Ch.8 - Business Markets and Buying Behaviors
vendor analysis
A formal systematic evaluation of current and potential vendors - Examines price, product quality, delivery service, product availability, and overall reliability
value analysis
An evaluation of each component of a potential purchase - Examines quality, design, materials, and possibly item reduction or deletion to acquire the product in the most cost-effective way
new task purchase
An organization's initial purchase of an item to be used to perform a new job or solve a new problem - The business buying decision process is used in its entirety - type of business purchase
The primary goal of business markets for marketers
to understand customer needs and provide a value-added exchange that shifts from attracting customers to keeping customers and developing relationships
Dimensions of Marketing to Business Customers
transaction characteristics customer attributes customers' primary concerns methods of buying types of purchases demand
The size of a buying center is influenced by the:
•Stage of the buying decision process •Type of purchase (new task, straight rebuy, or modified rebuy)
factors to consider when reseller markets make purchasing decisions:
•The level of demand for a product to determine the quality and price at which the product can be resold •The amount of space required to handle a product relative to its potential profit •A supplier's ability to provide adequate quantities when and where they are needed •The ease of placing orders and whether producers offer technical assistance or training programs •Whether the product competes with or complements products they currently have
buying center
•The people within an organization who makes business purchase decisions - roles: 1. users 2. influencers 3. buyers 4. deciders 5. gatekeepers - number and structure of this are affected by: - org size and market position - Volume and types of products being purchased - •Firm's overall managerial philosophy on who should make purchase decisions - size of this is affected by: - Stage of the buying decision process - Type of purchase (new task, straight rebuy, or modified rebuy)
business market
•consists of individuals, organizations, or groups that purchase a specific kind of product for one of three purposes: 1. resale 2. direct use in producing other products 3. use in general daily operations - also called a business-to-business market or B2B market 4 types: 1. producer 2. reseller 3. governmental 4. institutional
reliance on Internet and other technology
- Whereas in the past, an organization seeking a type of product might contact product suppliers, speak with someone on the sales force, and request a catalog or brochure, business customers today first turn to the internet to search for information and find sources - internet allows buyers to research potential solutions, talk with peers about their experiences with those products, read blogs, consult webinars and watch YouTube videos, examine specifications, and find reviews of potential products long before beginning a formal buying process
environmental influences on the business (organizational) buying decision process
- competitive factors - economic factors - political forces - legal and regulatory forces - technological changes - sociocultural issues
organizational influences on the business (organizational) buying decision process
- objectives of company - purchasing policies - resources - size/composition of buying center (structure)
The 4 categories of business markets are
1. producer 2. reseller 3. government 4. institutional
The business (organizational) buying decision process
1. recognize problem 2. develop product specifications to solve problem 3. search for and evaluate possible products and suppliers 4. select product and supplier and order product 5. evaluate product and supplier performance
3 reasons a business makes purchases
1. resale 2. direct use in producing other products 3. use in general daily operations
modified rebuy purchase
A new-task purchase that is changed on subsequent orders or when the requirements of a straight rebuy purchase are modified - several stages, but not necessarily all stages of the business buying decision process, are used - type of business purchase
straight rebuy purchase
A routine purchase of the same products under approximately the same terms of sale by a business buyer - several stages, but not necessarily all stages of the business buying decision process, are used - type of business purchase
B2B E-commerce sites
Online marketplaces where business buyers and sellers from around the world can exchange information, goods, services, ideas, and payments - also known as trading exchanges, B2B exchanges, and ehubs - may be independent or private
influencers (buying center roles)
Technical personnel who help develop product specifications and evaluate alternatives - provide information and advice for developing product specifications
Users (buying center roles)
The organizational members who frequently initiate the purchase process and/or generate purchase specifications, use the product, and evaluate product performance relative to the specifications - provide information and advice for developing product specifications
product specifications
Written statements describing a product's necessary characteristics, standards of quality, and other information essential to identifying the best supplier for the needed product - a dimension of primary concerns for business customers
individual influences on the business (organizational) buying decision process
are the personal characteristics of participants in the buying center - age - education level - personality - tenure - position in organization -> the influence of these factors depends on: - buying situation - type of product being purchased - whether the purchase is a new task, modified rebuy, or straight rebuy
benefit of building and maintaining good supplier relationships
buyers can reduce their search efforts and uncertainty about prices
transaction characteristics
dimension of marketing to business customers - Orders by business customers tend to be much larger than individual consumer sales - Discussions and negotiations associated with business purchases can require considerable marketing time and selling effort - Suppliers need to identify and promote their competencies to position their products so as to indicate how they provide customer value - To be successful, suppliers also have to differentiate their products from competitors - Reciprocity: An arrangement unique to business marketing in which two organizations agree to buy from each other - large orders - expensive items - extended negotiations - reciprocity
demand
dimension of marketing to business customers - derived - inelastic - joint demand - fluctuating
methods of buying
dimension of marketing to business customers - description - inspection - sampling - negotiation
customers' primary concerns
dimension of marketing to business customers - price - Influences operating costs and costs of goods sold, which affects selling price, profit margin, and ultimately the ability to compete - product quality - Most business customers try to maintain a specific level of quality in the products they buy - To achieve this goal, most firms establish standards for these products and buy them on the basis of a set of expressed characteristics - utilize product specifications - service - Typical services business customers desire from suppliers are market information, inventory maintenance, on-time delivery, and repair services - supplier relationships - the cost of developing and maintaining relationships with suppliers - By building trust with a particular supplier, buyers can reduce their search efforts and uncertainty about prices - ethics and social responsibility (particularly sustainability)
customer attributes
dimension of marketing to business customers •Business customers differ from consumers in their purchasing behavior because they are generally better informed about the products they purchase •They typically demand detailed information about a product's functional features and technical specifications to ensure that it meets their needs •Personal goals may influence business buying behavior •Most purchasing agents seek the psychological satisfaction that comes with organizational advancement and financial rewards •Today, many suppliers and their customers build and maintain mutually beneficial relationships, sometimes called partnerships - detailed information - technical specifications - partnerships
types of purchases
dimension of marketing to business customers •Most business purchases are one of three types, each subject to different influences and requiring business marketers to modify their selling approaches appropriately - new task - straight rebuy - modified rebuy
partnerships
many suppliers and their customers build and maintain mutually beneficial relationships
The business buying decision process is used in its entirety primarily for:
new-task purchases - An organization's initial purchase of an item to be used to perform a new job or solve a new problem
deciders (buying center roles)
people who actually choose the products
gatekeepers (buying center roles)
people who control the flow of information to and among the different roles in the buying center
buyers (buying center roles)
people who select suppliers and negotiate terms of purchase and may also be involved in developing specifications
Members of the buying center evaluate the supplier's and product's performance by comparing it with:
specifications (technical specifications)
Stage 5: Evaluate product and supplier performance
stage of the Business Buying Decision Process - Members of the buying center evaluate the supplier's and product's performance by comparing it with specifications - If the product meets the specifications but its performance fails to adequately solve the problem or satisfy the need recognized in the first stage, product specifications must be adjusted - If the supplier's performance is inadequate, the business purchaser seeks corrective action from the supplier or searches for a new one
Stage 1: Recognize problem
stage of the Business Buying Decision Process - One or more individuals recognize that a problem or need exists - Problem recognition may arise under a variety of circumstances: - When machines malfunction - When an existing product is modified - When a new product is introduced
Stage 2: Develop product specifications to solve problem
stage of the Business Buying Decision Process - The development of product specifications requires that buying center participants assess the problem or need and determine what is necessary to resolve or satisfy it - Users and influencers provide information and advice for developing product specifications - By assessing and describing needs, the organization should be able to establish product specifications
Stage 4: Select product and supplier and order product
stage of the Business Buying Decision Process - The results of deliberations and assessments in the third stage are used to select the product to be purchased and the supplier - multiple sourcing: An organization's decision to use several suppliers - sole sourcing: An organization's decision to use only one supplier - THE ACTUAL PRODUCT IS ORDERED IN THIS STAGE - specific details regarding terms, credit arrangements, delivery dates and methods, and technical assistance are finalized
Stage 3: Search for and evaluate possible products and suppliers
stage of the Business Buying Decision Process •activities may involve: - Looking in company files and trade directories - searching the Internet/websites - Contacting suppliers for information - Soliciting proposals from known vendors - Examining various online and print publications -> value analysis: An evaluation of each component of a potential purchase -> vendor analysis: A formal systematic evaluation of current and potential vendors
interpersonal influences on the business (organizational) buying decision process
the relationships among people in the buying center - Trust is crucial, especially when customized products are involved - Trust and clear communication will ensure that all parties are satisfied with the outcome - Interpersonal dynamics and varying communication abilities within the buying center may complicate processes - cooperation - conflict - power relationships
institutional markets
type of business market - Organizations with charitable, educational, community, or other non-business goals - include: - churches - some hospitals - fraternities and sororities - charitable organizations - private colleges - because these organizations often have different goals and fewer resources than other types of organizations, firms may use special marketing efforts to serve them
government markets
type of business market - Federal, state, county, or local governments that buy goods and services to support their internal operations and provide products to their constituencies - Because government agencies spend public funds to buy the products needed to provide services, they are accountable to the public - these markets advertise their product needs through releasing bids or negotiated contracts -
producer market
type of business market - Individuals and business organizations that purchase products to make profits by using them to produce other products or using them in their operations - Include buyers of raw materials, as well as purchasers of semi-finished and finished items, used to produce other products - include a broad array of industries - purchase raw materials often to make products - making something new from business purchases
reseller market
type of business market - Intermediaries that buy finished goods and resell them for a profit - Intermediaries consist of wholesalers and retailers - Wholesalers purchase products for resale to retailers, other wholesalers, producers, government, and institutions - Retailers purchase products and resell them to FINAL/ULTIMATE CONSUMERS - these markets must consider several factors when making purchasing decisions: - The level of demand for a product to determine the quality and price at which the product can be resold - The amount of space required to handle a product relative to its potential profit - A supplier's ability to provide adequate quantities when and where they are needed - The ease of placing orders and whether producers offer technical assistance or training programs - Whether the product competes with or complements products they currently have - thing wholesalers
The number and structure of an organization's buying centers are affected by:
•Organization's size and market position •Volume and types of products being purchased •Firm's overall managerial philosophy on who should make purchase decisions
reciprocity
•An arrangement unique to business marketing in which two organizations agree to buy from each other - Reciprocal agreements that threaten competition are illegal - Because reciprocity influences purchasing agents to deal only with certain suppliers, it can lead to less-than-optimal purchases - a dimension of transaction characteristics
marketing to businesses
•employs the same concepts—defining target markets, understanding buyer behavior, and developing effective marketing mixes—as marketing to ultimate consumers - HOWEVER: there are structural and behavioral differences in business markets - A company that markets to another company must be aware of how its product will affect other firms in the marketing channel, such as resellers and other manufacturers - Business products can also be technically complex, and the market often consists of sophisticated buyers