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.

3. Objectives • Understand the steps in the business buying decision process. • Understand institutional and government markets and how buyers in these markets make their buying decisions.

4. 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

5. Definition • Business Buyer Behavior: • The buying behavior of organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.

6. Business Markets • Characteristics of Business Markets • Sales in the business market far exceed sales in consumer markets.

7. Business Markets • Characteristics of Business Markets • Business markets differ from consumer markets in many ways. • Marketing structure and demand • Nature of the buying unit • Types of decisions and the decision process

8. Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Compared to consumer markets: Business markets have fewer but larger customers Business customers are concentrated geographically Demand is different Derived demand Price inelastic Fluctuates more, and changes more quickly Business Markets Characteristics

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.”

11. Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process Compared to consumer purchases: Business purchases involve more buyers in the decision process. Purchasing efforts are undertaken by professional buyers. Business Markets Characteristics

12. Marketing Structure and Demand Nature of the Buying Unit Types of Decisions and the Decision Process In comparison to consumer purchases: Business buyers face more complex buying decisions. The buying process is more formalized. Buyers and sellers work together closely and build long-term relationships. Business Markets Characteristics

13. BusinessNow NerveWire Video Clip Consultants work closely with their client companies. What criteria might guide the selection of a firm such as NerveWire? Click the picture above to play video

14. Figure 7-1: Model of Business Buyer Behavior

15. Business Buyer Behavior • Major Types of Buying Situations • Straight rebuy • Reordering without modification • Modified rebuy • Requires modification to prior purchase • New task • First time purchase

16. 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.

17. Business Buyer Behavior Participants in the Buying Decision Process Users Buyers • Influencers • Deciders Gatekeepers

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

19. Figure 7-2: Major Influences on Business Buyer Behavior

20. Environmental Organizational Interpersonal Individual Economic trends Supply conditions Technological change Regulatory and political environments Competitive developments Culture and customs Major Influences on Business Buyers Key Factors

21. Environmental Organizational Interpersonal Individual Objectives Policies Procedures Organizational structure Systems Major Influences on Business Buyers Key Factors

22. Environmental Organizational Interpersonal Individual Authority Status Empathy Persuasiveness Major Influences on Business Buyers Key Factors

23. Environmental Organizational Interpersonal Individual Authority Age Education Job position Personality Risk attitudes Major Influences on Business Buyers Key Factors

24. Figure 7-3: Stages of the Business Buying Process

25. Business Buying Process • Eight Stages: • Stage 1: Problem Recognition • Stage 2: General Need Description • Stage 3: Product Specification • Value analysis helps to reduce costs

26. Business Buying Process • Eight Stages: • Stage 4: Supplier Search • Supplier development

27. Business Buying Process • Eight Stages: • Stage 5: Proposal Solicitation

28. Business Buying Process • Eight Stages: • Stage 6: Supplier Selection • Stage 7: Order-Routine Specification • Blanket contracts are often used for maintenance, repair and operating items. • Stage 8: Performance Review

29. 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

30. Institutional and Government Markets • Institutional Markets • Consist of churches, schools, prisons, hospitals, nursing homes and other institutions that provide goods and services to people in their care.

31. Institutional and Government Markets • Institutional Markets • Often characterized by low budgets and captive patrons. • Marketers may develop separate divisions and marketing mixes to service institutional markets.

32. The Background: Institutional markets are often overlooked in B2B marketing The Potential: This market is somewhat recession-resistant; great target for hard economic times Institutional MarketsIn Depth • How To Sell Them: Catalogs are often the best method of contact • Crossover Potential: Same consumer catalogue items could be targeted to institutions

33. Timing is Important: Appropriate times to mail vary by institution. For example, August is a good month for schools, but often a poor time for other institutions due to worker vacations. Institutional MarketsIn Depth • Timing is Important: Understanding when government funding becomes available, or when the new budget year begins can help. Many institutions purchase early, then run low on funds.

34. Discussion Question Name some examples of goods or services that a catalogue marketer could target to your university, church, or hospital. Think beyond the obvious.

35. Institutional and Government Markets • Government Markets • Governmental units – federal, state, and local – that purchase or rent goods and services for carrying out the main functions of government.

36. Institutional and Government Markets • Government Markets • More than 82,000 buying units. • Require suppliers to submit bids. • Favor domestic suppliers. • Extensive paperwork is required from suppliers.

37. Institutional and Government Markets • Government Markets • Government buyers often favor: • Depressed business firms and areas • Small businesses • Minority-owned businesses • Firms which follow non-discriminatory practices

38. Institutional and Government Markets • Government Markets • Most firms that sell to government buyers are not marketing-oriented. • Some companies have separate government marketing departments. • Much of government buying has migrated online.

39. Institutional and Government Markets Government buying online:Procurement Gateway allows authorized defense and civilian agencies to buy online. Procurement Gateway