Business Market

Business Markets and Business Business Markets and Business Buyer BehaviorBuyer Behavior

Content

• Business Buyer Behavior• Business market• business market vs. consumer market• Model of Business buyers behavior• Business buying situations • Participates and influencer in the business-to-business buying

process• Business buying process

7 - 3

• Sells jets exclusively for corporate use

• 300 – 500 customers worldwide

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

• Multiple people are involved in the decision

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

• Company has been highly successful

Gulfstream AerospaceGulfstream Aerospace

Case Study

6- 4

Business Buyer Behavior

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

• Business to Business (B-to-B) marketers must understand the business markets & business buyer behavior.

Business Markets• Business marketing also referred to as “Industrial marketing”

or “B2B marketing” or “Organizational marketing”.

• Business marketing is the marketing of products & services to business organizations.

• Business organizations include:

Manufacturing companies

Govt. undertakings

Private sector organizations

Educational institutions

Hospitals

Distributors / Dealers

Business organizations buy products & services to satisfy many objectives like production of other goods & services, making profits, reducing costs, & so on.

Consumer marketing is the marketing of products & services to individuals, families, & households. The consumers buy products & services for their own consumption.

Business vs. Consumer market

B2B Marketing vs. Consumer Marketing

CISCO Targets Businesses

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

7-8

What is Organizational Buying?

Organizational buying refers to 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.

6- 10

Model of Business Buyer Behavior

The model suggests four aspects about business buyer behaviora. Buying situationsb. Participants in the buying processc. Major influences on business buyersd. The buying process

a. Major Types of Buying Situations:-

The buyer routinely reorders something without any

modifications. Straight Re-buy

Modified Re-buy

New Task

The buyer wants to modify product specifications,

prices, terms, or suppliers.

The buyer purchases a product or service for the

first time.

Characteristics of theThree Types of Buying Decisions:-

Newness of Problem or NeedNewness of Problem or Need

Information RequirementsInformation Requirements

Information SearchInformation Search

Consideration of New AlternativesConsideration of New Alternatives

Multiple Buying InfluenceMultiple Buying Influence

Financial RisksFinancial Risks

Straight Straight RebuyRebuy

LowLow

MinimalMinimal

MinimalMinimal

NoneNone

Very SmallVery Small

LowLow

Routine response

Modified Modified RebuyRebuy

MediumMedium

ModerateModerate

LimitedLimited

LimitedLimited

ModerateModerate

ModerateModerate

Limited prob.

solving

New New TaskTask

HighHigh

MaximumMaximum

ExtensiveExtensive

ExtensiveExtensive

LargeLarge

HighHigh

Extended prob

solving

Systems Buying and Selling

Turnkey solution desired;

bids solicited

Primecontractors

Second-tiercontractors

System subcomponents

assembled

Buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex

buying situation.

SYSTEMS BUYING AND SELLING

System selling is a key industrial marketing strategy in bidding to build large-scale industrial projects, such as:

dams, steel factories, irrigation systems, sanitation system, pipelines utilities, and even new towns.

Example: Ford has transformed itself from being mainly a car manufacturer to being mainly a car assembler.

Many business buyers prefer to buy a total solution to a problem from one seller. Called systems buying, this practice originated with government purchases of major weapons and communications systems. •The government would solicit bids from prime contractors, who assembled the package or system. •The contractor who was awarded the contract would be responsible for bidding out and assembling the systems subcomponents from second-tier contractors.

The prime contractor would thus provide a turnkey solution, so-called because the buyer simply had to turn one key to get the job done.

7 - 15

b. Participants in the b. Participants in the Business Buying ProcessBusiness Buying Process

Business Buyer Behavior

• Users• Buyers

• Influencers• Deciders

• GatekeepersGatekeepers

b. Participants in the Buying Decision b. Participants in the Buying Decision ProcessProcess

Buying Center: All the individuals & units that participate in Buying Center: All the individuals & units that participate in the business buying-decision process.the business buying-decision process. UsersUsers are members who will actually use the purchased products or are members who will actually use the purchased products or service. They initiate buying proposal & help define product service. They initiate buying proposal & help define product specification.(specification.(office staff)

InfluencersInfluencers often help define product specification & provide often help define product specification & provide information for evaluation. (information for evaluation. (engineers, researchers, product managers)

BuyersBuyers select supplier, arrange terms & make actual purchase. Such as select supplier, arrange terms & make actual purchase. Such as high level officers.(high level officers.( purchasing agent)

DecidersDeciders have formal or informal power to select the final suppliers. In have formal or informal power to select the final suppliers. In routine buying buyers are deciders. (CEO)routine buying buyers are deciders. (CEO)

GatekeepersGatekeepers control the flow of information to others. Such as control the flow of information to others. Such as purchasing agentspurchasing agents. (. (administrative assistant)

6- 16

6- 17

c. Major Influences on Business Buyer Behavior

Aramark Successfully Services Institutional and Government Markets

6- 19

d. Stages of theBusiness Buying Process

7 - 21

– E-procurement is growing rapidly.– Reverse auctions account for much of the

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

• Access to new suppliers• Lower purchasing costs• Quicker order processing and delivery

Business Buying on the Internet

7 - 22

• Institutional Markets– Consist of churches, schools, prisons,

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

– Often characterized by low budgets and captive patrons.

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

Institutional and Government Markets

7 - 23

• Government Markets– Governmental units – federal, state, and local

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

– Government buyers often favor:• Depressed business firms and areas• Small businesses• Minority-owned businesses• Firms which practice non-discriminatory

practices

Institutional and Government Markets

7 - 24

• Government Markets– Most firms that sell to government buyers are

not marketing oriented.– Some companies have separate government

marketing departments.– Much of government buying has migrated

online.

Institutional and Government Markets

Top Business Marketing Challenges

• Expand understanding of customer needs• Compete globally as China and India reshape

markets• Master analytical tools and improve quantitative

skills• Reinstate innovation as an engine of growth• Create new organizational models and linkages

What we learnt

• Define Business Buyer Behavior• What is Business market• What is the business market, and how does it differ from the

consumer market?• What buying situations do organizational buyers face?• What is system selling?• Who participates in the business-to-business buying process?• How do business buyers make their decisions?• How can companies build strong relationships with business

customers?• How do institutional buyers and government agencies do their

buying?