MARKETING MANAGEMENT 12 th edition 7 Analyzing Business Markets KotlerKeller

7-2 Chapter Questions What 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?

7-3 Chapter Questions 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?

7-4 Business market All organisations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. Also includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.

7-5 Organizational Buying Decision-making process by which Business buyers establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers.

7-6 Characteristics of Business markets Market Structure and Demand Fewer, larger buyers Geographically concentrated buyers Demand is derived from final consumer demand.e.g. GM buys steel because, consumers demand its cars. Inelastic demand: Not affected in short run by price changes. Fluctuating demand: Demand in business markets fluctuates more and more quickly. e.g a rise of only 10 percent in consumer demand can cause as much as 100 percent increase in business demand.

7-7 Nature of Buying unit: Fewer, larger buyers More Professional purchasing effort. Type of Decisions and the Decision Process: Complex buying decisions More formalised buying process Close supplier-customer relationships

7-8 Buying Situation Straight rebuy: buyer routinely reorders without modifications Modified rebuy: buyer wants to modify product specifications, prices, terms or suppliers New task: buyer purchases a product or service for the first time.

7-9 New Task In such cases, the greater the cost or risk, the larger the number of decision participants and the greater their efforts to collect information will be. The new task situation is the marketer’s greatest opportunity and challenge. The marketer tries to reach as many key buying influences as possible and provide help and information.

7-10 Systems Buying and Selling Turnkey solution desired; Bids solicited Prime Contractors Second-tier Contractors System subcomponents assembled

7-11 The Buying Center: Decision-making unit that participate in buying process Initiators Users Influencers: technical people Deciders: have formal power to approve the final suppliers Buyers: have formal authority to select Gatekeepers: control flow of infomation

7-12 The Business Buying process The figure on the next page depicts 8 stages of the buying process. Buyers who face a new task situation go through all stages of the buying process. Buyers making modified or straight rebuys may skip some of the stages.

7-13 Table 7.1 Buy-grid Framework

7-14 Problem Recognition The buying process begins when someone in the company recognises a problem or need that can be met by acquiring a specific product or service. Can result from internal or external stimuli. Co may decide to launch a new product that might require a new machinery. Machine may break down.

7-15 General need description Company describes the general characteristics and quantity of a needed item. Product Specification: Stage in which the buying organisation decides on and specifies the best technical product characteristics for a needed item.

7-16 Supplier Search The stage in which the buyer tries to find the best vendors. Proposal Solicitation: The stage in which the buyer invites qualified suppliers to submit proposals. Supplier selection: The stage in which buyer reviews proposals and selects a supplier.

7-17 Table 7.2 Vendor Analysis

7-18 Order-Routine specification Stage in which buyer writes the final order with the chosen suppliers listing the technical specifications, quantity needed, expected time of delivery, and warranties. Performance review: The final stage in which the buyer rates its satisfaction with suppliers, deciding whether to continue, modify or drop them.