1. Business Markets

2. Business Markets and Business Buying Behavior The nature and scope of the business market. The six categories of business buyers. The differentiating characteristics of business markets. What determines business market demand. The buying processes in business markets.

3. The business market consists of individuals and organizations that buy goods and services to: Make other goods and services. Resell to other business users or to consumers. Conduct the organization ’ s operations. Business marketing is the marketing of goods and services to business users, as contrasted to ultimate consumers.

4. Major Categories of the Business Market Producers, consisting of firms which transform raw materials or components into a finished product. The reseller market, consisting of firms that buy products from supplier organizations and resell these items unchanged to their customers. The government market, including all federal, state, and local units buying for government institutions such as schools, offices, hospitals, and military bases. The “ nonbusiness ” business market, or institutions consisting of nonprofit organizations such as churches, colleges, and museums. The services market, including firms that sell services to other organizations. Plus: The international market.

5. Types of business products: Major equipment: capital expenditures, large or expensive machinery. Accessory equipment: less expensive, may be billed as an expense. Raw materials, unprocessed products such as agricultural or mineral products. Component parts, semi-finished products ready for assembly, or requiring little preparation for assembly. Processed materials, materials used in manufacturing, which have undergone process from the raw material state. Supplies, consumable products which do not become part of the finished product.

6. Demand characteristics differentiate the business market from the consumer market: Demand is derived from the demand for the consumer products in which the business item is used. Joint demand* occurs when two or more items are used together in a final product. In the short run demand is inelastic, that is, demand for a product responds very little to changes in price when: The cost of a single part or material is a small portion of the total cost of the finished product. If the part or material has no substitute. Demand is widely fluctuating, meaning that demand for most classes of business goods fluctuates considerably more than the demand for consumer products. The buyers are well informed and know the relative merits of alternative sources of supply and competitive products.

7. The factors affecting the market for business products are: The number and types of potential business users. Their buying power, buying motives, and buying habits.

8. Business buying has become an important part of overall strategy for three reasons: Companies are making less and buying more. Intense quality and time pressure increases the need for reliable suppliers. Firms are choosing fewer suppliers and entering into long-term “ partnering ” relationships with them: Strategic Alliances

9. BUSINESS BUYING-DECISION PROCESS Need recognition Identification of alternatives Evaluation of alternatives Purchase and related decisions Postpurchase behavior TYPES OF DECISIONS New Task Straight Rebuy Modified Rebuy BUYING PATTERNS Direct Frequency Order Size Negotiation Reciprocity Service Leasing BUYING CENTER Users Influencers Deciders Initiator Gatekeepers Buyers BUYING MOTIVES Organizational Personal BUYER-SELLER RELATIONSHIP Value chain Loyalty

10. There are three classes of business buying situations (also called buy classes): New-task buying (the most difficult and complex buying situation), which is the first-time purchase of a major product. Straight rebuy. This is a routine, low-involvement purchase. Modified rebuy. The buying situation is somewhere between the other two in terms of: The time and people involved, the information needed, and the location of buying authority.

11. A Buying Center is all the individuals or groups who are involved in the purchase decision-making process. Buying Center members perform the following roles: Initiators – those who originally suggested the purchase. Users — people who actually use the product. Influencers — people who help to set the product specifications because of their expertise, financial position, or political power. Deciders — the people who make the actual buying decision regarding the product and supplier. Gatekeepers — people who control the flow of purchasing information within the organizations as well as between the firm and potential vendors. Buyers — people who arrange the terms of the sale and process the actual purchase orders.

12. In a Buying Center: Several people may play the same role or the same person may occupy more than one role. The size and composition of a buying center will vary among businesses. Trying to determine who does what in a buying center is very important but can also be very difficult. The challenges in a business buying-decision process suggest that coordination of the buying and selling activities would be beneficial to both firms.

13. Buying patterns of business users differ from consumers in several ways: Direct purchase - from the business producing the product is common. Nature of the relationship - there is an emphasis on building and maintaining relationships. Frequency of purchase - business firms buy certain products very infrequently. Size of order - the average business order is larger than in the consumer market. Length of negotiation period - the period of negotiation for a sale is often much longer.

14. Service expectations - for some products (e.g., elevators) the differentiating feature among sellers is their service. Dependability of supply - the user insists on an adequate quantity of uniform-quality products. Leasing instead of buying - a growing tendency in the business market is to lease products instead of buying them. Buying patterns of business users differ from consumers in several ways (cont.) :