07. business buyer behavior

• 1. Business Markets and Business Buying Behavior Rajeev ShresthaLecture 7 March 14, 2012

2. Business Markets andBusiness Buying Behavior Topic Outline Business Markets Business Buyer Behavior The Business Buying Process E-Procurement: Buying on the Internet Institutional and Government Markets 3. Business MarketsBusiness buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in production of other products and services that are sold, rented, or supplied to others.Business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands 4. Business Markets 5. Business Markets Market Structure and Demand Fewer and larger buyers Derived demand Inelastic demand Fluctuating demand 6. Business Markets More decision participants More professional purchasing effort 7. Business MarketsTypes of Decisions and the Decision ProcessSupplier development is the systematic development of networks of supplier- partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or resell 8. Business Buyer BehaviorThe Model of Business Buyer Behavior 9. Business Buyer Behavior Major Types of Buying SituationsStraight rebuy is a routine purchase decision such as reorder without any modificationModified rebuy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliersNew task is a purchase decision that requires thorough research such as a new product 10. Business Buyer Behavior Major Types of Buying Situations Systems selling involves the purchase of a packaged solution from a single seller 11. Business Buyer BehaviorParticipants in the Business Buying ProcessBuying center is all of the individuals and units that participate in the business decision- making process Users Influencers Buyers Deciders Gatekeepers 12. Business Buyer Behavior Participants in the Business Buying ProcessUsers are those that will use the product or serviceInfluencers help define specifications and provideinformation for evaluating alternativesBuyers have formal authority to select the supplier and arrange terms of purchaseDeciders have formal or informal power to select and approve final suppliersGatekeepers control the flow of information 13. Business Buyer Behavior Major Influences on Business BuyersEconomicPersonal FactorsFactorsPrice Emotion Service 14. Business Buyer BehaviorMajor Influences on Business Buyers Environmental Factors Demand forEconomic Cost ofproduct outlook money Resource Technology Culture availability PoliticsCompetition 15. Business Buyer BehaviorMajor Influences on Business Buyers OrganizationalFactors Objectives PoliciesProceduresStructureSystems 16. Business Buyer BehaviorMajor Influences on Business BuyersInterpersonal FactorsAuthorityStatusEmpathyPersuasiveness 17. Business Buyer BehaviorMajor Influences on Business BuyersIndividual FactorsJob PersonalityAgeposition AttitudeIncomeEducation toward risk 18. Business Buyer Behavior The Buying Process 19. Business Buyer BehaviorThe Buying ProcessProblem recognition occurs when someone inthe company recognizes a problem or need Internal stimuli Need for new product or productionequipment External stimuli Idea from a trade show or advertising 20. Business Buyer Behavior The Buying ProcessGeneral need description describes the characteristics and quantity of the needed itemProduct specification describes the technical criteriaValue analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production 21. Business Buyer Behavior The Buying ProcessSupplier search involves compiling a list of qualified suppliersProposal solicitation is the process of requesting proposals from qualified suppliers 22. Business Buyer Behavior The Buying ProcessSupplier selection is the process when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditionsOrder-routine specifications is the final order with the chosen supplier and lists all of the specifications and terms of the purchase 23. Business Buyer Behavior The Buying ProcessPerformance review involves a critique of supplier performance to the purchase terms 24. Business Buyer BehaviorE-Procurement Online purchasing Company-buyingsites Extranets 25. Business Buyer BehaviorE-Procurement Advantages Access to new suppliers Lowers costs Speeds order processing and delivery Shares information Sales Service and support Disadvantages Can erode relationships as buyers search for newsuppliers Security 26. Institutional and Government MarketsInstitutional markets consist of hospitals, nursinghomes, and prisons that provide goods andservices to people in their care Characteristics Low budgets Captive audience 27. Institutional and Government MarketsGovernment markets tend to favor domestic suppliers and require suppliers to submit bids and normally award to the lowest bidder