Chapter 6

Business Markets and Business Buyer Behavior

Last Week

Consumer Behavior
What

is it? Why is it important?

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

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. The business market is huge, growing globally and involves many dollars and goods.

Case Study UPS

Customer Needs

Services

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

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

These UPS ads target businesses as a supply chain solution

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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

Definition

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.

Characteristics of Business Markets

Business Markets
Characteristics

Compared to consumer markets:

Business markets

Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process

have fewer but larger customers are more geographically concentrated Demand is derived Demand is price inelastic
Demand fluctuates more

Business customers

Demand is different

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Characteristics of Business Markets

Marketing Structure and Demand Customers are more
Buyer demand is derived from final consumer demand Demand is often more inelastic Demand often fluctuates more, and more quickly
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Contain fewer, but larger buyers

geographically concentrated

Business Markets
Characteristics

Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process

Compared to consumer purchases:

Involve more buyers in the decision process More professional purchasing effort

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Characteristics of Business Markets

Nature of the Buying Unit
Business buying involves a more professional purchasing effort

Business buying involves more buyers (participants)

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Business Markets
Characteristics

Compared to consumer purchases

More

Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process

complex buying decisions The buying process is more formalized Buyers and sellers work more closely together and

build long-term relationships

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Characteristics of Business Markets

Business buyers usually face more complex buying decisions.

Types of Decisions and the Decision Process

Business buying process is more formalized.

In business buying, buyers and sellers work more closely together.

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Model of Business Buyer Behavior

The Environment
Marketing Stimuli:
Product Price Place Promotion

The Buying Organization

The buying center Buying decision process

Buyer Responses
Product or service choice

Supplier Choice
Order Quantities Delivery terms and times Service terms Payment
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Other Stimuli:
Economic Technological Political Cultural Competitive

(Interpersonal and individual influences)

(Organizational Influences)

Business Buyer Behavior

Major Types of Buying Situations

Involved Decision Making

Straight rebuy

Reordering without modification

Requires modification to prior purchase First-time purchase
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Modified rebuy

New task

Major Types of Buying Situations

New Task Buying

Involved Decision Making

Modified Rebuy

Straight Rebuy
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T23

Stages of the Buying Process

Stages of the buying process
New Task Yes Yes Yes Yes Yes Yes Yes Yes

Buying Situations
Modified Rebuy Maybe Maybe Yes Maybe Maybe Maybe Maybe Yes Straight Rebuy No No Yes No No No No Yes

Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routing specification Performance review

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 DuPont Chemicals

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

Business-to-Business Company DuPont Chemicals

Examples of B2B 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 DuPont product give the look of vintage lacquer

Business Buyer Behavior

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 ????

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Business Buyer Behavior

Buying Center
The

decision-making unit of a buying organization Includes all individuals and units that participate in decision making

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Participants in the Business Buying Process

Users Initiators Influencers Gatekeepers Buyers Approvers
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Deciders

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

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Major Influences on Business Buyers

Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual

Economic trends Supply conditions Technological, political and competitive changes Culture and customs

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Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual

Objectives Policies Procedures Organizational structure Systems

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Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual

Influence of members in the buying center

Authority Status Empathy Persuasiveness
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Major Influences on Business Buyers

Key Factors
Environmental Organizational Interpersonal Individual

Personal characteristics of members in the buying center

Age and income Education Job position Personality Risk attitudes Buying styles
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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

34

Stages in the Business Buying Process

Business Buying on the Internet

E-procurement is growing rapidly Business buyers may purchase electronically by:

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

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Benefits and Problems Created by Buying on the Internet

Benefits:

Problems:
Cut

Shave transaction costs Reduce time between order and delivery Create more efficient purchasing systems Forge more intimate relationships Level the playing field

purchasing jobs Erode supplier-buyer loyalty Create potential security disasters

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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

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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

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