Org Buy Behav - Marketing

8/14/2019 Org Buy Behav - Marketing

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17 Aug 2004 Business Markets &Organisational Buying Behaviour

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Business Markets and

Organizational BuyingBehavior

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What is a BusinessMarket?

The Business Market - all theorganizations that buy goods and

services to use in the production ofother products and services that aresold, rented, or supplied to others.

Business markets involve many more

dollars and items than Consumermarkets.


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Business-to-BusinessMarketing

Sales to businesses rather than end-consumers

Example: IBM personal computer

Business-to-BusinessExample: Sale of a personal computer to auniversity for use in PC labs

Consumer Marketing

Example: Sale of a personal computer to astudent for personal use


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Why Do Organizations Buy?

Raw Material for the goods produced

Supplies which help the employees run

the operations of the organisation. Eg:

Stationery

To sell to the consumers


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Types of OrganizationalBuyers

1.Business Buyers

2. Institutional Buyers

Low Budgets

Captive Patrons

3. Government Markets

Specialized Buying

Open Bids

Negotiated Contracts


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Basic Methods in

Organizational Buying


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Characteristics of

Business Markets


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Market Structure andDemand

Fewer, larger buyers (large orders)

Demand derived from consumers

Price-inelastic demand

Fluctuating demand


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Nature of the BuyingUnit

More people involved in theprocess

More professional purchasing effort


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Product / ServiceCharacteristics

Frequently technical /complex

Predominance of semi-finished

goods and raw materials

Important: delivery time, technicalassistance, post-sale service,

financing assistance


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Marketing Mix

Direct selling

Price is often negotiated

Advertising is often technical innature


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Types of Decisions &the Decision Process

More complex decisions

Process is more formalized

Buyer and seller are moredependent on each other

Build close long-term relationshipswith customers


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erences e weenBusiness-to-Businessand Consumer Buying

BehaviorBusiness to Business Business to Consumer Many people involved

Many different goals torealize

Formal decision process andinfo. gathering

Decision is explicit, rational

Price/cost often mostimportant

Competitive bidding andnegotiations often occur

Personal selling

Shorter distribution channel

Fewer people involved

Individual-level goals

Less formal process

Decision is often implicit,not always rational

Psychological factorsimportant

Generally non-negotiableprices

Mass communications

Longer distribution channel


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Model of BusinessBuyer Behavior


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Major Influences onBusiness Buying


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Organizational

Buying Process

1. Problem

Recognition

2. General

Description

of Need

3. Product

Specifications

4. Supplier

Search

5. Acquisitionand Analysis

of Proposals

6. SupplierSelection

7. Selectionof

Order Routine

8. PerformanceReview

Stages in the BusinessBuying Process


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ar c pan s n eBusiness Buying

Process:The Buying Center Initiators

Users Influencers

Deciders

Buyers

Gatekeepers


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Types of BuyingSituations


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Straight Rebuy Product specifications are not modified

Small DMU (decision-making unit) - generally oneperson

Low perceived risk

Routine / automated

Often based on a minimum acceptable quality In supplier

Out suppliers find it hard to get a foot in the door

Pray for an in supplier to mess up, or requirementsto change


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Modified Rebuy

Intention to modify specifications, prices,terms, suppliers, etc.

More participants than straight rebuy A mini or aging version of new task

A window of opportunity for outsuppliers


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New Task

Rarest, most glamorous type

Big DMU - depending on cost and risk

Lots of people involved, lots of indirect influence

Gather and weigh lots of information Decide on product, suppliers, payment terms,

delivery times etc.

Slower-than-usual processes

Opportunity and threat for marketers

Performance matters a lot (not just price)


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2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Organizational Buyers Are Problem Solvers


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Buyer-Seller Relationships


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-25- 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Buyer-Seller Relationships in Business Markets

BUT

Close Relationships

May Produce

Mutual Benefits

Close Relationships

May Produce

Mutual Benefits

- Reliable source of

supply

- Cost reductions

- Price stability or

concessions

- Reduced uncertainty

- Joint problem solving

- Improved quality

Relationships May

Not Make Sense

Relationships May

Not Make Sense

- Reduced flexibility

- Some purchases are

too small or infrequent

- Higher risk from

greater purchase

concentration


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Prominence of Online Buying in

Organizational Markets


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Prominent for three major

reasonsI. Technology provides timely supplier information

product availability

technical specifications

application uses price

delivery schedules.

I. Technology substantially reduces buyer order processing

costs.

II. Technology can reduce marketing costs, particularly sales andadvertising expense, and broaden their potential customer

base for many types of products and services.


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e-marketplaces

Bring together buyers and supplier

organizations.

Make possible the real-time exchangeof information, money, products, and

services

B2B exchanges


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Independent e-marketplaces

Charge a fee for service

Small business use to expand customer base

Exist in settings that have one or more of the

following features Thousands of geographically dispersed buyers and sellers. Volatile prices caused by demand and supply fluctuations.

Time sensitivity due to perishable offerings and changing

technologies.

Easily comparable offerings from a variety of suppliers.


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Private exchanges

Link large companies with their network

of qualified suppliers and customers.

They are not a neutral third party, butrepresent the interests of their owners


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Org Buy Behav - Marketing

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