Chapter 6
Understanding the Business Market
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–1
The business market
• Business buyers are defined as
organisations that buy goods and services
for:
– Making other goods and services.
– Reselling to other business users or to
consumers.
– Conducting the organisation’s
operations.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–2
The five business market segments
1 The agriculture market.
2 The reseller market.
3 The government market.
4 The services market.
5 The non-business, business market.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–3
Business-market segments
• Agribusiness
–
High value of agricultural commodities
produced and sold.
– Proportion of farmers decreasing.
– Increase in large corporate farms.
– As farms become fewer, larger and more
sophisticated, manufacturers must change
their distribution and promotion strategies
to reach the farm market effectively.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–4
Agribusiness markets
• The agriculture market, farming, food
processing, and other farming-related
businesses.
• Quick to adopt the Internet.
• Large buyers of spare parts and repair
services who prefer to deal through local
dealers.
• High degree of specialisation in the farming
sector.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–5
Reseller market
• The reseller market consists of firms that
buy products from suppliers and resell
these items essentially in the same form.
• Buy goods and services for use in
operating their business.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–6
Government markets
• The government market—all commonwealth, State
and local units buying for government institutions
such as schools, offices, hospitals and military
establishments.
• Sellers to governments must understand the
‘tender system’.
• Slow decision-making process.
• Decision maker may not be the person making the
purchase decision or approving the contract.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–7
Business services markets
• Services outnumber producers of
tangible goods.
• Business services markets include:
–
Transport and goods and handling firms.
– Public utilities.
– Financial, insurance and real estate.
– Entertainment, repairs and personal
care.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–8
Non-business ‘business’ market
• The non-business ‘business’ market—nonprofit organisations such as churches,
colleges, universities, museums, hospitals
and other health institutions.
• These groups of organisations still conduct
marketing campaigns to attract consumers
for the purpose of sponsorship, donations
or assistance for worthwhile causes.
•
E.g. Red Cross appeal.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–9
Characteristics of business
market demand
• Demand is derived from the demand for the
ultimate consumer products in which the business
product is finally used (e.g. steel).
• In the short run demand is inelastic, that is
demand for a product responds very little to
changes in price.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides
prepared
by: Joe Rosagrata
Copyright
© 1997
by The McGraw-Hill
Companies, Inc.
6–10
Characteristics of business
market demand
• Demand is widely fluctuating, meaning that
demand for most classes of business goods
fluctuates considerably more than the
demand for consumer products.
• Buyers are well informed and know the
relative merits of alternative sources of
supply and competitive products.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–11
Influences on business-market
demand
• The number and types of potential
business users.
• Users’ buying power.
• Users’ buying motives and habits.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–12
Influences on business-market
demand
• Small number of BMs.
• BMs have larger purchasing power and
buy in quantity.
• BMs are concentrated.
• Sellers deal direct with business users.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–13
Influences on business-market
demand
• BMs are usually regionally concentrated.
• BMs can be vertically or horizontally
concentrated.
• BM’s buying motives are rational and
purchase is methodical and objective.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–14
Business buying behaviour
• Problem recognition—someone in the
firm recognises that the firm has a need
for a product.
• Gathering information—deciding on the
specifications for the product to satisfy
the need and identifying alternatives.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–15
Business buying behaviour
• Evaluation of alternatives—considering such
factors as product performance, price, delivery,
quality and also suppliers’ ability to meet
commitments.
• Purchase decision—buyer decides on a specific
brand, model and supplier.
• Post-purchase behaviour—buyer continues to
evaluate the performance of the product
and supplier.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–16
Types of buying situations
• New-task buy
• New purchase or product category.
• More people involved in new purchase.
• Extensive information must be collected
and evaluation done on alternative
products.
• Seller displays creative selling ability in
satisfying buyer needs.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–17
Types of buying situations
•
•
•
•
•
Straight re-buy
Information needs are minimal.
There is no great consideration of
alternatives.
Buying decision made in the purchasing
department.
E.g. purchasing of office supplies.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–18
Types of buying situations
• Modified re-buy
• A situation in which the buyer
wants to change (modify) the
product specifications, price, terms
or suppliers.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–19
Multiple buying influences,
the buying centre
•
•
•
•
•
Users—people who actually use the good or service.
Influencers—people who set the specifications of, and help
determine aspects of the buying decision because of their
expertise, financial position or political power.
Deciders—people who make the actual buying decision
regarding the product and supplier.
Gatekeepers—people who control the flow of purchasing
information within the organisation, as well as between the firm
and potential vendors.
Buyers—people who select the suppliers, arrange the terms of
the sale and process the actual purchase orders.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–20
Buying patterns of business users
• Direct purchase.
• Frequency of purchases.
• Size of order.
• Length of negotiated period.
• Reciprocity arrangements.
• Service expectations.
• Dependability of supply.
• Leasing instead of buying.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–21
Importance of relationships in
business markets
• Selling and buying decisions dependent on
both parties and based on relationship.
• Buying firms may be dominant in business
relationships.
• Buyer and seller relationships are usually
long term.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–22
Building business trust
• Heart share—A measure of how customers
feel about the firm.
• Mind share—A measure of how customers
think about a firm.
• Business share—The proportion of product
supplied to firms in the market.
• Barriers to entry and exit through building
strong business relationships.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix
Slides prepared by: Joe Rosagrata
6–23