Business purchases Business purchases involve more buyers involve more buyers in the decision in the decision


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

Business Markets

In comparison toIn comparison toCharacteristicsCharacteristicsMarketing Marketing Structure and Structure and DemandDemandNature of the Nature of the Buying UnitBuying Unit

In comparison to In comparison to consumer consumer purchases:purchases:

Business buyers face Business buyers face more complex buying more complex buying decisions.decisions.The buying process is The buying process is


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The buying process is The buying process is more formalized.more formalized.Buyers and sellers Buyers and sellers work together closely work together closely and build longand build long--term term relationships.relationships.

Figure 7-1:Model of Business

Buyer BehaviorBuyer Behavior

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Business Buyer Behavior

Major Types of Buying SituationsMajor Types of Buying SituationsStraight rebuyStraight rebuy

Reordering without Reordering without modificationmodification

Modified rebuyModified rebuy

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yyRequires modification Requires modification to prior purchaseto prior purchase

New taskNew taskFirst time purchaseFirst time purchase

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Systems Selling:Systems Selling:Buying a packaged solution to a problem Buying a packaged solution to a problem from a single seller.from a single seller.

Convenience is a major Convenience is a major benefitbenefit

Oft k k tiOft k k ti

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


P ti i t i thP ti i t i thParticipants in the Participants in the Buying Decision ProcessBuying Decision Process

UsersUsersBuyersBuyers

InfluencersInfluencersDecidersDeciders

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BuyersBuyers DecidersDecidersGatekeepersGatekeepers

Figure 7-2:Major Influences on

Business Buyer BehaviorBusiness Buyer Behavior

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Major Influences on Business Buyers

EnvironmentalEnvironmentalOrganizationalOrganizational

Economic trendsEconomic trendsSupply conditionsSupply conditionsTechnological changeTechnological changeRegulatory and Regulatory and political environmentspolitical environments

Key FactorsKey Factors

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InterpersonalInterpersonalIndividualIndividual

ppCompetitive Competitive developmentsdevelopmentsCulture and customsCulture and customs

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ObjectivesObjectivesPoliciesPoliciesProceduresProceduresOrganizational Organizational


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ggstructurestructureSystemsSystems



AuthorityAuthorityStatusStatusEmpathyEmpathyPersuasivenessPersuasiveness


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AuthorityAuthorityAgeAgeEducationEducationJob positionJob position


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ppPersonalityPersonalityRisk attitudesRisk attitudes

Figure 7-3:Stages of the

Business Buying ProcessBusiness Buying Process

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Business Buying Process

Eight Stages:Eight Stages:Stage 1:Stage 1: Problem Problem RecognitionRecognitionStage 2:Stage 2: General General Need DescriptionNeed DescriptionSt 3St 3 P d tP d t

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Stage 3:Stage 3: Product Product Specification Specification

Value analysis Value analysis helps to reduce helps to reduce costscosts


Eight Stages:Eight Stages:Stage 4:Stage 4:Supplier Supplier SearchSearch

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Supplier Supplier development development


Eight Stages:Eight Stages:Stage 5:Stage 5:Proposal Proposal SolicitationSolicitation

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Eight Stages:Eight Stages:Stage 6:Stage 6: Supplier SelectionSupplier SelectionStage 7:Stage 7: OrderOrder--Routine Routine Specification Specification

Blanket contracts are often used forBlanket contracts are often used for

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Blanket contracts are often used for Blanket contracts are often used for maintenance, repair and operating maintenance, repair and operating items.items.

Stage 8:Stage 8: Performance ReviewPerformance Review

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Business Buying on the InternetBusiness Buying on the InternetEE--procurement is growing rapidly.procurement is growing rapidly.Reverse auctions account for much of Reverse auctions account for much of the online purchasing activity.the online purchasing activity.EE t ff b fitt ff b fit

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EE--procurement offers many benefits:procurement offers many benefits:Access to new suppliersAccess to new suppliersLower purchasing costsLower purchasing costsQuicker order processing and deliveryQuicker order processing and delivery

Institutional and Government Markets

Institutional MarketsInstitutional MarketsConsist of churches, schools, Consist of churches, schools, prisons, hospitals, prisons, hospitals, nursing homes and nursing homes and

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other institutions other institutions that provide goods that provide goods and services to and services to people in their care.people in their care.


Institutional MarketsInstitutional MarketsOften characterized by Often characterized by low budgets and captive low budgets and captive patrons.patrons.M k t d lM k t d l

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Marketers may develop Marketers may develop separate divisions and separate divisions and marketing mixes to marketing mixes to service institutional service institutional markets.markets.

Institutional Markets

In Depth

The Background:The Background:Institutional markets are Institutional markets are often overlooked in B2B often overlooked in B2B marketingmarketingTh P t ti lTh P t ti l ThiThi

How To Sell Them:How To Sell Them:Catalogs are often Catalogs are often the best method of the best method of contactcontactC P t ti lC P t ti l

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The Potential:The Potential: This This market is somewhat market is somewhat recessionrecession--resistant; resistant; great target for hard great target for hard economic timeseconomic times

Crossover Potential:Crossover Potential:Same consumer Same consumer catalogue items catalogue items could be targeted to could be targeted to institutionsinstitutions

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Institutional Markets

In Depth

Timing is Important:Timing is Important:Appropriate times to Appropriate times to mailmail vary by institution. vary by institution. For example, August is For example, August is a good month fora good month for

Timing is Important:Timing is Important:Understanding when Understanding when government funding government funding becomes available, or becomes available, or when the new budgetwhen the new budget

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a good month for a good month for schools, but often a schools, but often a poor time for other poor time for other institutions due to institutions due to worker vacations.worker vacations.

when the new budget when the new budget year begins can help. year begins can help. Many institutions Many institutions purchase early, then purchase early, then run low on funds.run low on funds.


Government MarketsGovernment MarketsGovernmental units Governmental units –– federal, federal, state, and local state, and local –– that purchase that purchase or rent goods and services foror rent goods and services for

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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.


Government MarketsGovernment MarketsMore than 82,000 buying More than 82,000 buying units.units.Require suppliers to Require suppliers to

b it bidb it bid

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submit bids.submit bids.Favor domestic suppliers.Favor domestic suppliers.ExtensiveExtensive paperwork paperwork is required from suppliers.is required from suppliers.


Government MarketsGovernment MarketsGovernment buyers often favor:Government buyers often favor:

Depressed business firms and areasDepressed business firms and areasSmall businessesSmall businesses

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Small businessesSmall businessesMinorityMinority--owned owned businessesbusinessesFirms which Firms which follow nonfollow non--discriminatory practicesdiscriminatory practices

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Government MarketsGovernment MarketsMost firms that sell to government Most firms that sell to government buyers are not marketingbuyers are not marketing--oriented.oriented.Some companies have separate Some companies have separate

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Some companies have separate Some companies have separate government marketing departments.government marketing departments.Much of government Much of government buying has migrated buying has migrated online.online.

business markets and objectives business buyer behavior of marketing 06... · business markets and...

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