Presentation on theme: "Business Markets and Business Buyer Behavior"— Presentation transcript:
1Business Markets and Business Buyer Behavior Chapter 6Business Markets and Business Buyer Behavior
2Last WeekConsumer BehaviorWhat is it?Why is it important?
3Learning GoalsDefine the business market and how it differs from consumer marketsIdentify the major factors that influence business buyer behaviorList and define the steps in the business buying decision process
4Why 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.
5Case Study UPS Services Customer Needs 360,000 people and 88,000 vehicles offer ground, air, freight worldwideHelps customer navigate the complexities of international shippingOffers a wide range of financial servicesProvides consulting services to improve logistics operationsCustomer NeedsConsumers need fast, friendly, low-cost package deliveryBusiness needs are more complexShipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns
6These UPS ads target businesses as a supply chain solution 6 - 6
8Learning GoalsDefine the business market and how it differs from consumer marketsIdentify the major factors that influence business buyer behaviorList and define the steps in the business buying decision process
9Definition 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.
11Business Markets Characteristics Compared to consumer markets: have fewer but larger customersBusiness customersare more geographically concentratedDemand is differentDemand is derivedDemand is price inelasticDemand fluctuates moreMarketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
12Characteristics of Business Markets Contain fewer, butlarger buyersCharacteristics of Business MarketsCustomers are moregeographically concentratedBuyer demand is derived fromfinal consumer demandMarketing Structure and DemandDemand is often more inelasticDemand often fluctuates more, and more quickly
13Business Markets Characteristics Compared to consumer purchases: Involve more buyers in the decision processMore professional purchasing effortMarketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
14Characteristics of Business Markets Nature of the Buying UnitBusiness buying involves a more professional purchasing effortBusiness buying involves more buyers (participants)
15Business Markets Characteristics Compared to consumer purchases More complex buying decisionsThe buying process is more formalizedBuyers and sellers work more closely together and build long-term relationshipsMarketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
16Characteristics of Business Markets Types of Decisions and the Decision ProcessBusiness buyers usually face more complex buying decisions.Business buying process is more formalized.In business buying, buyers and sellers work more closely together.Build Long-Term Partnerships
18Business Buyer Behavior Major Types of Buying SituationsStraight rebuyReordering without modificationModified rebuyRequires modification to prior purchaseNew taskFirst-time purchaseInvolved Decision Making
19Major Types of Buying Situations New Task BuyingInvolved Decision MakingModified RebuyStraight Rebuy
20Stages of the Buying Process Stages of the buying process Buying SituationsNew Modified StraightTask Rebuy RebuyProblem recognition Yes Maybe NoGeneral need description Yes Maybe NoProduct specification Yes Yes YesSupplier search Yes Maybe NoProposal solicitation Yes Maybe NoSupplier selection Yes Maybe NoOrder routing specification Yes Maybe NoPerformance review Yes Yes YesSource: Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Industrial Buyingand Creative Marketing (Boston: Allyn & Bacon, 1967), p.14.
21Business-to-Business Company DuPont Chemicals Established in 1802 with gunpowder as its first productIn 1910 moved away from explosives with the first non-leather material, which was snatched up for upholstery and automobile partsToday, 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 transportationRevenue of $27 billion
22Business-to-Business Company DuPont Chemicals Examples of B2B markets and products:Heath Care - Medical fabrics to provide comfort and safety to surgeonsAutomobile – airbag fibers and engineering plastics for safetyDental – filaments for toothbrushesGlass – technology to reduce glare and noise, save energy, protect against breakageFootware – flexibility for rubber, strength of plasticFarming – pesticidesGuitar manufacturers – DuPont product give the look of vintage lacquer
23Business Buyer Behavior Systems SellingBuying a packaged solution to a problem from a single seller.Often a key marketing strategy for businesses seeking to win and hold accounts.Customization ????
24Business Buyer Behavior Buying CenterThe decision-making unit of a buying organizationIncludes all individuals and units that participate in decision making
25Participants in the Business Buying Process UsersInitiatorsInfluencersGatekeepersBuyersDecidersApprovers
26Discussion QuestionWhat are the advantages and disadvantages of buying from single suppliers versus multiple suppliers?
27Learning GoalsDefine the business market and how it differs from consumer marketsIdentify the major factors that influence business buyer behaviorList and define the steps in the business buying-decision processCompare the institutional and government markets and explain how they make their buying decisions
29Major Influences on Business Buyers Key FactorsEconomic trendsSupply conditionsTechnological, political and competitive changesCulture and customsEnvironmentalOrganizationalInterpersonalIndividual
30Major Influences on Business Buyers Key FactorsObjectivesPoliciesProceduresOrganizational structureSystemsEnvironmentalOrganizationalInterpersonalIndividual
31Major Influences on Business Buyers Key FactorsInfluence of members in the buying centerAuthorityStatusEmpathyPersuasivenessEnvironmentalOrganizationalInterpersonalIndividual
32Major Influences on Business Buyers Key FactorsPersonal characteristics of members in the buying centerAge and incomeEducationJob positionPersonalityRisk attitudesBuying stylesEnvironmentalOrganizationalInterpersonalIndividual
33Discussion Question Buyer 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 buyer’s behavior that you did not expect.What environmental factor might exist?Organizational factors?Interpersonal factors?Individual factors?The price of sugar increases which would increase the price of your soda. At the same time, students might switch to water whose price might not be affected by this increase in sugar prices. Also, culture and customs might change. In fact people are currently moving away from soda and toward healthier drinks. The competitive situation might change where Pepsi has redesigned their manufacturing and can lower their prices far below Coca-Cola’s prices.Organizationally, the company might be too lazy to consider a new vendor. If all is working well with Pepsi, they might figure “if it ain’t broke, don’t fix it”Interpersonal dynamics might come into play. Perhaps the Pepsi rep has become very close with the decision makers over time. Perhaps the buying center doesn’t get along well and tries to minimize their interactions by reducing decisions.Perhaps the manager of dining services used to work for Pepsi. People tend to feel very strongly regarding the taste of Pepsi over Coke and perhaps all the members feel that Pepsi tastes better.
34Learning GoalsDefine the business market and how it differs from consumer marketsIdentify the major factors that influence business buyer behaviorList and define the steps in the business buying decision process
36Business Buying on the Internet E-procurement is growing rapidlyBusiness buyers may purchase electronically by:Electronic data interchange links (EDI)The InternetOnline auctions and online trading exchanges (e-marketplaces) account for much of the online purchasing activityE-procurement offers many benefits:Access to new suppliersLower purchasing costsQuicker order processing and delivery
37Benefits and Problems Created by Buying on the Internet Shave transaction costsReduce time between order and deliveryCreate more efficient purchasing systemsForge more intimate relationshipsLevel the playing fieldProblems:Cut purchasing jobsErode supplier-buyer loyaltyCreate potential security disasters
38Institutional and Government Markets Low BudgetsCaptive PatronsInstitutional MarketsPublic ReviewRed Tape isCommonGovernment MarketsNoneconomicCriteriaNegotiatedContractsSome BuyingOnlineThe collection or sequence of forms and procedures required to gain bureaucratic approval for something, especially when oppressively complex and time-consuming.
39Learning GoalsDefine the business market and how it differs from consumer marketsIdentify the major factors that influence business buyer behaviorList and define the steps in the business buying decision process