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Principles of Marketing

Chapter 6- Business buying Behavior

Business Buying Behavior


This is where the term B2B comes from.
These are the buyers that are not end
consumers, but other businesses, institutions,
or governmental organizations.

Main differences in B2B and B2C


B2B transactions are (generally) very, very
large
Think about your phone.
Purchased from a retailer one time. One
transaction.
How did the retailer get the phone?

Main differences in B2B and B2C


Retailer purchased from a supplier (B2B)
Supplier purchased the components from other
component manufacturers (B2B)
Circuit board, antenna, display, microphone, speaker,
battery, etc.

The components manufacturer purchased from other


suppliers (silicon, gold, aluminum, etc) (B2B)
**This doesnt even count all the people involved
with creating the building, labor, etc.

Main differences in B2B and B2C


The point is that the B2C part of this
transaction is quite small in comparison to the
other transactions that had to take place

Main differences in B2B and B2C


Product complexity:
When you bought your phone, could you alter the
size of the phone or change out a component?
(hint: no)

When in a B2B selling situation, you generally are


fully customizable.
Corrugate for big books example

This also means that there is generally a small


number of buyers for your product
Has anyone ever worked in an auto facility?

Main differences in B2B and B2C


Size of orders and accounts
Entrepreneurs and Walmart

One order to a major firm can make or break


smaller firms and sales positions
Some retailers have more net income than the GDP
of smaller countries. Think about that level of sales
volume

Main differences in B2B and B2C


The timeframe for sales
When dealing with these specific
transactions, often the sales and
development can take years.
Component for a sorting machine example
Ketchup packet

Think about an aircraft and how long it


takes to make that happen

Main differences in B2B and B2C


Stricter standards
When you purchased your phone, how many
phones did you try out?
Probably not many, since your time is finite and you
only need sufficiency

Five Guys tried 18 different types of mayonnaise


before settling on the one they use today.

Main differences in B2B and B2C


Personal selling
How much interaction was had with a salesperson
before, during, then after the purchase of your phone?
Before, probably little
During, probably some
After, probably little to none

Selling in these situations is much different since you


need to constantly be in contact with your people
Some places go as far as having locations specifically for
their salespeople when they drop in.

Demand for B2B


Even with no* contact with consumers, B2B
firms still need to know and follow consumer
demand trends.
Firms need to be able to derive demand from
other sources to ensure they are prepared for
consumer choices
Size of the firm and artificial demand generation

Demand for B2B


Fluctuating demand is when a consumer
response severely alters demand throughout
the supply chain
Imagine a rapid change in consumption of
carbonated drinks
Retract, then expansion and the effects on the supply
chain (like a whip)

Demand for B2B


Increasing demand directly
Often, suppliers will try to affect consumer
decisions by their use of advertising, etc.
Intel

Joint demand
Focus on possible tie-ins to other sales
When game consoles sell, so do games
New chips = more salsa sales

Buyers for B2B


Producers
Purchase goods and services to transform into
other products to sell
Dell uses components to make computers
Without their suppliers, Dell has almost no product to sell

Most* non-retailers are producers

Buyers for B2B


Resellers
Sellers of goods and services produced by other
firms without materially changing them

Most* retailers are resellers

Buyers for B2B


Governments
The U.S. government is the biggest purchaser of
goods and services in the world
Offices need paper, rockets need fuel, and everything in
between

Since most governments (U.S. included) have


stipulations in place for the amount of small
businesses they need to hire, it can be a quite
lucrative for smaller firms to land a governmental
contract

Buyers for B2B


Institutions
Nonprofit organizations, churches, charities,
private colleges, clubs, etc. all are considered
institutions
Generally have large orders
Generally are varied as well

Buyers for B2B


Who makes the decisions to purchase?
Depends
Book uses the example of textbooks
How many of you were targeted by textbook manufacturers?

Sometimes this is an instructor decision, sometimes it is


a coordinator decision
Depending on whos decision it is, this can be a very
powerful and influential position

Buying Centers
Groups* of people that make buying decisions
Can be a committee, can be an individual

Can be called purchasing agents, purchasing


managers, procurement officers, etc.
Sometimes this job is easy (like mine),
sometimes it can be difficult (World Market)

Buying Centers
Other players
Users- people and groups that use the products
Without users input, its difficult to know what to buy

Influencers- Not users, but have expertise in that area


Creative and the easy graphic buy

Gatekeepers- people who grant or deny access to buyers


Secretaries and Valentines

Deciders- person who makes final purchase decisions


Can be a purchasing agent, but sometimes it can come from
higher-up people
Mic drop on the TMT

Buying Centers
Interpersonal and personal dynamics
Sometimes it is simply a matter of being cordial
Sweaty newbie versus smooth veteran example
Reps across the board

Stages in the Buying Process


Need recognition
Generally driven by users, but could be driven by
other factors
Book uses janitorial service

Stages in the Buying Process


Need described and quantified
Buying center is brought in to determine what
needs to by purchased and add parameters to the
decision
Figure 6.6- Exact dimensions on what is needed
Does this need to have any specific features?
Depending on the nature of the product, it may need to be
hyper-specific
Bottle shape and quantity example

Stages in the Buying Process


Potential supplier are searched for
This is like information seeking. Buyer look to
what needs can be satisfied by what provider to
hopefully satisfy the need
Are all needs met? Are they reliable? Do they have any
problems?

Stages in the Buying Process


Qualified suppliers are asked to complete
responses to requests for proposals
Sometimes called a bid, this is where selected
companies vie for the sale
It is a semi-contract that gives details about the nature of
the business and the specifics of all the transactions
Can be in the form of a letter, formal presentation, or
anywhere in between
Depending on the nature of the good, this can be simple
(janitorial service), or very complex (ignition system for a jet
engine)

Stages in the Buying Process


Proposals are evaluated and selections are
made
There are generally a few decent options that need
to be sifted through to make sure the correct
purchase is made
Price, timing, sellers, etc. can all influence the choices
made
Corrugate for short turnaround versus price

Stages in the Buying Process


Order routine is established
This is the order actually being put together
This is the agreement that lines all things out and
makes the contract enforceable, etc.
If this is a perpetual contract, this can be incredible
time consuming

Stages in the Buying Process


Postpurchase evaluation
Just like with a consumer product, there needs to be aftersale evaluations on what occurred.
Need to have a metric in place to assess success, failure, etc.
Janitorial service may be based solely on a certain level of
cleanliness or simply on no one noticing they were there. (so
many times jobs can end up being out of sight, out of mind, until
you make a mistake)

If the service was as expected, then it can lead into more


contracts or simply a good review for other people in the
industry (everybody talks)

Types of Buying Situations


Straight rebuy- repeat purchase of the same
product type and quantity from the same
vendor.
Almost like a heuristic for consumer buys. I
always buy Tide because I always do = I always
buy chalk from Greg because I always do

Types of Buying Situations


New-buy- First time purchase of a product
from a firm or in general
Generally the most time consuming as the whole
buying process must be gone through

Types of Buying Situations


Modified rebuy- same product buy, but with
some modifications
Quantities, packaging, specific, etc.
Doesnt have to be the same seller
We are unhappy with our current janitorial service, so
we will make a modified rebuy, with the modification
being the supplier

International B2B
Most of the time, businesses cluster
Advertising firms in New York (though this is
changing a little)
Consumable goods in Arkansas
Tech in Seattle, Austin, and the Silicon Valley

Sometimes this is due to resources (natural,


cultural, etc.), simplicity (proximity), etc.

B2B E-Commerce
E-Commerce is making this clustering less
restrictive and opening many avenues for
people all over the world.
Now the benefits and issues are shifted.
Distribution restrictions, production restriction,
etc. are more imposing than the now nonexistent
demand issues

B2B E-Commerce
Making the process simpler as well
Buying something routine can be done online now
for the ease of everyone involved

B2B E-Commerce
Sell-Side Site- single seller sells products to
many different buyers Fastenal.com
Buy-Side Site- buyer buys products from
multiple sellers (some government agencies)
B2B Exchanges- (Alibaba)
B2B Auctions- web-based auctions between
firms (equipmentone.com)
Assets or products being sold to get rid of inventory
(surplus, overstock)

B2B E-Commerce
Pricing
Since pricing information is almost perfect, pricing
is a difficult game* to play B2B, especially in a
commoditized product line

Ethics in B2B
Ethical question:
As a sales rep, is it ok to take a potential buyer out
to dinner?
As a manufacturer, if someone does a straightrebuy, but the product has changed, is it legitimate
to not tell them the change was made?
As a buyer, can you tell a representative what you
will pay for a good?

For Next Time


Read Chapter 7

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