Chapter 6 Business Markets and Business Buyer Behavior
Last Week n Consumer Behavior ¨ What is it? ¨ Why is it important? 2
Learning Goals 1. 2. 3. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior List and define the steps in the business buying decision process 3
Why Bother? A business market comprises all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. n The business market is huge, growing globally and involves many dollars and goods. n 4
Case Study UPS Services Customer Needs n n Consumers need fast, friendly, low-cost package delivery Business needs are more complex ¨ Shipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns n n 360, 000 people and 88, 000 vehicles offer ground, air, freight worldwide Helps customer navigate the complexities of international shipping Offers a wide range of financial services Provides consulting services to improve logistics operations 5
These UPS ads target businesses as a supply chain solution 6 -6 6
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Learning Goals 1. 2. 3. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior List and define the steps in the business buying decision process 8
Definition n 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 or others at a profit. 9
Characteristics of Business Markets 10
Business Markets Characteristics n n n Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process n Compared to consumer markets: ¨ Business markets n ¨ Business customers n ¨ have fewer but larger customers are more geographically concentrated Demand is different n Demand is derived Demand is price inelastic n Demand fluctuates more n 11
Characteristics of Business Marketing Structure and Demand Contain fewer, but larger buyers Customers are more geographically concentrated Buyer demand is derived from final consumer demand Demand is often more inelastic Demand often fluctuates more, and more quickly 12
Business Markets Characteristics n n n Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process n Compared to consumer purchases: Involve more buyers in the decision process ¨ More professional purchasing effort ¨ 13
Characteristics of Business Markets Nature of the Buying Unit Business buying involves a more professional purchasing effort Business buying involves more buyers (participants) 14
Business Markets Characteristics n n n Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process n 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 15
Characteristics of Business Markets Business buyers usually face more complex buying decisions. Business buying process is more formalized. Types of Decisions and the Decision Process In business buying, buyers and sellers work more closely together. 16
Model of Business Buyer Behavior The Environment Marketing Stimuli: • Product • Price • Place • Promotion Other Stimuli: • Economic • Technological • Political • Cultural • Competitive The Buying Organization The buying center Buying decision process (Interpersonal and individual influences) (Organizational Influences) Buyer Responses Product or service choice Supplier Choice Order Quantities Delivery terms and times Service terms Payment 17
Business Buyer Behavior Major Types of Buying Situations Involved Decision Making n n Straight ¨ rebuy Reordering without modification n Modified ¨ Requires modification to prior purchase n New ¨ rebuy task First-time purchase 18
Major Types of Buying Situations Involved Decision Making New Task Buying Modified Rebuy Straight Rebuy 19
T 23 Stages of the Buying Process Stages of the buying process New Modified Task Rebuy Problem recognition Yes General need description Product specification Yes Supplier search Yes Proposal solicitation Yes Supplier selection Yes Order routing specification Performance review Yes Buying Situations Straight Maybe No Yes Yes Maybe No Yes Yes Source: Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Industrial Buying and Creative Marketing (Boston: Allyn & Bacon, 1967), p. 14.
Business-to-Business Company Du. Pont Chemicals n n Established in 1802 with gunpowder as its first product In 1910 moved away from explosives with the first non-leather material, which was snatched up for upholstery and automobile parts Today, the firm delivers science-based solutions that make real differences in people's lives around the world in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation Revenue of $27 billion 21
Business-to-Business Company Du. Pont Chemicals n Examples of B 2 B markets and products: Heath Care - Medical fabrics to provide comfort and safety to surgeons ¨ Automobile – airbag fibers and engineering plastics for safety ¨ Dental – filaments for toothbrushes ¨ Glass – technology to reduce glare and noise, save energy, protect against breakage ¨ Footware – flexibility for rubber, strength of plastic ¨ Farming – pesticides ¨ Guitar manufacturers – Du. Pont product give the look of vintage lacquer ¨ 22
Business Buyer Behavior n Systems Selling ¨ Buying a packaged solution to a problem from a single seller. ¨ Often a key marketing strategy for businesses seeking to win and hold accounts. ¨ Customization ? ? 23
Business Buyer Behavior n Buying Center ¨ The decision-making unit of a buying organization ¨ Includes all individuals and units that participate in decision making 24
Participants in the Business Buying Process Users Initiators Influencers Gatekeepers Buyers Deciders Approvers 25
Discussion Question What are the advantages and disadvantages of buying from single suppliers versus multiple suppliers?
Learning Goals 1. 2. 3. 4. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior List and define the steps in the business buyingdecision process Compare the institutional and government markets and explain how they make their buying decisions 27
Major Influences on Business Buyers 28
Major Influences on Business Buyers Key Factors Environmental Organizational Interpersonal Individual n n Economic trends Supply conditions Technological, political and competitive changes Culture and customs 29
Major Influences on Business Buyers Key Factors Environmental Organizational Interpersonal Individual n n n Objectives Policies Procedures Organizational structure Systems 30
Major Influences on Business Buyers Key Factors Environmental Organizational Interpersonal Individual n Influence of members in the buying center ¨ Authority ¨ Status ¨ Empathy ¨ Persuasiveness 31
Major Influences on Business Buyers Key Factors Environmental Organizational Interpersonal Individual n Personal characteristics of members in the buying center Age and income ¨ Education ¨ Job position ¨ Personality ¨ Risk attitudes ¨ Buying styles ¨ 32
Learning Goals 1. 2. 3. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior List and define the steps in the business buying decision process 34
Stages in the Business Buying Process 35
Business Buying on the Internet n n E-procurement is growing rapidly Business buyers may purchase electronically by: ¨ ¨ n n Electronic data interchange links (EDI) The Internet 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 36
Benefits and Problems Created by Buying on the Internet n Benefits: ¨ ¨ ¨ n Shave transaction costs Reduce time between order and delivery Create more efficient purchasing systems Forge more intimate relationships Level the playing field Problems: ¨ Cut purchasing jobs ¨ Erode supplier-buyer loyalty ¨ Create potential security disasters 37
Institutional and Government Markets Institutional Markets Low Budgets Captive Patrons Government Markets Public Review Negotiated Contracts Red Tape is Common Noneconomic Criteria Some Buying Online 38
Learning Goals 1. 2. 3. Define the business market and how it differs from consumer markets Identify the major factors that influence business buyer behavior List and define the steps in the business buying decision process 39
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