Business Markets and Business Buyer Behavior

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Business Markets and Business Buyer Behavior

• Chapter 7

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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.

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c
Gulfstream Aerospace

• Sells jets exclusively for corporate use
• 300 500 buyers worldwide
• Rational, objective, and human factors influence
  business buyers decisions

• Multiple people are involved in the decision
• Buying influences include the CEO, pilot, board
  members, even spouses
• Company has been highly successful

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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.

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Types of Organizational Markets
Business Markets

• Industrial
• Reseller
• Institutional and Government

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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

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Participants in the Business Buying Process The
Buying Center
Users
Gatekeepers
Buying Center
Deciders
Influencers
Buyers
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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
Buyers Response
Delivery Terms and Times Service Terms Payment
Product or Service Choice Supplier Choice Order
Quantities
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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?
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Fujitsu promises more than just high-tech
products Our technology helps keep you moving
upward. And our people wont let you down.
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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
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Compare to Consumer Buying Decision Behavior
Types of Buying Situations

• variety seeking
• complex
• habitual
• dissonance reduction

• straight rebuy
• modified rebuy
• new task

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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.

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

• economic conditions
• Economic outlook
• supply condition
• competition
• cost of money
• technological changes
• political
• regulations and enforcement

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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

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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

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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

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Organizational Markets Individual Influences

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

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Emotions also play a role in business buying.
Volvo stresses that the trucks benefits will
make drivers a lot more possessive.
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Stages in the BusinessBuying Process
Problem Recognition
General Need Description
Product Specification
Supplier Search
Proposal Solicitation
Supplier Selection
Order Routine Specification
Performance Review
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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

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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

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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

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Benefits and Problems Created by Buying on the
Internet

• 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

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