Business Markets and Business Buyer Behavior

Chapter 7

Objectives
Be able to define the business market and explain how business markets differ from consumer markets. Know the major factors that influence business buyer behavior.
7- 2

Objectives
Understand the steps in the business buying decision process. Understand institutional and government markets and how buyers in these markets make their buying decisions.
7- 3

Gulfstream Aerospace
c

Sells jets exclusively for corporate use 300 500 buyers worldwide Rational, objective, and human factors influence business

Multiple people are involved in the decision Buying influences include the CEO, pilot, board members, even spouses Company has been
7- 4

Definition
Business Buyer Behavior:
The buying behavior of 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.
7- 5

Business Markets
Characteristics of Business Markets
Sales in the business market far exceed sales in consumer markets.
7- 6

Business Markets
Characteristics of Business Markets
Business markets differ from consumer markets in many ways.
Marketing structure and demand Nature of the buying unit Types of decisions and the decision process

7- 7

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Compared to consumer markets:
Business markets
have

fewer but larger customers concentrated geographically

Business customers
are

Demand is different
Derived

demand Price inelastic

7- 8

Discussion Question
Think about derived demand in the context of vehicles. Which parts, components, or finished goods are most dependent upon the demand for new vehicle production?
7- 9

Fujitsu promises more than just high-tech products: Our technology helps keep you moving upward. And our people wont let you down.

7- 10

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Compared to consumer purchases:
Business purchases involve more buyers in the decision process. Purchasing efforts are undertaken by professional buyers.
7- 11

Business Markets
Characteristics
Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision In comparison to consumer purchases:
Business buyers face more complex buying decisions. The buying process is more formalized. Buyers and sellers work together closely and build long-term 7- 12

BusinessNow
NerveWire Video Clip
Consultants work closely with their client companies.
What criteria might guide the selection of a firm such as NerveWire?

Click the picture above to play video

7- 13

Figure 7-1:

Model of Business Buyer Behavior

7- 14

Business Buyer Behavior

Major Types of Buying Situations
Straight rebuy

Reordering without modification Requires modification to prior purchase First time purchase
7- 15

Modified rebuy

New task

Business Buyer Behavior

Systems Selling:
Buying a packaged solution to a problem from a single seller.

Convenience is a major benefit

Often a key marketing strategy for businesses seeking to win and hold accounts.
7- 16

Business Buyer Behavior

Participants in the Buying Decision Process Users Buyers Influencers Deciders

Gatekeepers
7- 17

Emotions also play a role in business buying. Volvo stresses that the trucks benefits will make drivers a lot more possessive.

7- 18

Figure 7-2:

Major Influences on Business Buyer Behavior

7- 19

Major Influences on Business Buyers

Key Factors
Economic trends Supply conditions Technological change Regulatory and political environments Competitive developments Culture and customs
7- 20

Environmental Organizational Interpersonal Individual

Major Influences on Business Buyers

Key Factors
Objectives Policies Procedures Organizational structure Systems
7- 21

Environmental Organizational Interpersonal Individual

Major Influences on Business Buyers

Key Factors
Authority Status Empathy Persuasiveness

Environmental Organizational Interpersonal Individual

7- 22

Major Influences on Business Buyers

Key Factors
Authority Age Education Job position Personality Risk attitudes

Environmental Organizational Interpersonal Individual

7- 23

Figure 7-3:

Stages of the Business Buying Process

7- 24

Business Buying Process

Eight Stages:
Stage 1: Problem Recognition Stage 2: General Need Description Stage 3: Product Specification

Value analysis helps to reduce costs

7- 25

Business Buying Process

Eight Stages:
Stage 4: Supplier Search

Supplier development

7- 26

Business Buying Process

Eight Stages:
Stage 5: Proposal Solicitation

7- 27

Business Buying Process

Eight Stages:
Stage 6: Supplier Selection Stage 7: Order-Routine Specification

Blanket contracts are often used for maintenance, repair and operating items.

Stage 8: Performance Review

7- 28

Business Buying Process

Business Buying on the Internet
E-procurement is growing rapidly. Reverse auctions account for much of the online purchasing activity. E-procurement offers many benefits:
Access to new suppliers Lower purchasing costs Quicker order processing and delivery

7- 29

Institutional and Government Markets

Institutional Markets
Consist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care.
7- 30

Institutional and Government Markets

Institutional Markets
Often characterized by low budgets and captive patrons. Marketers may develop separate divisions and marketing mixes to service institutional markets.
7- 31

Institutional Markets

In Depth
The Background: Institutional markets are often overlooked in B2B marketing The Potential: This market is somewhat recession-resistant; great target for hard economic times How To Sell Them: Catalogs are often the best method of contact Crossover Potential: Same consumer catalogue items could be targeted to institutions
7- 32

Institutional Markets

In Depth
Timing is Important: Appropriate times to mail vary by institution. For example, August is a good month for schools, but often a poor time for other institutions due to worker vacations. Timing is Important: Understanding when government funding becomes available, or when the new budget year begins can help. Many institutions purchase early, then run low on funds.
7- 33

Discussion Question
Name some examples of goods or services that a catalogue marketer could target to your university, church, or hospital.
Think beyond the obvious.

7- 34

Institutional and Government Markets

Government Markets
Governmental units federal, state, and local that purchase or rent goods and services for carrying out the main functions of government.
7- 35

Institutional and Government Markets

Government Markets
More than 82,000 buying units. Require suppliers to submit bids. Favor domestic suppliers. Extensive paperwork is required from suppliers.
7- 36

Institutional and Government Markets

Government Markets
Government buyers often favor:
Depressed business firms and areas Small businesses Minority-owned businesses Firms which follow non-discriminatory practices

7- 37

Institutional and Government Markets

Government Markets
Most firms that sell to government buyers are not marketing-oriented. Some companies have separate government marketing departments. Much of government buying has migrated online.
7- 38

Institutional and Government Markets

Government buying online: Procurement
Gateway allows authorized defense and civilian agencies to buy online.

Procurement Gateway
7- 39