ANALYZING BUSINESS MARKETS

Topics Covered
Business versus consumer market Buying situations Business-to-business buying

Making decisions

Customer relationships Institutional & govt. markets

I) Business versus Consumer Market

Fewer, large buyers Close relationship Professional purchasing Multiple buying influences, sales

I) Business versus Consumer Market

Demand Direct purchasing Concentrated buyers

Derived

Fluctuati ng

Inelastic

Product related purchasing processes

Marketers need to understand how business purchasing dept works . Peter kraljic distinguished 4 product-related purchasing process 1.Routine Products: These product have low value and cost to the customer

involves low risk. (e.g. stationary) 2.Leverage Products: These Products have high value and cost to the customer but involves little risk of supply.(e.g. engine piston) 3.Strategic Products: Such products have high value and cost to the customer also involves high risk.(e.g. main frame computers) 4.Bottleneck Products: Such products have low value and cost to the customer but they involve some risk.(e.g. spare parts)
Note: purchasing process will vary with different types of products.

II) Buying Situation

STRAIGHT
Purchaser Supplier

Marketer s greatest opportunity and challenge

MODIFIED
Purchaser
Purchaser

Supplier
Supplier

New Task
Purchaser? ?? Supplier

II) Buying Situation

SYSTEMS BUYING Primary Contractor SYSTEMS SELLING Key industrial marketing strategy for large-scale projects

Second-tier Contractor

II) Buying Situation Building cement factory

SYSTEMS SELLING
Choose site

TRUE SYSTEMS SELLING= SYSTEMS SELLING +

Turn over factory

Design factory

Hiring & training

Economic development

Assemble material & equipment

Hire crews

Participants in the business buying process

Initiators: Those Who request something to be

purchased. (can be Users or others in the Firm)

Users: Those who will use the product or service. Influencers: People who influence the buying

decision. Also help define specifications & provides information for evaluating alternatives.

Participants in the business buying process

 Deciders: People who decides on product requirements
or on suppliers.

 Approvers: Who authorized the propose actions of

deciders or buyers.

 Buyers: People who have authority to select the supplier &

arrange the purchase term.

 Gate Keepers: Who have the power to prevent sellers or

information from reaching members of the buying center.

III) Business-to-business buying

1.Buying Center Influences 2. Buying Center Targeting

Organisation Economic, strategic

Individual Achievement, reward

Small seller Large seller

Corporate brand

Major influences on buying decisions

make their decision. When supplier offers are similar ,business buyers can satisfy the purchasing requirements with any supplier. When supplier offers differ substantially, business buyers are more accountable for their choices and pay more attention to economic factor.

Business buyers respond to many influences when they

Business respond to Four main influences

1.Environmental factors:
Close attention to present and expected economic factors. Make long term contracts with suppliers.

2.Organizational factors:
Every Organization structures & policies vary from others. So because of this above reason buying business behavior is affected inside the organization

Business respond to Four main influences

3.Interpersonal & Individual Factors:
Buying decision is influenced due to the interests ,status ,age and authority of the business buying. Also influenced by likes and dislike of business buyers.

4.Cultural Factors

Influences on buying decision

ENVIRONMENTAL FACTOR
ORGANIZATIONAL

&
INTERPERSONAL FACTOR

FACTOR

1. Level of Demand
1. Objectives 2. Economic Output

INDIVIDUAL FACTOR 1. 2. Age Income

1. Interest

3. Interest Rate 4. Rate of Technology change 5. Political Developments

2. Policies

2. Authority
3. Education

C U L T U R A L F A C T O R

3. Procedure

3. Status

4. Job Position 5. Personality

B u s i n e s s B u y e r

4. Firm Structure

4. Empathy

6. Competitive Developments
5. Systems

6. Risk
Attitudes

7. Social Responsibility

Company s purchasing orientations

1.Buying Orientation: * focus on short term & tactical Two tactics: a. Commoditization: firm imply that product is commodity & care only about price b. Multisourcing: firm use several sources & make them compete for shares of company s purchase. 2.Procurement Orientation: * focus on quality & cost ,long term contracts. * nice relation with suppliers. 3.Supply Chain Management Orientation: * more strategic. * firm focus on improvement of value chain.

IV) Purchasing/Procurement
Decision Making

Staged buying-decision : Buy-phases (8)

(1) Problem recognition

(2-3) Need and product specification

Internal

External

Simple

Complex

Product spec.

Marketers

Single

Multiple

IV) Purchasing/Procurement Decision Making

Catalogs

Auction sites

Private exchange s

E-procurement

(4) Supplier Search

Markets Vertical Spot Barter

Direct links Alliances RFPs

Buying alliances Advantageous

IV) Purchasing/Procurement
Decision Making (5) Proposal solicitation (6) Supplier selection

Simple quote

Detailed proposal

Simple products

Formal

Price Reputation Product reliability Service reliability Supplier flexibility

Next: Price pressure, # of suppliers

IV) Purchasing/Procurement
Decision Making (7) Order-routine specification (8) Performance review

Final order Tech. spec. Qty needed Delivery Return policy Warranties

Evaluation Rating Performance vs. price

V) Customer Relationships
Create more value, establish trust. Advertising agencies -clients relationship illustrates the following findings: (a) Market growth (b) Information asymmetry (c) Barriers to entry (d) Dependence asymmetry (e) Economies of scale

V) Customer Relationships
Buyer-Supplier relationship: availability of alternatives, importance of supply, supply complexity and supply market dynamism.

Routine Basic buying/ selling

Bare bones Less cooperation/info exchange

Contractual Transaction Formal, low trust, info exchange

Customer supply Competitive, seller adapts

V) Customer Relationships
Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism ..

Cooperative systems United operationally, not structurally

Collaborative True partnership, commitment

Mutually adaptive Relationshipspecific

Customer is king Close, Seller adapts

VI) Institutional and Government Markets

Institutional markets

Characterized by: Low budgets and captive clienteles

VI) Institutional & Government markets

of goods and services. Government organizations typically require suppliers to submit bids and normally they awards the contract to the lowest bidder. In some cases ,the government will make allowance for the supplier s reputation for completing project on time. Government organization tends to favor domestic supplier over foreign supplier.

In major countries, government organization are major buyer

Institutional & Government markets

Selling Tech to the Government:
Get in the Government It catalog Work your way in
Make sure contractors find you Stay on top of key contracts Work on angles

Network actively

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Thank-You