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Chapter 6

Business Markets
and Business
Buyer Behavior
Business-to-Business
Markets

06
What is Business buyer behavior??
Business buyer behavior refers to the
buying behavior of 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.

It also includes the behavior of retailing


and wholesaling firms that acquire goods
for the purpose of reselling or renting
them to others at a profit.
What is Business buying process?

The decision process by which business


buyers determine which products and
services their organizations need to
purchase and then find, evaluate, and
choose among alternative suppliers and
brands.
Business markets differ from consumer
markets in several ways
The business market is huge. In fact, business
markets involve far more dollars and items
than do consumer markets.
There are substantial differences between
consumer and business marketsespecially
in market structure and demand, the nature of
the buying unit, and the types of decisions and
the decision process involved.

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall


Business
Buyers
1-Fewer and larger
2-Geographically
concentrated
3-More decision
participants
4-Professional
purchasers
Derived Demand
Business Derived demand:
Business demand that
ultimately comes from (derives
from) the demand for
consumer goods.
Businesss demand for goods and services
comes either directly or indirectly from
consumers demand.
For example:

Textbooks demand > paper demand > pulp


demand > forestry product demand
Note that if demand shifts toward digital
books on the iPad or Kindle, it would
influence the derived demand for forestry
products in a negative manner.
Inelastic Demand
To produce a car, a manufacturer
purchases thousands of different
parts.
If the price of tires, batteries, or auto
glass goes up $100, it wont change
consumer demand for the carso
demand for parts remains the same.
Thus B2B demand is often inelastic. It
is not unusual for a large increase in a
business products price to have little
effect on the final consumer products
price.
Fluctuating Demand

Consumer
Business
Demand Demand

SMALL CHANGES IN CONSUMER


DEMAND CREATE BIG SHIFTS IN
BUSINESS DEMAND
Business demand also is subject to
greater fluctuations than is consumer
demand. This is because even modest
changes in consumer
demand can create large changes in
business demand.
For example, a small shift in consumer
demand for air travel may lead to a big
drop in orders for aircraft.
Decision characteristics
1- More complex

2- High prices

3- Formal process

4- Buyers and seller


dependency
1- More complex: Business buyers
usually face more complex buying
decisions than do consumer
buyers.
2- High prices: Purchases often
involve large sums of money,
complex technical and economic
considerations, and interactions
among many people at many
levels of the buyers organization.
3- Formal process: The business
buying process also tends to be
more formalized than the
consumer buying process.
4- Buyers and seller dependency:
In the business buying process,
buyer and seller are often much
more dependent on each other.
Supplier development:
Systematic development of
networks of supplier-partners to
ensure an appropriate and
dependable supply of products
and materials for use in making
products or reselling them to
others.
Major Types of Buying Situations
BUYING SITUATIONS

Straight Modified New-task


Rebuy Rebuy Buy

There are three types of situations based on the


degree of effort a firm needs to expend in order to
collect information and make a decision.
1- Straight Rebuy
A business buying situation in which
the buyer routinely reorders
something without any
modifications.
A straight rebuy refers to the routine
purchase of items that a B2B
customer regularly needs. These
purchases contribute to the bread
and butter revenue a firm needs to
maintain a steady stream of income.
Marketers work to maintain
relationships with customers who
submit reorders on a regular basis.
2-Modified
Rebuy

A business buying situation in which the


buyer wants to modify product
specifications, prices, terms, or suppliers
Modified rebuy occurs when a firm
decides to shop around for suppliers
with better prices, quality, or delivery
times. This situation also can occur
when the organization confronts new
needs for products it already buys.
Modified rebuys require more time and
effort than straight rebuys. The buyer
generally knows the purchase
requirements and he/ she has a few
potential suppliers in mind.
3-New Task
Buy

A business buying situation in which


the buyer purchases a product or
service for the first time.

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall


New-task buy is a first-time
purchase. Uncertainty and risk
characterize buying decisions in
this classification.
It requires the most effort because
the buyer has no previous
experience on which to base a
decision.
Buying Centers
Buying centers include all people
in an organization who participate
in a purchasing decision.
People in a buying center can play
one or more roles. Buying centers
provide a challenge to marketers
in determining who participates in
the process, their relative
authority, and what evaluation
criteria each participant uses.
Buying Centers
INFLUENCER DECIDER

BUYER
USER

GATEKEEPER
People in a buying center can
play one or more roles:
1- An influencer:
An influencer affects the buying
decision by dispensing advice,
expertise.
Highly-trained employees like
engineers, quality-control specialists,
and other technical experts may be
key influencers.
2- The gatekeeper:
The gatekeeper is the person who
controls the flow of information to
other members. Typically the
gatekeeper is the purchasing agent,
who gathers information and
materials from salespeople,
schedules sales presentations, and
controls suppliers access to other
participants in the center.
3- The decider:
The decider is the member of the
buying center who makes the final
decision and has the greatest power
within the buying center. This person
has power to authorize spending the
companys money. For a routine
purchase, the decider may be the
purchasing agent.
4- The buyer:
The buyer is the person who
executes the purchase and handles
the details of the transaction. The
buyer obtains competing bids,
negotiates contracts, and arranges
delivery dates and payment plans.
5- The user:
The user is the member of the buying
center who actually needs and uses
the product.
Major Influences on
Business Buyers
Business buyers are subject to many
influences when they make their
buying decisions.
Some marketers assume that the
major influences are economic.
They think buyers will favor the
supplier who offers the lowest price
or the best product or the most
service.
lowest price

Economic best product


INFLUENCES

most service
When suppliers offers are very similar,
business buyers have little basis for
strictly rational choice. Because they
can meet organizational goals with any
supplier, buyers can allow personal
factors to play a larger role in their
decisions.
When competing products differ
greatly, business buyers are more
accountable for their choice and tend
to pay more attention to economic
factors.
Figure 6.2 lists various groups of
influences on business buyers
Environmental influences ,
Organizational influences,
Interpersonal influences,
Individual influences.
1- ENVIRONMENTAL
Demand
INFLUENCES ON
Economic outlook BUSINESS BUYING
Cost of money
Resources
Decision
Technology Process
Culture
Politics
Competition
Business buyers are heavily
influenced by factors in the current
and expected economic
environment, such as the level of
primary demand, the economic
outlook, and the cost of money.
An increasingly important
environmental factor is shortages in
key materials. Many companies are
now more willing to buy and hold
larger inventories of scarce
materials to ensure adequate
supply. Business buyers also are
affected by technological, political,
and competitive developments in
the environment.
Culture and customs can strongly
influence business buyer
reactions to the marketers
behavior and strategies,
especially in the international
marketing environment.
2- ORGANIZATIONAL
Objectives INFLUENCES ON
BUSINESS BUYING
Policies

Procedures Decision
Process
Structure

Systems
Each buying organization has its own
objectives, policies, procedures,
structure, and systems, and the
business marketer must understand
those factors as well.
3- INTERPERSONAL
INFLUENCES ON
Authority BUSINESS BUYING

Status

Decision
Empathy Process

Persuasiveness
The buying center usually includes
many participants who influence
each other; so interpersonal factors
also influence the business buying
process. It is often difficult to assess
such interpersonal factors and
group dynamics.
4- INDIVIDUAL
Motives
INFLUENCES ON
Perceptions BUSINESS BUYING

Preferences

Age Decision
Process
Income

Education

Attitude toward risk


Each participant in the business
buying-decision process brings in
personal motives, perceptions, and
preferences.
These individual factors are
affected by personal characteristics
such as age, income, education,
professional identification,
personality, and attitudes toward
risk.