B 2 B Buying Behaviour Lecture 4

learning objectives • Understand the nature and structure of B 2 B buying • Appreciate the differences between B 2 B buying and consumer buying • Analyze the buying process and the reasons why purchasing varies across different buying situations • Link B 2 B buying with the development of marketing strategy 4 -2 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

B 2 B marketing defined B 2 B marketing is the management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers 4 -3 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

B 2 B and Consumer Markets B 2 B customers • Purchase products to meet specific business needs • Emphasise economic benefits • Use formal, lengthy purchasing policies and processes 4 -4 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 Consumer customers • Purchase products to meet individual or family needs • Emphasise psychological benefits • Buy on impulse or with minimal processes

B 2 B and Consumer Markets B 2 B customers • Involve large groups in purchasing decisions • Buy large quantities infrequently • Want a customised product package Consumer customers • Purchase as individuals or as a family unit • Buy small quantities frequently • Are content with standardised product packages 4 -5 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

B 2 B and Consumer Markets B 2 B customers • Experience major problems if supply fails • Find switching suppliers difficult • Negotiate on price 4 -6 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 Consumer customers • Experience minor irritation if supply fails • Find switching suppliers easy • Accept stated price

B 2 B and Consumer Markets B 2 B customers • Purchase direct from suppliers • Justify an emphasis on personal selling Consumer customers • Purchase from intermediaries • Justify an emphasis on mass media 4 -7 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Types of B 2 B Customers • Commercial enterprises • Government bodies • Institutions 4 -8 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Characteristics of B 2 B Markets Nature of demand Complexity of buying process 4 -9 Structure of demand Buyer-seller relationships Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Derived Demand Goodyear’s Run. On. Flat Tyres are featured on • BMWs, • Ferraris, • Corvettes, • Maseratis, and • Mercedes Source: © Goodyear Dunlop Tyres Europe B. V. http: //eu. goodyear. com 4 -10 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Joint Demand for Samsung’s Solid State Disk (SSD) is tightly coupled with the demand for computers and other devices with memory chips 4 -11 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Inelastic Demand Elasticity of demand refers to the extent to which the quantity of a product demanded changes when its price changes; If a product has inelastic demand, demand does not change due to price changes 4 -12 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Advantages of Single Sourcing • Improved communications • Increased responsiveness • Shared design of quality control systems • Elimination of supplier switching costs 4 -13 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 • Improvement in product cost effectiveness • Reduced prices through larger volume • Reduced prices through reduced supplier costs • Enhanced ability to implement JIT systems

Disadvantages of Single Sourcing • Increased costs through lack of competitive pressure • Increased supply vulnerability 4 -14 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 • Reduced market intelligence and flexibility • Improved supplier appraisal capacity

Advantages and Disadvantages of Multiple Sourcing Advantages • Increased competitive pressure • Improved supply continuity • Improved market intelligence • Improved supplier appraisal effectiveness 4 -15 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 Disadvantages • Perceived lack of commitment • Increased costs • Less supplier investment • Reduced willingness to adapt • Higher operating costs

Purchase Significance New Task Modified re-buy 4 -16 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 Routine re-buy

Question for discussion From the supplier’s point of view, how might the marketing approaches aimed at a customer making a new task purchase differ from those aimed at a routine re-buy customer?

Buying Decision-Making Process Precipitation Product specification Supplier selection Commitment 4 -18 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Buying Centres Consumer B 2 B Initiator Influencer Decider Purchaser Buyer User 4 -19 User Gatekeeper Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Buying Criteria: Economic Influences Appropriate prices Product specification Supply reliability and continuity 4 -20 Quality consistency Customer service Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Approaches to Supplier Handling Adversarial • • 4 -21 Multiple suppliers Regular price quotes Adversarial negotiations Sporadic communication Little cooperation Quality and time scales to meet lowest expectations Emphasis on lowest unit price Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006 Collaborative • • Few suppliers Long-term relationship Partnerships Frequent, planned communication Integrated operations Quality and time scales ‘designed in’ Emphasis on lowest overall cost

Relationship Life Cycle Awareness Exploration Expansion Commitment Dissolution 4 -22 Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Buying Criteria: Non-Economic Influences Prestige Career security Other personal needs 4 -23 Friendship Trust Brassington & Pettitt, Principles of Marketing 4 e, © Pearson Education 2006

Question for discussion You are the purchasing manager of a large organisation with an enormous annual spend. Most of your contracts are awarded by tender. What would your attitude be to the following offers from potential suppliers, and to what extent would they influence your decision-making: (a) a bottle of whiskey at Christmas? (b) an invitation to lunch to discuss your requirements? (c) an offer of the free use of the supplier’s managing director’s Spanish villa for two weeks? (d) £ 1500?