Business Markets and Business Buyer Behavior

1
Chapter 6

• Business Markets and Business Buyer Behavior

2
Last Week

• Consumer Behavior
• What is it?
• Why is it important?

3
Learning Goals

1. Define the business market and how it differs
   from consumer markets
2. Identify the major factors that influence
   business buyer behavior
3. List and define the steps in the business buying
   decision process

4
Why Bother?

• A business market comprises all the organizations
  that buy goods and services for use in the
  production of other products and services that
  are sold, rented, or supplied to others.
• The business market is huge, growing globally and
  involves many dollars and goods.

5
Case StudyUPS

• Services
• 360,000 people and 88,000 vehicles offer ground,
  air, freight worldwide
• Helps customer navigate the complexities of
  international shipping
• Offers a wide range of financial services
• Provides consulting services to improve logistics
  operations

• Customer Needs
• Consumers need fast, friendly, low-cost package
  delivery
• Business needs are more complex
• Shipping part of complex logistics process
  including purchasing, inventory, order status,
  invoices, payments, returns

6
These UPS ads target businesses as a supply
chain solution
6 - 6
7
(No Transcript)
8
Learning Goals

1. Define the business market and how it differs
   from consumer markets
2. Identify the major factors that influence
   business buyer behavior
3. List and define the steps in the business buying
   decision process

9
Definition

• 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.
• Also included are retailing and wholesaling
  firms that acquire goods for the purpose of
  reselling or renting them or others at a profit.

10
Characteristics of Business Markets
11
Business Markets

• Compared to consumer markets
• Business markets
• have fewer but larger customers
• Business customers
• are more geographically concentrated
• Demand is different
• Demand is derived
• Demand is price inelastic
• Demand fluctuates more

Characteristics

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

12
Characteristics of Business Markets
Contain fewer, but larger buyers
Customers are more geographically concentrated
Buyer demand is derived from final consumer
demand
Marketing Structure and Demand
13
Business Markets
Characteristics

• Compared to consumer purchases
• Involve more buyers in the decision process
• More professional purchasing effort

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

14
Characteristics of Business Markets
Nature of the Buying Unit
15
Business Markets

• Compared to consumer purchases
• More complex buying decisions
• The buying process is more formalized
• Buyers and sellers work more closely together and
  build long-term relationships

Characteristics

• Marketing Structure and Demand
• Nature of the Buying Unit
• Types of Decisions and the Decision Process

16
Characteristics of Business Markets
Types of Decisions and the Decision Process
Build Long-Term Partnerships
17
Model of Business Buyer Behavior
Buyer Responses Product or service
choice Supplier Choice Order Quantities Deliver
y terms and times Service terms Payment

• The Environment
• Marketing
• Stimuli
• Product
• Price
• Place
• Promotion
• Other Stimuli
• Economic
• Technological
• Political
• Cultural
• Competitive

The Buying Organization The buying
center Buying decision process (Interpersonal
and individual influences) (Organizational
Influences)
18
Business Buyer Behavior

• Major Types of Buying Situations
• Straight rebuy
• Reordering without modification
• Modified rebuy
• Requires modification to prior purchase
• New task
• First-time purchase

Involved Decision Making
19
Major Types of Buying Situations
20
Stages of the Buying Process
T23
Stages of the buying process
Buying Situations

• New Modified Straight
• Task Rebuy Rebuy
• Problem recognition Yes Maybe No
• General need description Yes Maybe No
• Product specification Yes Yes Yes
• Supplier search Yes Maybe No
• Proposal solicitation Yes Maybe No
• Supplier selection Yes Maybe No
• Order routing specification Yes Maybe No
• Performance review Yes Yes Yes

Source Adapted from Patrick J. Robinson, Charles
W. Faris, and Yoram Wind, Industrial Buying and
Creative Marketing (Boston Allyn Bacon, 1967),
p.14.
21
Business-to-Business CompanyDuPont Chemicals

• Established in 1802 with gunpowder as its first
  product
• In 1910 moved away from explosives with the first
  non-leather material, which was snatched up for
  upholstery and automobile parts
• Today, the firm delivers science-based solutions
  that make real differences in people's lives
  around the world in areas such as food and
  nutrition, health care, apparel, safety and
  security, construction, electronics and
  transportation
• Revenue of 27 billion

22
Business-to-Business CompanyDuPont Chemicals

• Examples of B2B markets and products
• Heath Care - Medical fabrics to provide comfort
  and safety to surgeons
• Automobile airbag fibers and engineering
  plastics for safety
• Dental filaments for toothbrushes
• Glass technology to reduce glare and noise,
  save energy, protect against breakage
• Footware flexibility for rubber, strength of
  plastic
• Farming pesticides
• Guitar manufacturers DuPont product give the
  look of vintage lacquer

23
Business Buyer Behavior

• Systems Selling
• Buying a packaged solution to a problem from a
  single seller.
• Often a key marketing strategy for businesses
  seeking to win and hold accounts.
• Customization ????

24
Business Buyer Behavior

• Buying Center
• The decision-making unit of a buying organization
• Includes all individuals and units that
  participate in decision making

25
Participants in the Business Buying Process
Users
Initiators
Influencers
Gatekeepers
Buyers
Deciders
Approvers
26
Discussion Question

• What are the advantages and disadvantages of
  buying from single suppliers versus multiple
  suppliers?

27
Learning Goals

1. Define the business market and how it differs
   from consumer markets
2. Identify the major factors that influence
   business buyer behavior
3. List and define the steps in the business
   buying-decision process
4. Compare the institutional and government markets
   and explain how they make their buying decisions

28
Major Influences on Business Buyers
29
Major Influences on Business Buyers
Key Factors

• Economic trends
• Supply conditions
• Technological, political and competitive changes
• Culture and customs

• Environmental
• Organizational
• Interpersonal
• Individual

30
Major Influences on Business Buyers
Key Factors

• Objectives
• Policies
• Procedures
• Organizational structure
• Systems

• Environmental
• Organizational
• Interpersonal
• Individual

31
Major Influences on Business Buyers
Key Factors

• Influence of members in the buying center
• Authority
• Status
• Empathy
• Persuasiveness

• Environmental
• Organizational
• Interpersonal
• Individual

32
Major Influences on Business Buyers
Key Factors

• Personal characteristics of members in the buying
  center
• Age and income
• Education
• Job position
• Personality
• Risk attitudes
• Buying styles

• Environmental
• Organizational
• Interpersonal
• Individual

33
Discussion QuestionBuyer Behavior

• Your job selling Coca-Cola to your old college
  has proven more difficult than you imagined.
  There seem to be many influences on your buyers
  behavior that you did not expect.
• What environmental factor might exist?
• Organizational factors?
• Interpersonal factors?
• Individual factors?

34
Learning Goals

1. Define the business market and how it differs
   from consumer markets
2. Identify the major factors that influence
   business buyer behavior
3. List and define the steps in the business buying
   decision process

35
Stages in the Business Buying Process
36
Business Buying on the Internet

• E-procurement is growing rapidly
• Business buyers may purchase electronically by
• Electronic data interchange links (EDI)
• The Internet
• Online auctions and online trading exchanges
  (e-marketplaces) 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

37
Benefits and Problems Created by Buying on the
Internet

• Problems
• Cut purchasing jobs
• Erode supplier-buyer loyalty
• Create potential security disasters

• Benefits
• Shave transaction costs
• Reduce time between order and delivery
• Create more efficient purchasing systems
• Forge more intimate relationships
• Level the playing field

38
Institutional and Government Markets
39
Learning Goals

• Define the business market and how it differs
  from consumer markets
• Identify the major factors that influence
  business buyer behavior
• List and define the steps in the business buying
  decision process