BUS 101 Chapter 11

Three types of business buying decisions are common:

new task buy, modified rebuy and straight rebuy

cognitive dissonance

a feeling of uncertainty about whether or not they made the right choice

Institutions

are also important buyers of business products and include such entities as hospitals, schools and correctional facilities. Institutions purchase significant quantities of food products, cleaning supplies and office equipment and supplies.

Producers

are businesses that manufacture goods or provide services

niche market

includes only those specific customers who would enjoy a particular product.

Consumers make decisions to purchase products in one of three ways

routine response behavior, limited problem solving or extended problem solving

Post-purchase evaluation

the fifth stage in Consumer Buying Decision process. Once the product is purchased and used, the consumer will evaluate the adequacy with his original needs.

Regardless of nationality, consumers make decisions following a similar process.

consumers make buying decisions is commonly explained through a five-step process

marketing research

"... the function that links the consumer, customer and public to the marketer through information—information used to identify and define marketing opportunities and problems; generate, refine and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process."

2. Identification of segmentation bases

Business markets (i.e., customers buying to use the product in production of another product or for resell) require a different set of segmentation bases: customer type, geographic location, customer size and product use.

consumers

Customers who are the end users of the product

The real benefit of conducting marketing research comes through good data analysis, the seventh step in the process.

Data analysis can involve several steps, but in general means that the researcher is processing the data collected in the previous step to put it in a form that allows interpretation and the assignment of meaning to the numbers. Numbers alone are data, but interpretation of those numbers in the context of the research problem is analysis. This step of the process should tie the analysis back into the research objectives set forth in an earlier step.

Marketing research should include the fourth step of developing hypotheses.

Hypotheses are educated guesses about how to solve the problem or exploit the opportunity defined in Step 1. If the marketing researcher is not knowledgeable enough about the problem to state hypotheses, primary data collection is premature. The researcher should go back to a preliminary step of exploratory research to help better define the problem.

Step 5 calls for design of the appropriate research method

In general, marketing research can be exploratory, descriptive or causal (notice this word is NOT casual, but causal).

internal search

In some purchase situations, a search of internal mental files provides the consumer with adequate information to move on to the purchase decision step.

routine response behavior

On the other end of the decision-making continuum, consumers frequently purchase products without giving much thought to either the product or the purchase situation

3. Profile and analysis of segments

Profiling the different types of potential customers in a given market segment can provide a rich description that helps a business to develop an appropriate marketing mix.

outsourcing

Purchasing of business services by institutions or any other business buyer it can be a cost effective way to manage business processes, especially if the company doesn't have the resources to produce that good or service.

In the eighth step, marketing research results must be communicated and recommendations made.

Results are typically presented both orally and in a written report. The researcher's task is to find the right balance between reporting data and discussing analysis. Research results are often complex and require excellent communication skills to be sure that implications are fully understood by management. Most companies want researchers to go the next step beyond reporting results by requiring specific recommendations that address how to solve the problem that was identified in Step 1.

secondary research

Secondary research is information that has already been gathered, perhaps by someone else, for a different purpose. It is imperative that a thorough examination of what is already known, or can be surmised, be completed before resources are devoted to collecting additional data (known as primary research) that may not be necessary. Secondary data may be internal, such as sales records, accounting and financial information and customer records. In addition, a wealth of external information exists for public consumption and can be easily accessed through the Internet. Much of this information is collected and reported by government agencies or by industry trade associations.

Limited problem solving

The majority of decisions consumers make about products fall into this category; consumers are familiar with the product, but prefer to compare brands and stores before making a purchase.

perceptual map

The process used by businesses as they position products includes the initial step of fully understanding how customers perceive competitors in the marketplace relative to one another, through market research.

4. Selection of target market(s)-

The result of the segmentation process should be the selection of one or more target markets. A target market is an identified market segment on which a company will focus its marketing efforts. Selection of a target market is a critical strategic step for any organization and influences how resources will be allocated and how the marketing mix will be created.

5. Development of marketing mix for each identified target market-

The ultimate example of niche marketing is called one-to-one marketing and can be described as tailoring a marketing mix to appeal to a single customer. A thorough understanding of the target market(s) dictates how the marketing mix (i.e., the product, price, promotion and place, which are also known as the 4Ps of marketing

1. Selection of industry/product category/market

This overall market is also commonly referred to as an industry or a product category. Regardless of the terminology, the important consideration is that the marketer must understand the set of competitors it will face. This set of competitors will typically use similar groups of suppliers, compete for similar customers and provide a frame of reference for those potential customers.

straight rebuy

This type of purchase is similar to the consumer's routine response. The business will often automate straight rebuys so that a reorder is placed as soon as the product inventory reaches a certain point, or when it reaches a certain amount of time since the last order such as an order that is placed during the first week of every month.

business-to-consumer (B2C)

When a business sells products to consumers

external search

a consumer may seek additional information through external search (e.g., going to websites, consulting Consumer Reports, asking friends for advice)

consideration set

an important place for a brand to be. If a computer brand does not make it into Riley's consideration set, it has no chance of being evaluated as a purchase alternative.

Government

at all levels—federal, state, county and city—is one of the biggest purchasers of B2B goods and services. In most cases, government buyers are purchasing goods and services with the intention of using these products in the production of other goods and services as opposed to reselling them for a profit.

differentiated targeting strategy

attempts to satisfy the broader marketplace by identifying multiple market segments to target, building a unique marketing mix to appeal to each segment. Toyota is a good example of a company that successfully uses a differentiated strategy. Toyota has identified different needs in the car market and has developed products to appeal differentially to these needs. But Toyota does not stop at designing different car models; rather, it tailors the entire marketing mix to appeal to each of these identified segments.

Data collection is the sixth step

in the Marketing Research Process and addresses carrying out the research design by deciding the exact collection procedures that will produce the type of information required. For example, if the research method selected is descriptive research, data collection will employ the technique best suited for the project.

purchaser

in the buying center group is the individual who has the authority to sign off on the purchase agreement. This individual often carries the title of purchasing manager or buyer and may or may not be closely involved in the actual decision process. The title itself gives this person power to veto or add to any purchasing decisions made by the buying center. Sometimes this role works in an antagonistic fashion, controlling the disbursement of funds and exerting control to follow purchasing policies and standards.

A buying center is an informal group of individuals that, together, make a business buying decision. The interaction of the various buying center members contributes to the complexity of a business buying decision. Even though the buying center is informal, it is usually composed of individuals carrying out these common roles

influencer, purchaser, decider, user and gatekeeper

Setting research objectives

is a critical third step, yet one that is too often overlooked by anxious data gatherers. Research objectives outline what the primary data collection should discover in very specific points. All research objectives should be addressed when the research method is designed and the data collection should not seek information beyond the set of research objectives that has been agreed upon. As such, research objectives act as a set of checks and balances that ensure that the right information will be collected.

Causal research

is also described as predictive and attempts to explain cause/effect relationships. This method usually involves conducting experiments that control for extraneous variables so that the researcher can predict what the impact will be on one variable when another variable is manipulated. Laboratory or field tests are examples of causal research.

The final step, follow up

is also often over-looked. It is the marketing researcher's responsibility to ensure that the research report includes action steps that can be implemented and monitored to achieve the greatest success.

influencer

is anyone inside or outside the business that can exert influence on any one of the buying center members. This may be someone in the organization who has worked previously with the group making the purchase or has experience working with a particular supplier or purchasing similar products. The influencer may or may not have direct input into the decision; rather, the input could be indirect through another member of the buying center.

STP

segmentation, targeting and positioning

total market

is composed of customers and potential customers who meet three criteria with respect to purchasing a particular product: ability, willingness and authority. If a potential customer does not have the financial resources (i.e., ability) to purchase the product, does not have the desire for the product (i.e., willingness) and does not have freedom to make the purchasing decision (i.e., authority), that individual (or business) should not be considered part of the total market.

decider

is frequently the highest-level management person involved in the decision. This individual will have budgetary responsibility for the purchase but may delegate the actual decision to another member. At the end of the day, if something goes wrong, this individual must take responsibility.

Exploratory research

is information gathering that takes place in the preliminary stages of marketing research and may be used in preparation for developing a project to address specific questions. It is often used when research has not previously been conducted or when the cause of a problem is unknown. Focus groups and depth interviews are examples of exploratory research.

undifferentiated targeting strategy

is one for which the marketer chooses to avoid the segmentation process and treats the total market as a single segment. This firm would create a single marketing mix and would make no effort to tailor the mix to appeal differentially to any single, well-defined group. It is difficult to identify a company of any size in today's marketplace that successfully employs an undifferentiated targeting strategy. This type of strategy was common 100 years ago, but is rarely viable today.

Problem Definition

is the first step in conducting marketing research. The problem does not have to involve a negative situation and could just as likely be an opportunity. In either case, the purpose of marketing research must be clearly defined before the process begins. Without a thorough definition of what the research should accomplish, agreed to by all parties, money and time can easily be wasted and decisions made based on erroneous information.

Descriptive research

is the most common type of marketing research and involves counting numbers of respondents who have certain characteristics or behaviors. The objective is to describe groups, not try to predict their behaviors. Surveys and observation are examples of descriptive research.

new task buy

is the most complex buying situation for a business. In this scenario, the business has never before purchased this good or service and does not have an existing set of product specifications nor a preferred supplier list. This decision process is likely to follow all the steps outlined in the business buying decision process presented above. It is likely to take the most time and involve the largest number of individuals in the process since it is the riskiest of the three decision types.

user

may have little input into the purchasing decision even though that individual is the one who will be using the product once it is purchased. If the user is not consulted in the purchase decision, it may make it difficult for the product to be adopted. If the user is involved in the decision, it will increase the effectiveness of the purchasing department because they will be sure they're purchasing the item that is the most effective and efficient for its purpose.

modified rebuy

occurs when a business has previously purchased a product but must revisit the product specifications due to a change in circumstances. For example, the business may have made an improvement to the product being produced that results in a required upgrade to machinery on the production line. In this case, the business may be looking for the upgraded product at the same company or may need to look elsewhere if it is not available with that specific supplier. Additionally, the existing supplier may not be meeting deadlines or has declining quality, which prompts a review of the current relationship.

gatekeeper

plays an important role in the decision process, although may be the most difficult person to identify. A gatekeeper controls access to the information and/or the decision-maker. Without buy-in from the gatekeeper, access could be limited.

Business buyers can be categorized into four types

producers, resellers, government and institutions

concentrated targeting strategy

selects a single segment of the market on which it focuses all of its marketing efforts. This strategy is not the same as an undifferentiated strategy because the segmentation process has been used to identify a single segment, sometimes referred to as a niche market.

Information search

stage in Consumer Decision Process during which a consumer searches for internal or external information.

resellers

such as wholesalers, distributors and retailers

Problem recognition

the first stage in the consumer buying decision process. Results when a customer recognizes a substantial difference between what is perceived as the actual product and the product he/she wants to purchase, which directly impacts the decision making of the customer in the buying process.

Purchase decision

the fourth stage in the Consumer Buying Decision process. The process a customer goes through when buying a product. It can be seen as a particular form of a cost-benefit analysis.

These companies employ a series of planning steps, known as

the market segmentation process, which helps them to narrow the scope of the market so that they can target their marketing efforts to appeal most effectively to those members of the overall market that are most likely to become customers. These steps include:

Extended problem solving

the purchase decision carries a high level of risk and is one that the consumer is willing to invest both time and effort.

Evaluation of alternatives

the third stage in the Consumer Buying Decision process. During this stage, consumers evaluate all of their product and brand options on a scale of attributes which have the ability to deliver the benefit that the consumer is seeking.

business-to-business (B2B)

transaction occurs when a business sells products to another business

product positioning

when it makes efforts to establish a unique place in the minds of its target market, relative to competitors. This unique place is known as the product's position. Some products have clear positioning in the marketplace.

business buyers

who purchase products with the intention of either using that product in the production of another product or reselling it for a profit