Ch 6 Business Markets and Business Buyer Behavior

buying center ----------------------------- The decision-making unit of a buying organization The buying center includes all members of the organization who play any of five roles in the purchase decision process. The buying center is not a fixed and formally identified unit within the buying organization. It is a set of buying roles assumed by different people for different purchases.

all the individuals and units that play a role in the purchase decision-making process -------------------------------------------- This group includes the actual users of the product or service, those who make the buying decision, those who influence the buying decision, those who do the actual buying, and those who control buying information.

Business-to-business (B2B) ------------------------------ B-to-B marketers want to be involved from beginning to end. -business buyer process

applies to businesses buying from and selling to each other over the internet ----------------------------------------------- In the short run, sales go to suppliers who meet buyers' immediate product and service needs. In the long run, however, business-to-business marketers keep customers by meeting current needs and by partnering with them to help solve their problems.

Systems selling (or solutions selling) ------------------------------------- is often a key business marketing strategy for winning and holding accounts.

buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation -------------------------------------------- The sale often goes to the firm that engages business customers deeply and provides the most complete system for meeting a customer's needs and solving its problems.

general need description

the stage in the business buying process in which a buyer describes the general characteristics and quantity of a needed item

performance review

the stage of the business buying process in which the buyer assesses the performance of the supplier and decides to continue, modify, or drop the arrangement.

Stages of the Business Buyer Decision Process ----------------------------------------------- Buyers who face a new task buying situation usually go through all stages of the buying process. Buyers making modified or straight rebuys, in contrast, may skip some of the stages. In all, the eight-stage buying-process model shown in Figure 6.3 provides a simple view of the business buying as it might occur in a new task buying situation. However, the actual process is usually much more complex. In the modified rebuy or straight rebuy situation, some of these stages would be compressed or bypassed. The seller must manage the total customer relationship, not just individual purchases.

1. problem recognition 2. general need description 3. product specification 4. supplier search 5. proposal solicitation 6. supplier selection 7. order-routine specification 8. performance review

straight rebuy modified rebuy new task

3 major types of buying/buyer situations

product value analysis ----------------------------------- By showing buyers a better way to make an object, outside sellers can turn straight rebuy situations into new task situations that give them a chance to obtain new business.

An approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production

Business markets: market structure and demand

Fewer and larger businesses fewer but larger buyers Geographic concentration Derived demand -----Inelastic demand -----Fluctuating demand Buyer and seller dependency The business buying decision usually involves more, and more professional, buyers Business buyers usually face more complex buying decisions, and the buying process tends to be more formalized

derived demand ---------------------- business demand is derived demand—it ultimately derives from the demand for consumer goods.

Business demand that ultimately comes from (derives from) the demand for consumer goods.

major influences on business buyers environmental factors

Demand for product Economic outlook Cost of money Resource availability Technology Culture Politics Competition

Getting into the B2B frame of mind

Different audience Different addresses Different tenure - there will be movement Different offerings - CNU call the technician to fix the copier when it break not asking professors Different price point - may get 3 months free and then you pay Different time-frame - it will be a lot longer

1. Environmental 2. Organizational 3. Interpersonal 4. Individual

Major Influences on Business Buyer Behavior ------------------------------------------------- The business buyer must watch these factors, determine how they will affect the buyer, and try to turn these challenges into opportunities.

Major influences on business buyers individual factors

Motives Perceptions Preferences Age Income Education Attitude towards risk

major influences of business buyers organizational factors

Objectives Policies Procedures Structure Systems

Influencers -------------------------------- Technical personnel are particularly important influencers.

People in an organization's buying center who affect the buying decision; they often help define specifications and also provide information for evaluating alternatives.

Buying Center can consist of many different persons playing many different roles. --------------------------------------------------------------------------The business marketer needs to know the following: Who are the major buying center participants? In what decisions do they exercise influence and to what degree? What evaluation criteria does each decision participant use?

The decision-making unit of a buying organization

Model of Business Buyer Behavior

The environment - marketing stimuli and other stimuli. -> The buying organization-The buying center, and the buying decision process. -> Buyer responses

problem recognition

The first stage of the business buying process in which someone in the company recognizes a problem or need that can be met by acquiring a good or a service. ---------------------------- can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Or a machine may break down and need new parts. Perhaps a purchasing manager is unhappy with a current supplier's product quality, service, or prices. Externally, the buyer may get some new ideas at a trade show, see an ad or website, or receive a call from a salesperson who offers a better product or a lower price.

Order-routine specification

The stage of the business buying process in which the buyer writes the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies, and warranties. -------------------------------------------- In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. A blanket contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period. Many large buyers now practice vendor-managed inventory, in which they turn over ordering and inventory responsibilities to their suppliers. under such systems, buyers share sales and inventory information directly with key suppliers. The suppliers then monitor inventories and replenish stock automatically as needed. For example, most major suppliers to large retailers such as Walmart, Target, Home Depot, and Lowe's assume vendor-managed inventory responsibilities.

B-to-B digital and social media marketing --------------------------------------------- Digital and social media marketing have rapidly become the new space for engaging business customers. can create greater customer engagement and interaction. B-to-B marketers know that they aren't really targeting businesses, they are targeting individuals in those businesses who affect buying decisions.

Using digital and social media marketing approaches to engage business customers and manage customer relationships anywhere, any time.

the buying center, composed of all the people involved in the buying decision; and the buying decision process.

Within the organization, buying activity consists of two major parts business buyer behavior model

new task

a business buying situation in which the buyer purchases a product or service for the first time -is a purchase decision that requires thorough research such as a new product

straight rebuy

a business buying situation in which the buyer routinely reorders something without any modifications -is a routine purchase decision such as reorder without any modifications

modified rebuy

a business buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers -is a purchase decision that requires some research where the buyer wants to modify the product specification, price ,terms, or suppliers

Business Market

comprises all 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.

Government Market - is vast Government buying practices are highly specialized and specified, with open bidding or negotiated contracts characterizing most of the buying. -nonbusiness organizational market ---------------------------------------------------- The U.S. government is the world's largest buyer of products and services -------------------------------------------------------- offers large opportunities for many companies, both big and small. In most countries, government organizations are major buyers of goods and services.

governmental units - federal, state, and local - that purchase or rent goods and services for carrying out the main functions of government ------------------------------------------------ typically require suppliers to submit bids, and normally they award the contract to the lowest bidder. tend to favor domestic suppliers over foreign suppliers Like consumer and business buyers, ... buyers are affected by environmental, organizational, interpersonal, and individual factors.

reverse auctions -under e-procurement

in which they put their purchasing requests online and invite suppliers to bid for the business.

business market -------------------------- Business buyers usually face more complex buying decisions than do consumer buyers. in the business buying process, the buyer and seller are often much more dependent on each other.

is huge. involve far more dollars and items than do consumer markets. -------------------------------------------- In some ways, they are similar to consumer markets. Both involve people who assume buying roles and make purchase decisions to satisfy needs. Market Structure and Demand: normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large ... markets, a few buyers often account for most of the purchasing. Further, many business markets have inelastic and more fluctuating demand. The total demand for many business products is not much affected by price changes, especially in the short run. And the demand for many business goods and services tends to change more—and more quickly—than does the demand for consumer goods and services. A small percentage increase in consumer demand can cause large increases in business demand. Nature of buying unit: usually involves more decision participants and a more professional purchasing effort. often, business buying is done by trained purchasing agents who spend their working lives learning how to buy better. The more complex the purchase, the more likely it is that several people will participate in the decision-making process.

Users ------------------------------------- In many cases, users initiate the buying proposal and help define product specifications

members of the buying organization who will actually use the purchased product or service

business buying process

the decision process by which business buyers determine which products and services their organizations need to purchase and then find, evaluate, and choose among alternative suppliers and brands ---------------------------------------- Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior. Then, like businesses that sell to final buyers, they must engage business customers and build profitable relationships with them by creating superior customer value.

Gatekeepers -------------------------------------------- For example, purchasing agents often have authority to prevent salespersons from seeing users or deciders. Other gatekeepers include technical personnel and even personal secretaries.

people in an organization's buying center who control the flow of information to others

Deciders ----------------------------------------------- In routine buying, the buyers are often the deciders or at least the approvers.

people in an organization's buying center who have formal or informal power to select or approve the final suppliers

Buyers -------------------------------------------- have formal authority to select the supplier and arrange terms of purchase. Buyers may help shape product specifications, but their major role is in selecting vendors and negotiating. In more complex purchases, buyers might include high-level officers participating in the negotiations

people in an organization's buying center who make an actual purchase -have formal authority to select the supplier and arrange terms of purchase

trade journals ----------------------------------- Ex) plumbers there are trade journals to find the companies you could work with to fix the problem They fulfilled a need that maybe digital or online commerce cant fill But, with social media they ceased to exist 3rd party transport services are involved with B2B businesses

primary exchange and communication between businesses.

B2C

provides to end consumer who doesn't turn around and sell it to someone else

E-procurement -reverse auctions -online trading auctions -setting up their own company buying sites - create extranet links with key suppliers --------------------------------------------------- it shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. reduces the time between order and delivery. And an online-powered purchasing program eliminates the paperwork associated with traditional requisition and ordering procedures and helps an organization keep better track of all purchases. Finally, beyond the cost and time savings, e-procurement frees purchasing people from a lot of drudgery and paperwork. Instead, they can focus on more-strategic issues, such as finding better supply sources and working with suppliers to reduce costs and develop new products. it can also erode decades-old customer-supplier relationships

purchasing through electronic connections between buyers and sellers - usually online

Institutional Market -------------------------------------------------- -nonbusiness organizational market Many institutional markets are characterized by low budgets and captive patrons.

schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care ------------------------------------------- can be huge

B2B ---------------------- Buyers and seller in B2B are like partners

sells to others to sell

supplier development

systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others -------------------------------------------------- For example, Walmart doesn't have a "Purchasing Department"; it has a "Supplier Development Department." The giant retailer knows that it can't just rely on spot suppliers who might be available when needed. Instead, Walmart manages a huge network of supplier-partners that help provide the hundreds of billions of dollars of goods that it sells to its customers each year.

business buyer behavior

the buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others ----------------------------------------------- It also includes the behavior of retailing and wholesaling firms that acquire goods to resell or rent to others at a profit

Proposal solicitation ------------------------------------------- some suppliers will refer the buyer to their website or promotional materials or send a salesperson to call on the prospect. However, when the item is complex or expensive, the buyer will usually require a detailed written proposal or formal presentation from each potential supplier.

the stage of the business buying process in which the buyer invites qualified suppliers to submit proposals

Supplier Selection

the stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers ---------------------------------------------- the buying center often will draw up a list of the desired supplier attributes and their relative importance. Such attributes include product and service quality, reputation, on-time delivery, ethical corporate behavior, honest communication, and competitive prices. Many buyers prefer multiple sources of supplies to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time. today's supplier development managers want to develop a full network of supplier-partners that can help the company bring more value to its customers.

supplier search -------------------------------------- the internet gives smaller suppliers many of the same advantages as larger competitors. The newer the buying task and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers.

the stage of the business buying process in which the buyer tries to find the best vendors

product specification

the stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item

online trading exchanges -under e-procurement

through which companies work collectively to facilitate the trading process.

Five roles in the purchase decision process -Business buyer behavior: participants

users, influencers, buyers, deciders, gatekeepers

e-procurement The internet gives business buyers access to - new suppliers, -lowers purchasing costs, -and hastens order processing and delivery.

usiness buyers are purchasing all kinds of products and services online