Transcript Chapter 7 - courses.psu.edu

Business Markets and
Business Buyer
Behavior
Chapter 7
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.
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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.
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Gulfstreamc Aerospace
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
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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.
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Business Markets
Characteristics
of Business
Markets
 Sales in the
business market
far exceed sales
in consumer
markets.
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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

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Business Markets
Characteristics
Compared to
consumer markets:
Marketing
Structure and
Demand
Nature of the
Buying Unit
Types of
Decisions and
the Decision
Process
 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

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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 won’t
let you
down.”
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Business Markets
Characteristics
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.
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Business Markets
Characteristics
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.
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BusinessNow
NerveWire Video Clip
Consultants work
closely with their
client companies.
Click the picture above to play video
What criteria might
guide the selection of a
firm such as
NerveWire?
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Figure 7-1:
Model of Business
Buyer Behavior
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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
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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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Business Buyer Behavior
Participants in the
Buying Decision Process
Users
Buyers
Influencers
Deciders
Gatekeepers
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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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Figure 7-2:
Major Influences on
Business Buyer Behavior
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Major Influences on
Business Buyers
Key Factors
Environmental
Organizational
Interpersonal
Individual
Economic trends
Supply conditions
Technological change
Regulatory and
political environments
Competitive
developments
Culture and customs
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Major Influences on
Business Buyers
Key Factors
Environmental
Organizational
Interpersonal
Individual
Objectives
Policies
Procedures
Organizational
structure
Systems
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Major Influences on
Business Buyers
Key Factors
Environmental
Organizational
Interpersonal
Individual
Authority
Status
Empathy
Persuasiveness
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Major Influences on
Business Buyers
Key Factors
Environmental
Organizational
Interpersonal
Individual
Authority
Age
Education
Job position
Personality
Risk attitudes
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Figure 7-3:
Stages of the
Business Buying Process
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Business Buying Process
Eight Stages:
 Stage 1: Problem
Recognition
 Stage 2: General
Need Description
 Stage 3: Product
Specification

Value analysis
helps to reduce
costs
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Business Buying Process
Eight Stages:
 Stage 4:
Supplier
Search

Supplier
development
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Business Buying Process
Eight Stages:
 Stage 5:
Proposal
Solicitation
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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
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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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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.
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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.
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Institutional Markets
In Depth
The Background:
Institutional markets are
often overlooked in B2B
marketing
The Potential: This
market is somewhat
recession-resistant;
great target for hard
economic times
How To Sell Them:
Catalogs are often
the best method of
contact
Crossover Potential:
Same consumer
catalogue items
could be targeted to
institutions
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Institutional Markets
In Depth
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.
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.
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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.
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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.
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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.
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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

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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.
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Institutional and
Government Markets
Government
buying online:
Procurement Gateway
allows authorized
defense and civilian
agencies to buy online.
Procurement Gateway
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