1. Business Markets and Business Buyer Behavior Chapter 6

2. 6 - 1 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

3. 6 - 2 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 to others at a profit. Goal 1: Define the business market

4. 6 - 3  Sales in the business market far exceed sales in consumer 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 Characteristics of Business Markets Goal 1: Define the business market

5. 6 - 4 Types of Decisions & the Decision Process Types of Decisions & the Decision Process Characteristics of Business Markets Market Structure and Demand Fewer, larger buyers Geographically concentrated Demand derived from consumers Inelastic demand Fluctuating demand Fewer, larger buyers Geographically concentrated Demand derived from consumers Inelastic demand Fluctuating demand Nature of the Buying Unit More buyers More professional purchasing effort More buyers More professional purchasing effort More complex decisions Process is more formalized Buyer and seller are more dependent on each other Build close long-term relationships with customers More complex decisions Process is more formalized Buyer and seller are more dependent on each other Build close long-term relationships with customers

6. 6 - 5 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 moreCharacteristics Goal 1: Define the business market Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process

7. 6 - 6 Business Markets Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Compared to consumer purchases:  Involve more buyers in the decision process  More professional purchasing effort Characteristics Goal 1: Define the business market

8. 6 - 7 Business Markets Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process 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 Goal 1: Define the business market Characteristics

9. 6 - 8 Major Types of Buying Situations  Straight rebuy Reordering without modification  Modified rebuy Requires modification to prior purchase  New task First-time purchase Business Buyer Behavior Goal 1: Define the business market

10. 6 - 9 Business Buying Situations Straight Rebuy New Task Buying Modified Rebuy Involved Decision Making

11. 6 - 10 The Buying Organization Model of Business Buyer Behavior Marketing and Other Stimuli Marketing and Other Stimuli Buyer’s Response Product Price Place Promotion Economic Technological Political Cultural Interpersonal and Individual Influences Organizational Influences Product or Service Choice Supplier Choice Order Quantities Delivery Terms and Times Service Terms Payment The Buying Center Buying Decision Process

12. 6 - 11 Members of the Buying Center Business Buyer Behavior Users Buyers Influencers Deciders Gatekeepers Goal 1: Define the business market

13. 6 - 12 Major Influences on Business Buying Environmental Economic, Technological, Political, Competitive & Cultural Environmental Economic, Technological, Political, Competitive & Cultural Organizational Objectives, Policies, Procedures, Structure, & Systems Organizational Objectives, Policies, Procedures, Structure, & Systems Interpersonal Authority, Status, Empathy & Persuasiveness Interpersonal Authority, Status, Empathy & Persuasiveness Individual Age, Education, Job Position, Personality & Risk Attitudes Individual Age, Education, Job Position, Personality & Risk Attitudes Buyers

14. 6 - 13 Major Influences on Business Buyers Environmental Organizational Interpersonal Individual Economic trends Supply conditions Technological, political and competitive changes Culture and customs Key Factors Goal 2: Identify the major factors that influence business buyer behavior

15. 6 - 14 Major Influences on Business Buyers Environmental Organizational Interpersonal Individual Objectives Policies Procedures Organizational structure Systems Key Factors Goal 2: Identify the major factors that influence business buyer behavior

16. 6 - 15 Major Influences on Business Buyers Influence of members in the buying center  Authority  Status  Empathy  Persuasiveness Key Factors Goal 2: Identify the major factors that influence business buyer behavior Environmental Organizational Interpersonal Individual

17. 6 - 16 Major Influences on Business Buyers Personal characteristics of members in the buying center  Age and income  Education  Job position  Personality  Risk attitudes  Buying styles Key Factors Goal 2: Identify the major factors that influence business buyer behavior Environmental Organizational Interpersonal Individual

18. 6 - 17 Stages in the Business Buying Process Problem Recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order Routine Specification Performance Review

19. 6 - 18 Stages in the Business Buying Process Stage 1: Problem Recognition Stage 2: General Need Description Stage 3: Product Specification  Value analysis helps to reduce costs Stage 4: Supplier Search  Supplier development Goal 3: List and define the steps in the business buying decision process

20. 6 - 19 Stage 5: Proposal Solicitation Stage 6: Supplier Selection Stage 7: Order-Routine Specification  Blanket contracts are often used for maintenance, repair and operating items. Stage 8: Performance Review Stages in the Business Buying Process Goal 3: List and define the steps in the business buying decision process

21. 6 - 20  E-procurement is growing rapidly  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 Business Buying on the Internet Goal 3: List and define the steps in the business buying decision process

22. 6 - 21 Institutional Markets  Consist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care. Institutional and Government Markets Goal 4: Compare the institutional and government markets

23. 6 - 22 Institutional Markets  Often characterized by low budgets and captive patrons.  Marketers may develop separate divisions and marketing mixes to service institutional markets. Institutional and Government Markets Goal 4: Compare the institutional and government markets