Principles of Marketing Global Edition Kotler and Armstrong Chapter 6: Business Markets and Business Buyer Behavior Copyright © 2016 Pearson Education, Inc. 6-1 Business Markets and Business Buyer Behavior Learning Objectives • Objective 1: Define the business market and explain how business markets differ from consumer markets. • Objective 2: Identify the major factors that influence business buyer behavior. • Objective 3: List and define the steps in the business buying decision process. Copyright © 2016 Pearson Education, Inc. 6-2 Learning Objective 1 Define the business market and differences from consumer markets. Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, or rented others. The business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands. The main differences between consumer and business markets are in : 1. market structure and demand, 2. the nature of the buying unit 3. the types of decisions 4. the decision process involved Copyright © 2016 Pearson Education, Inc. 6-3 Market Structure and Demand • The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. • Business markets are more geographically concentrated. • Business demand is derived demand—it ultimately derives from the demand for consumer goods. • B2B marketers sometimes promote their products directly to final consumers to increase business demand. • Many business markets have inelastic demand; that is, total demand for many Fewer but larger buyers business products is not affected much by price changes, especially in the short run. Derived demand • Business markets have more fluctuating demand. The demand for many business Inelastic demand goods and services tends to change more— and more quickly—than the demand for Fluctuating demand consumer goods and services does. Copyright © 2016 Pearson Education, Inc. 6-4 Nature of the Buying Unit Business buyers usually face more complex buying decisions than do consumer buyers. Compared with consumer purchases, a business purchase usually involves: • More decision participants • More professional purchasing effort • More buyer and seller interaction • Buying committees composed of technical experts and top management are common in the buying of major goods. Beyond this, B-to-B marketers now face better-trained supply managers. Therefore, companies must have well-trained marketers and salespeople to deal with these well-trained buyers. Copyright © 2016 Pearson Education, Inc. 6-5 Business Markets Decision Process The buyer and seller are often much more dependent on each other. Bto-B marketers may work closely with their customers during all stages of the buying process—from helping customers define problems, to finding solutions, to supporting after-sale operation. They often customize their offerings to individual customer needs. Supplier development is the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others. Copyright © 2016 Pearson Education, Inc. 6-6 Learning Objective 2 Major Types of Buying Situations FIGURE | 6.1 Copyright © 2016 Pearson Education, Inc. 6-7 Major Types of Buying Situations • Straight rebuy is a routine purchase decision/ Buying situation such as reorder without any modification . It is usually handled on a routine basis by the purchasing department. • Modified rebuy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers. In such cases, the greater the cost or risk, the larger the number of decision participants and the greater their efforts to collect information will be. • New task is a purchase decision in which the buyer purchases a product or service for the first time. It requires thorough research such as a new product. The buyer must decide on product specifications, suppliers, price limits, payment terms, order quantities, delivery times, and service terms. The new task situation is the marketer’s greatest opportunity and challenge. The marketer not only tries to reach as many key buying influences as possible, but also provides help and information. 6-8 Copyright © 2016 Pearson Education, Inc. Business Buyer Behavior Major Types of Buying Situations • Business buyers usually face more complex buying decisions than do consumer buyers. • Purchases often involve large sums of money, and interactions among many people at many levels of the buyer’s organization. • The business buying process also tends to be more formalized than the consumer buying process. Copyright © 2016 Pearson Education, Inc. 6-9 Participants in the Business Buying Process • The buying center includes all members of the organization who play any of roles in the purchase decision process : • Users are those that will use the product or service. • Influencers help define specifications and provide information for evaluating alternatives such as technical personnel. • Buyers have formal authority to select the supplier and arrange terms of purchase. • Deciders have formal (CEO) or informal power to select and approve final suppliers. In routine buying, the buyers are often the deciders, or at least the approvers. • Gatekeepers control the flow of information to others, such as Purchasing agents, technical personnel and even personal secretaries. Copyright © 2016 Pearson Education, Inc. 6-10 Participants in the Business Buying Process • The buying center concept presents a major marketing challenge given the varied groups involved in the decision. • Who participates in the decision? • Relative influence on decision by various participants • Evaluation criteria used by various participants • Are there Informal participants involved in decision Copyright © 2016 Pearson Education, Inc. 6-11 The Business Buying Process Learning Objective 3 FIGURE | 6.3 Stages of Business Buying Behavior 1- Problem recognition occurs when someone in the company recognizes a problem or need. • can result from internal or external stimuli. • Internally, the company may decide to launch a new product that requires new production equipment and materials. • Externally, the buyer may get some new ideas at a trade show, see an advertising, or receive a call from a salesperson who offers a better product or a lower price. 6-12 Copyright © 2016 Pearson Education, Inc. The Business Buying Process 2- General need description: The buyer describes the characteristics and quantity of the needed item. • For standard items, this process presents few problems. • For complex items, however, the buyer may have to work with others—engineers, users, and consultants—to define the item. 3- Product specifications: it is often developed with the help of a value analysis engineering team. It describes the technical criteria. • Product value analysis : is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production. The Business Buying Process 4- Supplier Search: involves compiling a list of qualified suppliers. • The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. • The newer the buying task, the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers. 5- Proposal Solicitation : is the process of requesting proposals from qualified suppliers. The buyer invites qualified suppliers to submit proposals. • When the item is complex or expensive, the buyer will usually require detailed written proposals or formal presentations from each potential supplier. The Business Buying Process 6- Supplier selection is the process when the buying center creates a list of desired supplier attributes and their relative importance and negotiates with preferred suppliers for favorable terms and conditions. • Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time. 7- Order-routine specifications : It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected time of delivery, return policies, and warranties. 8- The performance review may lead the buyer to continue, modify, or drop the arrangement.
