Chap# 6:- Business markets

A FRAMEWORK for MARKETING MANAGEMENT

Kotler Keller

Chapter 6Chapter 6Analyzing

Business Markets

• Business Marketing is the practice of individuals, or organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations. Also known as industrial marketing, business marketing is also called business-to-business marketing, or B2B marketing, for short.

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• Business marketing vs. consumer marketing

Business marketing generally entails shorter and more direct channels of distribution.

While consumer marketing is aimed at large demographic groups through mass media and retailers, the negotiation process between the buyer and seller is more personal in business marketing

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Business marketers commit only a small part of their promotional budgets to advertising, and that is usually through direct mail efforts and trade journals. While that advertising is limited, it often helps the business marketer set up successful sales calls. Marketing to a business trying to make a profit (Business-to-Business marketing) as opposed to an individual for personal use (Business-to-Consumer, or B2C marketing) is similar in terms of the fundamental principals of marketing.

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Organizational Buying

Decision-making process by whichformal organizations establish theneed for purchased products and

services, and identify,evaluate, and choose among

alternative brands and suppliers

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Organizational Buying

• Fewer buyers

• Larger buyers

• Geographically concentrated buyers

• Closer relationships with suppliers

• Closer relationships with customers

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Organizational Buying

• Fluctuating demand• Inelastic demand• Leasing• Professional

purchasing• Direct purchasing

• Multiple buying influences

• Multiple sales calls• Derived demand• Reciprocity

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Organizational Buying

Buying Situations

• Straight rebuy• Modified rebuy• New task

• Routine reorders from approved vendor list

• Low involvement, minimal time commitment

• Example: copier paper

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Organizational Buying

Buying Situations

• Straight rebuy• Modified rebuy• New task

• Specifications, prices, delivery terms, or other aspects require modification

• Moderate level of involvement and time commitment

• Example: desktop computers

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Organizational Buying

Buying Situations

• Straight rebuy• Modified rebuy• New task

• Purchasing a product or service for the first time

• High level of involvement and time commitment; multiple influences

• Example: selecting a website design firm or consultant

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Systems Buying and Selling

Many business buyers prefer to buy a total solution to problem from one seller. called system buying.

This practice originated with government purchases of major weapons & communication systems.

The government solicit bids from prime contractors, who assembled package or system.

System Buying & Selling

The contractor who was awarded contract will be responsible for bidding out & assembling system 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.

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System Buying & 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 systems, pipelines, utilities and even new towns.

Firms must compete on price, quality, reliability & other attributes to win contracts.

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The Buying Centre

The buying centre is a collection of individuals who contribute to the final purchase decision.

Participants in the Business Buying Process: The Buying Center

UsersInfluencersDeciders

GatekeepersBuyers

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The Buying Centre

Buying centre includes people who play any of buying roles:

• Users: People who actually use business products example an executive, production line worker etc.

• Influencers: People who set specifications of buying decisions b/c of their technical expertise, organizational position.

• Deciders: People who make actual buying decision regarding business product and the supplier. A purchasing agent may be a decider in straight rebuy condition. Top management may make decision regarding whether to buy an expensive computer system.

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The Buying Centre

• Gatekeepers: People who control the flow of purchasing information within organization as well as between firm and potential vendors. These people may be purchasing agents, secretaries or technical personnel.

• Buyers: People who interact with suppliers, arrange terms of sale & process purchase orders. Basically it is purchasing department role but if purchase is expensive, complex new buy, the buyers role may be filled with someone in top management.

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Types of Business Customers

• Price-oriented: Price is everything.

• Solution-oriented: They want low price but will respond to argument about lower total cost.

• Gold-standard: They want the best performance in terms of product quality, assistance, reliable delivery and son on.

• Strategic-value: They want a fairly permanent sole supplier relationship with your company.

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Types of Purchasing Processes

Peter Kraljic Identifies four product related purchasing processes.

• Routine products: Products that have low value & cost to customer and involve little risk. (e.g Office supplies)

• Leverage Products: Product have high value & cost to customer but involve little risk of supply. (e.g. Engine Pistons).

Types of Purchasing Processes

• Strategic Products: Product have high value and cost to customer and also involve high risk. (e.g mainframe computers).

• Bottleneck Products: Product have low value and cost to customer but they involve some risk. (e.g Spare Parts).

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Buyphases: Stages in the Business Buying Process

• Problem recognition

• General need description

• Product specification

• Supplier search

• Proposal solicitation

• Supplier selection

• Order-routine specification

• Performance review

Proposal Solicitation

The buyer invites qualifies suppliers to submit proposals. If the item is complex the buyer will require a detailed written proposal from each qualifies suppliers.

After evaluating the proposal the buyer will invite a few suppliers to make formal presentation.

Business marketers must be skilled in researching, writing & presenting proposals.

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Supplier Selection

Before selecting a supplier buying centre will specify desired supplier attributes and indicate their relative importance. To rate & identify most attractive suppliers, buying centers use following supplier evaluation model.

• Price

• Supplier Reputation

• Product Reliability

• Service Reliability

• Supplier Flexibility6-22