the business market
TRANSCRIPT
-
8/8/2019 The Business Market
1/18
-
8/8/2019 The Business Market
2/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 2
Chapter Goals
To gain an understanding of:The nature and scope of the business
market
Components of the business market
Characteristics and determinants ofbusiness market demand
The buying motives, buyingprocesses, and buying patterns inbusiness markets
-
8/8/2019 The Business Market
3/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 3
Nature and Scope of Market
the business market consists of allorganizations that buy products and services:
to make other products and services
to resell to business users or to consumers to conduct the operations of the
organization
the business market is larger than the
consumer market because many businessessell to other businesses and many productschange hands several times before reachingthe end consumer
-
8/8/2019 The Business Market
4/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 4
Components of the
Business Market The agriculture market,agriculture market, consisting of
farming, food processing, and otherfarming-related businesses.
The reseller market,reseller market, consisting of firms thatbuy products from supplier organizations
and resell these items to their customers.
The government marketgovernment market, including all
federal, provincial, territorial, and localunits buying for government institutionssuch as schools, offices, hospitals, andmilitary bases.
-
8/8/2019 The Business Market
5/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 5
More Components
The services marketservices market, including firms thatsell services to other organizations.
The nonbusiness business market,nonbusiness business market,
consisting of not-for-profit organizationssuch as churches, universities, colleges,and museums.
The international marketinternational market, including The export market.
Overseas subsidiaries.
-
8/8/2019 The Business Market
6/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 6
Business Market Demand
the demand for a business product is oftenderivedderived from demand for a consumerproduct
demand for business products is generallyrelatively price inelasticprice inelastic
demand in the business market tends tofluctuatefluctuate more widely than that in consumer
markets buyers in the business market are generally
much better informedbetter informed than are endconsumers
-
8/8/2019 The Business Market
7/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 7
Number and Types of
Business Users The number of buyers in the business market
is small when compared to the consumermarket 500,000 versus 30 million.
For statistical purposes, the government has
created the Standard Industrial Classification(SIC) system, a useful tool for segmentingbusiness markets.
The business market is large in purchasing
power and concentrated in a few firms. There is substantial regional concentration in
many major industries.
A business market may be vertical orhorizontal.
-
8/8/2019 The Business Market
8/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 8
NAICS
The North American IndustryClassification System (NAICS) is a
newer system adopted by Canada,United States, and Mexico tosegment business markets
NAICS is a more detailedclassification scheme than SIC
-
8/8/2019 The Business Market
9/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 - 9
MAJOR GROUPS:2-DIGIT CODE
11 Agriculture
21 Mining
23 Construction
31-33 Manufacturing42 Wholesale trade
44-45 Retail trade
51 Information
52-92 (Other industry)
SUBGROUPS:3-DIGIT CODE
513 Broadcast and
Telecommunications
SUBGROUPS:4-DIGIT CODE
5133 Telecom-
munications
SUBGROUPS:
5-DIGIT CODE
51332 Wireless TelecommunicationsCarrierSUBGROUPS:
6-DIGIT CODE
513321 Pagers
The NAICS Coding Scheme
-
8/8/2019 The Business Market
10/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -10
Reasons for Growth inImportance of Business Market
Companies are making less andbuying more.
Intense quality and time pressureincreases the need for reliablesuppliers.
Firms are choosing fewer suppliers
and entering into long-termpartnering relationships withthem.
Companies are making less andbuying more.
Intense quality and time pressureincreases the need for reliablesuppliers.
Firms are choosing fewer suppliers
and entering into long-termpartnering relationships withthem.
-
8/8/2019 The Business Market
11/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -11
BUSINESS BUYING-DECISION
PROCESS
Need recognition
Identification of alternatives
Evaluation of alternatives
Purchase and related decisions
Postpurchase behaviour
TYPES OF
DECISIONS
New TaskStraight Rebuy
Modified Rebuy
BUYING
PATTERNS
Direct
Frequency
Order Size
Negotiation
Reciprocity
ServiceLeasing
BUYING CENTRE
Users Influencers
Deciders GatekeepersBuyers
BUYING MOTIVES
Organizational
Personal
BUYER-SELLER
RELATIONSHIP
Value chainLoyalty
The Business Market
-
8/8/2019 The Business Market
12/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -12
Buying-Decision Process
need recognition:need recognition: determine what needs aremost important to the buyer
identify alternativesidentify alternatives for buying the product evaluateevaluate those alternatives on certaincriteria
make the decisionmake the decision to buy and related
decisions pertaining to delivery, credit, etc. postpurchasepostpurchase decisions include evaluation
of the supplier and of the product or service
-
8/8/2019 The Business Market
13/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -13
Business Buying Motives
business buying motives are often differentfrom those that influence end consumers
business buyers are motivated by bothorganizational and personal goals
the business buying situation can fit into oneof three categories: new-task buy, straight
rebuy, or modified rebuy each will likely require a different approach
on the part of the business marketer
-
8/8/2019 The Business Market
14/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -14
Buy Classes
NewNew--task buytask buy (the most difficult andcomplex buying situation), which is thefirst-time purchase of a major product.
Straight rebuy.Straight rebuy. This is a routine, low-involvement purchase.
Modified rebuyModified rebuy. The buying situation issomewhere between the other two in
terms of: The time and people involved, the
information needed, and the location ofbuying authority.
-
8/8/2019 The Business Market
15/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -15
Multiple BuyingInfluences
There are likely to be a number of peopleinvolved in most business buying decisions. Abuying centre includes people playing the
following roles:users:users: those who will use the product/service
influencers:influencers: often set specifications to follow
deciders:deciders: make the actual decision to buygatekeepers:gatekeepers: control the flow of information
buyersbuyers: actually process the purchase order
-
8/8/2019 The Business Market
16/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -16
In a Buying Centre
Several people may play the same role or thesame person may occupy more than one role.
The size and composition of a buying centrewill vary among businesses.
Trying to determine who does what in abuying centre is very important but can alsobe very difficult.
T
he challenges in a business buying-decisionprocess suggest that co-ordination of thebuying and selling activities would bebeneficial to both firms.
-
8/8/2019 The Business Market
17/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -17
Business Buying Patterns often will buy directly from the producer suppliers will often establish long-term close
relationships with their customers
some products are bought very infrequently
average order is larger than in the consumermarket
negotiations often go on for months or years
sometimes there is reciprocityreciprocity involved
often considerable need for after-sale service
customers are very dependent on suppliers toguarantee a consistency of supply
growing tendency to lease instead of buy
-
8/8/2019 The Business Market
18/18
Copyright 2001 McGraw-Hill Ryerson Limited 7 -18
Segmenting BusinessMarkets
can use some of the same bases as usedto segment consumer markets
often segment business markets on the
type of customertype of customer or on industryclassification
segmentation by size of customersize of customer really
considers sales volume or potential can also consider segmenting on the
basis of the type of buying situationtype of buying situation thecustomer is in