Presentation on theme: "Chapter 6: Analyzing Business Market"— Presentation transcript:
1 Chapter 6: Analyzing Business Market Marketing ManagementChapter 6: Analyzing Business MarketReported By: Eulisan J. Florague
2 Chapter questionsWhat is the business market, and how does it differ from the consumer market?What buying situations do organizational buyers face?Who participates in the business-to-business buying process?How do business buyers make their decisions?How can companies build strong relationships with business customers?How do institutional buyers and government agencies do their buying?
3 Content III. Managing business-to-business customer relationships I. What is organizational buying?II. Participants in the business buying processIII. Managing business-to-business customer relationships
4 I. What is organizational buying ? What is business market?A business market is a group of profit making organizations that buy goods and services for business use.It consists of industries, distributors and retailers.This market has rational buying with and experiences an inelastic demand.
6 How does it differ from the consumer market ? BusinessEvery customer has equal value and represents a small % of revenueThere are a small number of big customers that account for a large % of revenueSales are made remotely, the manufacturer doesn't meet the customerSales are made personally, the manufacturer gets to know the customerProducts are the same for all customers. The service element is lowProducts are customized for different customers. Service is highly valuedPurchases are made for personal use - image is important for its own sakePurchases are made for others to use - image is important where it adds value to customers
7 Cont. The purchaser is normally the user The purchaser is normally an integrator, someone down the supply chain is the user.Costs are restricted to purchase costsPurchase costs may be a small part of the total costs of useThe purchase event is not subject to tender and negotiationThe purchase event is conducted professionally and includes tender and negotiation.The exchange is one off transaction. There is no long-time view (financial services differ)The exchange is often one of strategic intent. There is the potential for long term value
8 Buying situations Straight rebuy Modified rebuy Reorders supplies (office supplies, bulk chemicals) at a routine basis and chooses from list of suppliers.Modified rebuyThe buyer want to modified products specs, prices, delivery requirements from previous orders.New taskPurchaser buys a products for the first time
10 The buying center 1. Initiators 2. Users 3. Influencers 4. Deciders Those requesting the product2. UsersThose who will you use the product or service3. InfluencersThose who influence the buying decisions4. DecidersThose who decide on products reqs & suppliers5. ApproversThose authorizing actions of buyerstho6. BuyersThose who have authority to select supplier & arrange purchase terms7. GatekeepersThose who prevent information from reaching members of buying center
11 Of Concern to Business Marketers Who are the major decision participants?What decisions do they influence?What is their level of influence?What evaluation criteria do they use?
12 Stages in Buying Process Problem recognitionGeneral need descriptionProduct specificationSupplier searchProposal solicitationSupplier selectionOrder routine specificationPerformance review
13 The buygrid framework New Task Modified Rebuy Straight Buy Problem recognitionGeneral need descriptionProduct specificationSupplier searchProposal solicitationSupplier selectionOrder-routine specificationPerformance reviewMaybeMaybeMaybeMaybeMaybeMaybe
14 Searching for suppliers Catalog sitesElectronic catalogsVertical marketsOrdering raw materials from specialized websitesPure play auction sitesOnline marketplaces (Ebay, Amazon)Spot marketsOn spot electronic markets, prices change by the minutePrivate exchangesPrivate exchange to link groups of suppliers over the webBarter marketsParticipants offer to trade goods or servicesBuying alliancesCompanies buying the same goods join together to form purchasing consortia
15 Overcoming Price Pressures Limit quantity purchasedAllow no refundsMake no adjustmentsProvide no services
16 Researching Customer Value Internal engineering assessmentField value-in-use assessmentFocus-group value assessmentDirect survey questionsConjoint analysisBenchmarksCompositional approachImportance ratings
17 Order – routine specification The buyers negotiates: The final order; listing the technical specifications; the quantity needed; the expected time of delivery; return policies; warranties…Performance reviewThree methods:The buyer may contact the end users and ask for their evaluationsThe buyer may rate the supplier on several criteria using a weighted score methodThe buyer might aggregate the cost of poor performance to come up with adjusted costs of purchase including price
18 III. Managing Business- to- Business Customer Relationships
19 The Benefits of Vertical Coordination Create more value for both buying partners and sellers partnersEstablishing Corporate Trust and Credibility
20 The relationship between advertising agencies and clients In the relationship formation stage, one partner experienced substantial market growth.Information asymmetry between partnership would generate more profit than if the partner attempted to invade the other firm’s areaAt least one partner had high barriers to entry that would prevent the other partner from entering the businessDependence asymmetry existed such that one partner was more able to control or influence the other’s conductOne partner benefited from economies of scale related to the relationship
21 Factors of buyer-supplier relationships Availability of alternativesImportance of supplyComplexity of supplySupply market dynamism
22 Categories of Buyer-Supplier Relationships Basic buying and sellingBare bonesContractual transactionCustomer supplyCooperative systemsCollaborativeMutually adaptiveCustomer is king
23 Business Relationship : Risks and Opportunism Opportunism is a concernVertical coordination can facilitate stronger customer – seller ties but increase the risk to the customers and supplier specific investment
24 Institutional and Government Markets Institutional market consists of schools ,hospitals, nursing home, prisons and other institutions that provide goods and services to people in their care
25 Institutional and Government Markets ( Cont ) Buyers for government organization tend to require a great deal of paperwork from their vendors and to favor open bidding and domestic companiesSuppliers must be prepared to adapt their offers to the special needs and procedures found in institutional and government markets
26 Summary Business markets differ from consumer markets Business buyers make purchase decisions base on different buying situationsThe buying process consists of eight stages.sellers use different sales strategies according to their size. One is to use e – marketplacesThere are also different strategies in handling price – oriented customersBusiness marketers must form strong bonds and relationships with their customers and provide them added value.