7

Analyzing
Business Markets

Marketing Management, 13th ed

 Chapter Questions

• What is the business market, and how

does it differ from the consumer
market?
• What buying situations do
organizational buyers face?
• Who participates in the business-to-
business buying process?

Copyright © 2009 Jared Hansen

 Chapter Questions

• How do business buyers make their

decisions?
• How can companies build strong
relationships with business customers?
• How do institutional buyers and
government agencies do their buying?

Copyright © 2009 Jared Hansen

 What is Organizational Buying?

Organizational buying refers

to the 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.

Copyright © 2009 Jared Hansen

 Top Business Marketing Challenges

• Expand understanding of customer needs

• Compete globally as China and India
reshape markets
• Master analytical tools and improve
quantitative skills
• Reinstate innovation as an engine of growth
• Create new organizational models and
linkages

Copyright © 2009 Jared Hansen

 Characteristics of Business Markets

• Fewer, larger • Multiple sales calls

buyers • Derived demand
• Close supplier- • Inelastic demand
customer • Fluctuating demand
relationships
• Geographically
• Professional
concentrated buyers
purchasing
• Direct purchasing
• Many buying
influences

Copyright © 2009 Jared Hansen

 Buying Situation

• Straight rebuy
• Modified rebuy
• New task

Copyright © 2009 Jared Hansen

 The Buying Center

• Initiators • Approvers
• Users • Buyers
• Influencers • Gatekeepers
• Deciders

Copyright © 2009 Jared Hansen

 Of Concern to Business Marketers

• Who are the major decision

participants?
• What decisions do they influence?
• What is their level of influence?
• What evaluation criteria do they use?

Copyright © 2009 Jared Hansen

 Stages in the Buying Process:
Buyphases
• Problem recognition
• General need description
• Product specification
• Supplier search
• Proposal solicitation
• Supplier selection
• Order-routine specification
• Performance review

Copyright © 2009 Jared Hansen

 Forms of Electronic Marketplaces

• Catalog sites
• Vertical markets
• Pure play auction sites
• Spot markets
• Private exchanges
• Barter markets
• Buying alliances

Copyright © 2009 Jared Hansen

 Methods of e-Procurement

• Websites organized using vertical hubs

• Websites organized using functional
hubs
• Direct extranet links to major suppliers
• Buying alliances
• Company buying sites

Copyright © 2009 Jared Hansen

 Handling Price-Oriented Customers

• Limit quantity purchased

• Allow no refunds
• Make no adjustments
• Provide no services

Copyright © 2009 Jared Hansen

 Methods for Researching
Customer Value

• Internal engineering • Conjoint analysis

assessment • Benchmarks
• Field value-in-use • Compositional
assessment approach
• Focus-group value • Importance ratings
assessment
• Direct survey
questions

Copyright © 2009 Jared Hansen

 Order Routine Specification

• Stockless purchase plans

• Vendor-managed inventory
• Continuous replenishment

Copyright © 2009 Jared Hansen

 Establishing Corporate Trust
and Credibility
• Expertise
• Trustworthiness
• Likability

Copyright © 2009 Jared Hansen

 Trust Dimensions

• Transparent • Cooperating design

• Product/Service • Product comparison
Quality • Supply chain
• Incentive • Pervasive advocacy
• Partnering

Copyright © 2009 Jared Hansen

 Factors Affecting
Buyer-Supplier Relationships
• Availability of alternatives
• Importance of supply
• Complexity of supply
• Supply market dynamism

Copyright © 2009 Jared Hansen

 Categories of Buyer-Seller
Relationships

• Basic buying and • Cooperative

selling systems
• Bare bones • Collaborative
• Contractual • Mutually adaptive
transaction • Customer is king
• Customer supply

Copyright © 2009 Jared Hansen

 A Buyers Trust Matrix
Trust Toward Supplier’s Representative
(SR-Trust)
Lower Higher
1. 2.
Trust Toward Supplier

Higher Co-Production Co-Creation

(S-Trust)

3. 4.

Lower Transactions Collaboration

Copyright © 2009 Jared Hansen

 Shift in Relational Power
Leader A&P Safeway Sears Wal-Mart Ratio 2
Year (60-72) (73-82) (83-89) (90-05) largest
retailers

1960 5.2 2.5 NA -- 2.1

1972 6.4 6.1 3.9 0.08 1.1
1973 6.7 6.8 4.7 0.13 1.0
1982 4.6 17.6 16.9 3.4 1.0
1983 5.2 18.6 18.8 4.7 1.0
1989 11.1 14.3 29.7 25.8 1.2
1990 11.4 14.9 32.3 32.6 1.0
1995 -- 16.4 34.7 93.6 2.7
2000 -- 32.0 37.0 192.0 5.2
2005 -- 38.4 36.0 312.4 8.1
Copyright © 2009 Jared Hansen
 Shift in Relational Power
Compared to 20 years ago, how much has each of the
following changed (in relationships with retailers) for your Mean Std
company? Err
1. …having to provide slotting allowances 2.5 1.0
2. …having to provide advertising funds 2.7 1.4
3. …having to provide fixture funds 2.5 0.8
4. …having to provide other trade funds 2.8 1.3
5. …having to take back merchandise 3.3 0.8
6. …having to manage retailer sales data 4.3 1.0
7. …having to give price concessions 4.2 0.8
8. …having to shrink product size or portions to remain
3.4
profitable 1.5
9. …having to decrease product quality to remain profitable 2.8 1.0
Copyright © 2009 Jared Hansen
 What is Opportunism?

Opportunism is some form of

cheating or undersupply relative to
an implicit or explicit contract.

Copyright © 2009 Jared Hansen