6

Principles of Marketing

Business Markets and

Business Buyer Behavior

Learning Objectives
After studying this chapter, you should be able to:
1.
Define the business market and explain how
business markets differ from consumer markets
2.
Identify the major factors that influence business
buyer behavior
3.
List and define the steps in the business buyingdecision process
4.
Compare the institutional and government markets
and explain how institutional and government
buyers make their buying decisions

6-2

Chapter Outline

1.
2.

3.

Business Markets
Business Buyer Behavior
Institutional and Government
Markets

6-3

Business Markets
Business buying process is the process
where business buyers determine which
products and services are needed to
purchase and then find, evaluate, and
choose among alternative brands

6-4

Business Markets
Differ from consumer markets in:

Market structure and demand

Nature of the buying unit

Types of decisions and the decisionmaking process

6-5

Business Markets
Market Structure and Demand

Fewer and larger buyers

Geographic concentration
Derived demand

Inelastic demand

Fluctuating demand
Buyer and seller dependency
6-6

Business Markets
Market Structure and Demand
Supplier development is the systematic
development of networks of supplierpartners to ensure an appropriate and
dependable supply of products and materials
that they will use in making their own
products or resell

6-7

Business Buyer Behavior

Marketing Stimuli

Similar to consumer buying, business buying

consists of the four Ps
Product
Price
Place
Promotion
6-8

Business Buyer Behavior

Business buyer behavior refers to the buying
behavior of the organizations that buy goods
and services for use in production of other
products and services that are sold, rented,
or supplied to others. Also included are
retailing and wholesaling firms that acquire
goods to resell or rent to others for profit.

6-9

Business Buyer Behavior

Marketing Stimuli
Additional stimuli include major economic forces

Political

Economic

Technological

Cultural

Competitive
6-10

Business Buyer Behavior

Buyer Responses to Marketing Stimuli

Product or service choice

Supplier choice
Order quantities
Delivery
Service
Payment terms
6-11

Business Buyer Behavior

Buyer Responses to Marketing Stimuli
Marketers must understand what happens
within the organization and turn stimuli into
purchase responses

6-12

Business Buyer Behavior

Major Types of Buying Situations

Straight rebuy
Modified rebuy
New task

6-13

Business Buyer Behavior

Major Types of Buying Situations
Straight rebuy is a routine purchase decision such as
a reorder without any modification

Modified rebuy is a purchase decision that requires

some research where the buyer wants to modify the
product specification, price, terms, or suppliers
New task is a purchase decision that requires
thorough research such as a new product
6-14

Business Buyer Behavior

Major Types of Buying Situations
Systems selling involves the purchase of a
packaged solution from a single seller
Two-step process of selling:

Interlocking products

System of production, inventory control,

distribution, and other services to meet the
buyers need for a smooth-running operation
6-15

Business Buyer Behavior

Participants in the Business Buying Process
Buying center is all of the individuals and
units that participate in the business
decision-making process

Users

Influencers

Buyers

Deciders

Gatekeepers
6-16

Business Buyer Behavior

Participants in the Business Buying Process
Users are those that will use the product or service
Influencers help define specifications and provide
information for evaluating alternatives
Buyers have formal authority to select the supplier and
arrange terms of purchase
Deciders have formal or informal power to select and
approve final suppliers
Gatekeepers control the flow of information
6-17

Business Buyer Behavior

Participants in the Business Buying Process
Buying center provides a major challenge

Who participates in the process

Their relative authority

What evaluation criteria each participant

uses

Informal participants
6-18

Business Buyer Behavior

Major Influences on Business Buyers

Economic factors
Personal factors
Environmental factors
Organizational factors
Interpersonal factors
6-19

Business Buyer Behavior

Major Influences on Business Buyers
Economic factors:

Price

Service

Personal factors:
Emotion

6-20

Business Buyer Behavior

Major Influences on Business Buyers
Environmental Factors

Demand for product

Economic outlook
Cost of money
Resource availability

Technology
Culture
Politics
Competition

6-21

Business Buyer Behavior

Major Influences on Business Buyers
Organizational factors

Objectives

Policies

Procedures

Structure

Systems
6-22

Business Buyer Behavior

Major Influences on Business Buyers
Interpersonal factors

Motives

Perceptions

Preferences

Age

Income

Education

Attitude toward risk

6-23

Business Buyer Behavior

The Buying Process
1.
2.
3.
4.
5.
6.
7.

8.
9.

Problem recognition
General need description
Product specification
Value analysis
Supplier search
Proposal solicitation
Supplier selection
Order-routine specifications
Performance review
6-24

Business Buyer Behavior

Problem recognition occurs when someone
in the company recognizes a problem or
need

Internal stimuli

Need for new product or production equipment

External stimuli

Idea from a trade show or advertising

6-25

Business Buyer Behavior

The Buying Process
General need description describes the
characteristics and quantity of the needed item

Product specification describes the technical criteria

Value analysis is an approach to cost reduction where
components are studied to determined if they can
be redesigned, standardized, or made with less
costly methods of production
6-26

Business Buyer Behavior

The Buying Process
Supplier search involves compiling a list of
qualified suppliers
Proposal solicitation is the process of
requesting proposals from qualified
suppliers
6-27

Business Buyer Behavior

The Buying Process
Supplier selection is the process when the buying
center creates a list of desired supplier attributes
and negotiates with preferred suppliers for
favorable terms and conditions
Order-routine specifications is the final order with
the chosen supplier and lists all of the
specifications and terms of the purchase

6-28

Business Buyer Behavior

The Buying Process
Performance review involves a critique of
supplier performance to the purchase terms

6-29

Business Buyer Behavior

E-Procurement and Buying on the Internet
Online purchasing

Company buying sites

Extranets

6-30

Business Buyer Behavior

E-Procurement and Buying on the Internet
Advantages

Access to new suppliers

Lowers costs

Speed in order processing and delivery

Share information

Sales

Service and support

6-31

Business Buyer Behavior

E-Procurement and Buying on the Internet
Disadvantages

Can erode relationships as buyers search

for new suppliers

Security

6-32

Institutional and
Government Markets
Institutional markets consist of hospitals,
nursing homes, and prisons that provide
goods and services to people in their care

Characteristics

Low budgets
Captive audience

6-33

Institutional and
Government Markets
Government markets tend to favor domestic
suppliers and require suppliers to submit bids and
normally award to the lowest bidder

Carefully monitored

Affected by similar environmental factors

Good credit

Non-economic factors

Minority suppliers

Depressed suppliers

Small businesses
6-34

PowerPoint created by:

Ronald Heimler

Dowling College, MBA

Georgetown University, BS Business
Administration
Adjunct Professor, LIM College, NY
Adjunct Professor, Long Island University,
NY
Lecturer, California Polytechnic State
University, Pomona, CA
President, Walter Heimler, Inc.