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Analyzing Business Markets
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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.
-- F. Webster Jr and Y. Wind
Organizational Buying
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Business Markets
Agriculture
Communications
Banking & Finance
Transportation & Distribution
Construction
ForestryManufacturing
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Business Markets
• Understanding deep customer needs
• Identify areas for growth
• Improving value management techniques
• Calculating better marketing metrics
• Competing and growing in global markets
• Countering product commoditization
• Gain support for the marketing concept
Similarities to the Consumer Market
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Business Markets
Professional Buyers
Geographically Concentrated
Multiple Sales Calls
Differences to the Consumer Market
Personal Relationships
Fewer, Larger Buyers
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Business Markets
Demand• Derived• Inelastic: • Fluctuating
Derived Demand: Demand in the business market depends on demand from the consumer market.
Differences to the Consumer Market
Fluctuating Demand
$$Inelastic Demand:Total demand for many business goods and services is inelastic – that is, not affected too much by changes in price.
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Buying Situations
Straight Rebuy: Purchasing department coordinates with suppliers whenever they need something
New Task: A purchaser buys the product first time like office building, machinery
Modified Rebuy: When product specifications, delivery
requirements, or other terms changed on the request of buyer
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Systems Buying and Selling
Buyer
Prime Contractor
Second-tier Contractors
• Systems buying originated with the government awarding contracts for weapons and communications systems. The firm (buyer) solicits bids from prime contractors that, if awarded the bid, would be responsible for assembling the subcomponents of the system from second-tier contractors.• Systems selling as a marketing tool. The contractor (seller) approaches a potential buyer and offers to provide all of the organizations MRO (maintenance, repair, and operating) supplies. • Systems selling is a key strategy in bidding on large-scale industrial projects such as dams, pipelines, factories, etc.
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Business Buying Participants
Influencer
Buyers Gatekeeper
DeciderInitiator/Users
Approver
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Buying Center Influences
Participants differ by:• Interest• Authority• Status• Persuasiveness• Decision criteria
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Targeting Firms and Buying Centers
Who to target?
Marketers must determine:Who are the major decision makers? What decisions do the influence?What is their level of influence?What evaluation criteria do they use?
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Purchasing/Procurement Process
Diverse supplier base
Benefits vs. Costs
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Stages in the Buying Process
Problem Recognition Description and
Characteristics Supplier Search
Proposal Solicitations
Supplier Selection
Order Specification
Performance Review
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Stages in the Buying Process
Problem Recognition Internal stimuli
• New product being developed
• Broken machine
• Low stock level
External stimuli
• Trade show visit
• Advertisement
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Stages in the Buying Process
Technical specifications• Reliability
• Durability
• Price
Description and Characteristics
Product value analysis
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Stages in the Buying Process
Trade directories
Trade advertisements
Trade shows
Supplier Search
E-Procurement Lead generation
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Proposal Solicitations
Stages in the Buying Process
Formal presentation
Written
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Supplier Selection
Stages in the Buying Process
Supplier-evaluation model
Number of suppliers
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Order Specification
Stages in the Buying Process
Technical specifications
Quantity
Delivery time
Return policy
Warranties
Stockless purchase
plan
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Stages in the Buying Process
End user evaluations
Weighted-score method
Performance Review
7 9 4 C1 C2 C3 C4 TOTAL
Alts 0.2 0.15 0.4 0.25 A1 25 20 15 30 21.5
A2 10 30 20 30 22A3 30 10 20 10 18
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Managing B2B Relationships
One-to-one Marketing
Online social media
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Managing B2B Relationships
Vertical Coordination
Relationship FactorsAvailability of alternativesImportance of supplyComplexity of supplySupply market dynamism
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Buyer-Seller Relationship Categories
Customer is king
Collaborative
Mutually adaptiveContractual transaction
Cooperative systems
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Institutional and Governments Markets
Schools
Hospitals
Prisons
Government agencies
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Thank You