Business versus Consumer Markets

Characteristic Business Market Demand Organizational

Volume Larger # of CustomersFewer Location Concentrated Distribution More Direct Nature of Buy More Professional Buy Influence Multiple Negotiations Reciprocity Leasing Promotion More Complex Yes Greater Personal Selling

Consumer Market
Individual Smaller Many Dispersed More Indirect More Personal Single Simpler No Lesser Advertising
1

Consumer vs. organizational buyer Behavior

Attributes of Business Customers

Better informed about products purchased Demand more detailed product information Personal goals (in support of organizational goals) may influence buying behavior

Dimensions of Marketing to Business Customers

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New-task purchase first-time purchase of complex and expensive product or service Modified rebuy requires modification to existing purchase decision and may open the door for new suppliers Straight rebuy reorder item purchased many times in the past

Organizational Buying Situations

Business (Organizational) Buying Decision Process and Factors That May Influence It

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FIGURE 10.1

Primary Concerns of Business Customers

Price of goods affecting ability to compete Return on investment in product Price of product compared to the benefits it provides Quality of the product in meeting specifications Quality of services offered by suppliers in support of their products

Dimensions of Marketing to Business Customers

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Initiators perceive problems/opportunities requiring new product or service

Users use or work with product or service

Influencers provide information for evaluating products or suppliers

Gatekeepers control flow of information Buyers contact selling organization and place order Deciders final authority to purchase Controllers determine budget

Buying Process Participants

Methods of Business Buying

Description Inspection Sampling
Products standardized by certain characteristics

Products with particular characteristics

Product is homogenous and a single specimen can be evaluated as representative of the entire product Sellers are asked to bid on specified product characteristics and purchasers negotiate with successful bidders

Negotiation

Dimensions of Marketing to Business Customers (contd)

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Demand for Business Products

Derived demand Inelastic demand Joint demand
Demand for industrial products that stems from demand for consumer products Demand that is not significantly altered by a price increase or decrease Demand involving the use of two or more items in combination to produce a product Demand that varies directly as consumer demand varies

Fluctuating demand

Dimensions of Marketing to Business Customers (contd)

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Derived Demand

means the demand is derived (or caused by, or linked to) demand for a consumer item - demand for lithium is derived from the demand for lithium batteries, which is in turn derived from the demand for cell phones

- demand for wood pulp is derived from the demand for paper, which is derived from the increase in people printing on paper

Joint Demand

means the demand is related to the demand for other industrial things eg. The demand for printer cartridges is linked to the demand for printer paper
for services, the demand for Netscape 4.05 is linked to the demand for an ISP account

Business (Organizational) Buying Behavior

Buying Center
The purchase behavior of producers, government units, institutions, and resellers

The people within an organization who make business purchase decisions

Usersactually use the products Influencershelp develop the specifications and evaluate alternative products Buyersselect suppliers and negotiate terms of purchase Decidersactually choose the products Gatekeeperscontrol the flow of information to others in the buying center

Business Buying Decisions

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Value Analysis

Vendor Analysis

An evaluation of each component of a potential purchase.

Multiple Sourcing Sole Sourcing

A formal systematic evaluation of current and potential vendors

An organizations decision to use several suppliers An organizations decision to use only one source

The Buying Process: Key Terms

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Business (Organizational) Buying Decision Process and Factors That May Influence It

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FIGURE 10.1