International Burch University
Management Department
Marketing Management, Prof. Dr. Teoman Duman
Presentation: Analyzing Business Markets (KK), chapter 7
by Nadira Sarajlic
Organizational buying
is decision making process by which formal organizations establish the need for purchased
products and services and identify, evaluate, and choose among alternative brands and
suppliers.
*Business market VS Consumer market
Business market consists of all organizations that acquire goods and services used in the
production of other products or services that are sold, rented, or supplied to the others. Major
industries: agriculture, forestry, and fisheries, mining, manufacturing, construction,
transportation, communication, public utilities, banking, finance, and insurance, distribution
and services. More dollars and items are involved in sales to business buyers (book example
of shoe production). There are some characteristics of market:
- Fewer, larger buyers
- Close supplier – customer relationship
- Professional purchasing
- Several buying influences
- Multiple sales calls
- Derived demand
- Inelastic demand
- Fluctuating demand
- Geographically concentrated buyers
- Direct purchasing
* Buying situations
Numerous decisions made, depends on the buying situation: complexity of the problem being
solved, newness of the buying requirement, number of people involved, and time required.
There are 3 types of buying situations:
- Straight rebuy
- Modified rebuy
- New task
* Preference to buy a total solution to a problem from one seller is called system buying, and
this practice originated with government purchases of major weapons and communication
system. Buyers like this way of purchase so many have adopted it as marketing tool. Variant
is system contracting *example cement factory at Indonesia.
*Participants in the Business Buying Process
In first two types of buying situatution purchasing agents have the word and in new buy
situations other departments personel.
Decision making unit is called buying center consisted of at least 5 members and often has
dozens. It is composed of individials/groups who participate in the purchasing decision
making process and share some common goals and risks arising from decisions; these are:
- initiators, users, influencers, deciders, approvers, buyers, gatekeepers.
*Influences – buyers responds to many influences and there are different styles: ``keep it
simple`` buyers, ``own expert``, ``want the best``, ``want everything done``, ``toughies``
buyers.
* Buying center targeting – 4 types of business customers can be identified:
- price oriented customers *transactional selling)
-solution oriented customers (consultaive selling)
- gold standard customers ( quality selling)
- strategic value customers (enterprise selling)
* Purchasing orientations – new, strategically oriented purchasing departments have a mission
to seek the best value from fewer and better suppliers. There are 3 orientations:
- buying orientation
- procurement orientation
- supply chain management orientation
* Purchasing processes – According to peter Kraljic there are 4 product related purchasing
processes:
- routine products
- leverage products
- strategic products
- bottleneck products
* Stages in the Buying Process
There are 8 stages identified as buyphases:
1. problem recognition – trigered by internal or external stimuli
2. general need description – needed items general characteristics and required quanitity
3. product specification – product values analysis (PVA) approach to cost reduction
4. supplier search – identify the most appropriate supplier through trade directories,
contactswith other companies, trade advertisments and trade shows /E-Procurement
5. proposal solicitation – invitation to qualified suppliers to submit proposals (detailed
written or formal presentation)
6. supplier selecetion – identifying the mostattractive suppliers mostly according to supplier
evaluation model ( price, supplier reputation, product reliability, service reliability, supplier
flexibility)
7. order routine specification – listing of technical specifications, the quantity needed, the
expected time of delivery, return policies, warranties and final order of other factors
OTIFINE is a term that summarizes 3 desirable outcomes of B to B transaction
OT - deliver on time
IF – in full
NE - no error
8. performance review – three methods are commonly used:
- contact end usrer and ask for evaluatuon
- rate the supplier on several criteria using a weighted score
- agregate the cost of poor performance to come up with adjusted costs of purchase
Managing Business to Business Customer Relationship


closer relationships driven in
building trust as a prerequisite for long term relationships
Study on B2B relationship (advertising agency and clients example)
1.
In the relationship formation stage, one partner experienced substantial market growth
2.
Information asymmetry between partnesr was such that partners would generate more
profits than if the partner attempted to invade the other firms area
3.
at least on partner had high barriers to entry that would prevent the other partner from
entering the business
4.
dependence asymmetry existed such that one partner was more able to control or
influence the others conduct
5.
one partner benefited from economics of scale related to the relationship
Cannon and Perreault found that buyer – supplier relationship differed according to 4 factors:
1.
availability and alterantives
2.
importance of supply
3.
complexity of supply
4.
supply marketing dynamism
Acording to these there are 8 different categories of buyer – supplier relationship:
1. basic buying and selling
2. bare bones
3. contractual transaction
4. customer supply
5. cooperative systems
6. collaborative
7. mutually adaptive
8. customer is king
*Business Relationships: Risks and Opportunism
*Institutional and Government Markets