Objectives Be able to define the business market and explain how business markets differ from consumer markets. Know the major factors that influence business.
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0 Business Markets and Business Buyer Behavior Chapter 7
1 ObjectivesBe able to define the business market and explain how business markets differ from consumer markets.Know the major factors that influence business buyer behavior.
2 ObjectivesUnderstand the steps in the business buying decision process.Understand institutional and government markets and how buyers in these markets make their buying decisions.
3 Gulfstream Aerospace Sells jets exclusively for corporate use 300 – 500 buyers worldwideRational, objective, and human factors influence business buyer’s decisionsMultiple people are involved in the decisionBuying influences include the CEO, pilot, board members, even spousesCompany has been highly successful
4 Definition Business Buyer Behavior: The buying behavior of organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.
5 Business Markets Characteristics of Business Markets Sales in the business market far exceed sales in consumer markets.
6 Business Markets Characteristics of Business Markets Business markets differ from consumer markets in many ways.Marketing structure and demandNature of the buying unitTypes of decisions and the decision process
7 Business Markets Characteristics Compared to consumer markets: have fewer but larger customersBusiness customersare concentrated geographicallyDemand is differentDerived demandPrice inelasticFluctuates more, and changes more quicklyMarketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
8 Discussion QuestionThink about derived demand in the context of vehicles. Which parts, components, or finished goods are most dependent upon the demand for new vehicle production?
9 Fujitsu promises more than just high-tech products: “Our technology helps keep you moving upward. And our people won’t let you down.”
10 Business Markets Characteristics Compared to consumer purchases: Business purchases involve more buyers in the decision process.Purchasing efforts are undertaken by professional buyers.Marketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
11 Business Markets Characteristics In comparison to consumer purchases: Business buyers face more complex buying decisions.The buying process is more formalized.Buyers and sellers work together closely and build long-term relationships.Marketing Structure and DemandNature of the Buying UnitTypes of Decisions and the Decision Process
12 BusinessNow NerveWire Video Clip Consultants work closely with their client companies.What criteria might guide the selection of a firm such as NerveWire?Click the picture above to play video
13 Model of Business Buyer Behavior Figure 7-1:Model of Business Buyer Behavior
14 Business Buyer Behavior Major Types of Buying SituationsStraight rebuyReordering without modificationModified rebuyRequires modification to prior purchaseNew taskFirst time purchase
15 Business Buyer Behavior Systems Selling:Buying a packaged solution to a problem from a single seller.Convenience is a major benefitOften a key marketing strategy for businesses seeking to win and hold accounts.
16 Business Buyer Behavior Participants in the Buying Decision ProcessUsersBuyersInfluencersDecidersGatekeepers
17 Emotions also play a role in business buying Emotions also play a role in business buying. Volvo stresses that the trucks’ benefits will make “drivers a lot more possessive”.
18 Major Influences on Business Buyer Behavior Figure 7-2:Major Influences on Business Buyer Behavior
19 Major Influences on Business Buyers Key FactorsEconomic trendsSupply conditionsTechnological changeRegulatory and political environmentsCompetitive developmentsCulture and customsEnvironmentalOrganizationalInterpersonalIndividual
20 Major Influences on Business Buyers Key FactorsObjectivesPoliciesProceduresOrganizational structureSystemsEnvironmentalOrganizationalInterpersonalIndividual
21 Major Influences on Business Buyers Key FactorsAuthorityStatusEmpathyPersuasivenessEnvironmentalOrganizationalInterpersonalIndividual
22 Major Influences on Business Buyers Key FactorsAuthorityAgeEducationJob positionPersonalityRisk attitudesEnvironmentalOrganizationalInterpersonalIndividual
23 Stages of the Business Buying Process Figure 7-3:Stages of the Business Buying Process
24 Business Buying Process Eight Stages:Stage 1: Problem RecognitionStage 2: General Need DescriptionStage 3: Product SpecificationValue analysis helps to reduce costs
25 Business Buying Process Eight Stages:Stage 4: Supplier SearchSupplier development
26 Business Buying Process Eight Stages:Stage 5: Proposal Solicitation
27 Business Buying Process Eight Stages:Stage 6: Supplier SelectionStage 7: Order-Routine SpecificationBlanket contracts are often used for maintenance, repair and operating items.Stage 8: Performance Review
28 Business Buying Process Business Buying on the InternetE-procurement is growing rapidly.Reverse auctions account for much of the online purchasing activity.E-procurement offers many benefits:Access to new suppliersLower purchasing costsQuicker order processing and delivery
29 Institutional and Government Markets Institutional MarketsConsist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care.
30 Institutional and Government Markets Institutional MarketsOften characterized by low budgets and captive patrons.Marketers may develop separate divisions and marketing mixes to service institutional markets.
31 Institutional Markets In Depth The Background: Institutional markets are often overlooked in B2B marketingThe Potential: This market is somewhat recession-resistant; great target for hard economic timesHow To Sell Them: Catalogs are often the best method of contactCrossover Potential: Same consumer catalogue items could be targeted to institutionsFor additional information, see the article by Alicia Orr Suman entitled, “Institutions are businesses, too” in Target Marketing, Vol. 25, Issue 10, p. 125 (October 2002)
32 Institutional Markets In Depth Timing is Important: Appropriate times to mail vary by institution. For example, August is a good month for schools, but often a poor time for other institutions due to worker vacations.Timing is Important: Understanding when government funding becomes available, or when the new budget year begins can help. Many institutions purchase early, then run low on funds.For additional information, see the article by Alicia Orr Suman entitled, “Institutions are businesses, too” in Target Marketing, Vol. 25, Issue 10, p. 125 (October 2002)
33 Discussion QuestionName some examples of goods or services that a catalogue marketer could target to your university, church, or hospital.Think beyond the obvious.
34 Institutional and Government Markets Governmental units – federal, state, and local – that purchase or rent goods and services for carrying out the main functions of government.
35 Institutional and Government Markets More than 82,000 buying units.Require suppliers to submit bids.Favor domestic suppliers.Extensive paperwork is required from suppliers.
36 Institutional and Government Markets Government buyers often favor:Depressed business firms and areasSmall businessesMinority-owned businessesFirms which follow non-discriminatory practices
37 Institutional and Government Markets Most firms that sell to government buyers are not marketing-oriented.Some companies have separate government marketing departments.Much of government buying has migrated online.
38 Institutional and Government Markets Government buying online: Procurement Gateway allows authorized defense and civilian agencies to buy online.Procurement Gateway