Business Markets and Business Buyer Behavior

1. Business Markets and Business Buyer Behavior Chapter 7

2. Objectives • Be able to define the business market and explain how business markets differ from consumer markets. • Know the major factors that influence business buyer behavior. • Understand the steps in the business buying decision process.

3. Sells jets exclusively for corporate use 300 – 500 buyers worldwide Rational, objective, and human factors influence business buyer’s decisions Multiple people are involved in the decision Buying influences include the CEO, pilot, board members, even spouses Company has been highly successful c Gulfstream Aerospace

4. What is a Business Market? • The Business Market - all the organizations that buy goods and services to use in the production • Business markets involve many more dollars and items do consumer markets.

5. Types of Organizational Markets • Industrial • Reseller • Institutional and Government Business Markets

6. Characteristics of Business Markets* Market Structure and Demand • Fewer, larger buyers • Geographically concentrated • Demand derived from consumers • Inelastic demand* • Fluctuating demand Nature of the Buying Unit • More people are involved • More professional purchasing • effort Types of Decisions & the Decision Process • More complex decisions • Process is more formalized • Buyer and seller are more • dependent on each other • Build close long-term relationships • with customers

7. Participants in the Business Buying Process: The Buying Center Gatekeepers Users Buying Center Deciders Influencers Buyers

8. Marketing and Other Stimuli Model of Business Buyer Behavior Economic Technological Political Cultural Product Price Place Promotion The Buying Organization Interpersonal and Individual Influences Organizational Influences The Buying Center Buying Decision Process Buyer’s Response Delivery Terms and Times Service Terms Payment Product or Service Choice Supplier Choice Order Quantities

9. Discussion Question Think about derived demand in the context of vehicles. Which parts, components, or finished goods are most dependent upon the demand for new vehicle production?

10. Fujitsu promises more than just high-tech products: “Our technology helps keep you moving upward. And our people won’t let you down.”

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12. straight rebuy modified rebuy new task variety seeking complex habitual dissonance reduction Types of Buying Situations Compare to Consumer Buying Decision Behavior

13. Business Buyer Behavior • Systems Selling: • Buying a packaged solution to a problem from a single seller. • Convenience is a major benefit • Often a key marketing strategy for businesses seeking to win and hold accounts.

14. Environmental Economic, Technological, Political, Competitive & Cultural Organizational Objectives, Policies, Procedures, Structure, & Systems Interpersonal Authority, Status, Empathy & Persuasiveness Major Influences on Business Buying Individual Age, Education, Job Position, Personality & Risk Attitudes Buyers

15. Organizational Markets:Environmental Influences • economic conditions • Economic outlook • supply condition • competition • cost of money • technological changes • political • regulations and enforcement

16. Organizational Markets Influences of Buying Organization • Purchasing Management • how is purchasing regarded in the firm? • where is purchasing performed • one department - buying clout • individual units - better match of needs - what kinds of contracts with suppliers? • short-term vs. long-term • when is purchasing done? • just in time vs. inventory build-up

17. Organizational Markets Influences of Buying Organization Just In Time Purchasing & JITII • search for high quality suppliers • frequent deliveries - as needed • location close to buyer • communicate needs via shared MIS • buy only from single or dual source • - long term contract • reduction of costs & inefficiencies • buyer and seller connected in early stages • close relationships

18. Business Market: Interpersonal Influence • Do buyers know sellers? • special relationship • Do people exercise control of purchasing decision as a? • show of power • a reward or punishment • Group dynamics play a role

19. Organizational Markets Individual Influences • Demographics of Buyer • age, sex, ethnicity • psychological factors (Buying Styles) • risk • intuitive vs. systematic (technical) thinking

20. Emotions also play a role in business buying. Volvo stresses that the trucks’ benefits will make “drivers a lot more possessive”.

21. Problem Recognition General Need Description Stages in the BusinessBuying Process Product Specification Supplier Search Proposal Solicitation Supplier Selection Order Routine Specification Performance Review

22. Reseller Buying Style (vs. Individual) • Loyal Buyer - loyal to one or two source over the years • Opportunistic - selects vendors who will further interests and drives a hard bargain • Creative - buyer tells the seller what s/he wants in product, service prices • Advertising - attempts to obtain advertising money with the deal • Chiseler - constantly negotiates prices • Nuts and Bolts - looks for the best value

23. Vendor Incentives to Aid Resellers *** Channel-Offering Components • Cooperative Advertising • Stockless Purchasing • Automatic Reorder • Advertising Aids • Special Prices • Return and Exchange Privileges • Allowances for Markdowns • Sponsorship of in-store demonstrations/promotions

24. Business Buying Process • Business Buying on the Internet • E-procurement is growing rapidly. • Reverse auctions 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

25. Benefits: Shave transaction costs Reduce time between order and delivery Create more efficient purchasing systems Level the playing field Problems: Cut purchasing jobs Erode supplier-buyer loyalty Create potential security disasters Benefits and Problems Created by Buying on the Internet

26. Institutional Markets Government Markets Institutional and Government Markets Low Budgets Captive Patrons Public Review Specialized Buying Open Bids Outside Publics Negotiated Contracts