Business Markets and Business Buyer Behavior

What is Organizational Buying?
Organizational buying is 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

The Business Market versus the Consumer Market
The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. Business marketers face many of the same challenges as consumer marketers. In particular, understanding their customers and what they value is of paramount importance to both. Business marketers, however, have several characteristics that contrast sharply with those of consumer markets.
•Fewer,

larger buyers. The business marketer normally deals withy far fewer,. Much larger buyers than the consumer marketer does, particularly in such industries as aircraft engines and defense weapons. Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customize their offerings to individual business customer needs. purchasing. Business goods are often purchased by trained purchasing agents, who must follow their organizations’ purchasing policies, constraints and requirements. Many of the buying instruments for example, requests for quotations, proposals, and purchase contracts – are not typically found in consumer buying. influences. Most people typically influence business buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. calls- More call to complete an average sale

•Close supplier-customer relationship.

•Professional

•Multiple buying

•Multiple Sales •Derived

demand. The demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the business marketer must closely monitor the buying patterns of ultimate consumers.

Business Buying Situations
Business buyers in companies, institutions, and government organizations face many decisions in the course of making a purchase. The number of decisions depends on the type of buying situation.
•Straight

rebuy: The straight rebuy is a buying situation in which the purchasing department reorders on a routine basis (e.g. office supplies, bulk chemicals). The buyer chooses from suppliers on an “approved list.” These suppliers make an effort to maintain product and service quality. rebuy: The modified rebuy is a situation in which the buyer wants to modify product specifications, prices, delivery requirements, or other terms. The modified rebuy usually involves additional decision participants on both sides. task: The new task is a buying situation in which a purchaser buys a product or service for the first time (e.g., office building, new security system). The greater the cost or risk, the larger the number of decision participants and the greater their information gathering and therefore the longer the time to decision completion

•Modified

•New

Participants in the Business Buying Process
The Buying Center Webster and Wind call the decision-making unit of a buying organization the buying center. The buying center is composed of “all those individuals and groups who participate in the purchasing decision-making process. They are •Initiators: People who request that something be purchased, including users or others. •Users: Those who will use the product or service; often, users initiate the buying proposal and help define product requirements. •Influencers: People who influence the buying decision, including technical personnel. They often help define specifications and also provide information for evaluating alternatives. •Deciders: Those who decide on product requirements or on suppliers. •Approvers: People who authorize the proposed actions of deciders or buyers. •Buyers: People who have formal authority to select the supplier and arrange the purchase terms, including high-level managers. Buyers may help shape product specifications, but

their major role is selecting vendors and negotiating. •Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying center; examples are purchasing agents, receptionists, and telephone operators.

Major Influences on Business Buying
Business buyers respond to four main influences: environmental, organizational, interpersonal, and individual. Environmental Factors Within the macroenvironment, business buyers pay close attention to numerous economic factors, including interest rates and levels of production, investment, and consumer spending. Business buyers also actively monitor technological, political-regulatory, and competitive developments. For example, environmental concerns can cause changes in business buyer behavior. A printing firm might favor suppliers that carry recycled papers or use environmentally safe ink. Organizational Factors Every organization has specific purchasing objectives, policies, procedures, organizational structures, and systems. Questions such as these arise how many people are involved in the buying decision, •who are they? •What are their evaluative criteria? •what are the companies policies? Interpersonal Factors Buying centers usually include several participants with differing interests, authority, status, and empathy. Therefore, successful firms strive to find out as much as possible about individual buying center participants and their interaction and train sales personnel and others from the marketing organization to be more attuned to the influence of interpersonal factors. Individual Factors Each buyer carries personal motivations, perceptions, and preferences, as influenced by the buyer’s age, income, education, job position, personality, attitudes toward risk, and culture . Eg- Young and traditional buyers Cultural Factors Savvy marketers carefully study the culture and customs of each country or region

where they want to sell their products, to better understand the cultural factors that can affect buyers and the buying organization.

The Business Purchasing Process
Stage 1: Problem Recognition The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a good or service. The recognition can be triggered by internal or external stimuli. Eg - Internally, problem recognition commonly occurs when a firm decides to develop a new product and needs new equipment and materials, Externally, problem recognition can occur when a buyer gets new ideas at a trade show, sees a supplier’s ad, or is contacted by a sales representative offering a better product or a lower price. For their part, business marketers can stimulate problem recognition by direct mail, telemarketing, effective Internet communications, and calling on prospects. Stage 2: General Need Description Once a problem has been recognized, the buyer has to determine the needed item’s general characteristics and the required quantity. Stage 3: Product Specification With a general need description in hand, the buying organization can develop the item’s technical specifications. Stage 4: Supplier Search The buyer now tries to identify the most appropriate suppliers, by examining trade directories, doing a computer search, phoning other firms for recommendations, scanning trade advertisements, and attending trade shows. Stage 5: Proposal Solicitation In this stage, the buyer is ready to invite qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will require a detailed written proposal from each qualified supplier. After evaluating the proposals, the buyer will invite a few suppliers to make formal presentations. Stage 6: Supplier Selection Before selecting a supplier, the buying center will specify desired supplier attributes (such as product reliability and service reliability) and indicate their relative importance. It will then rate each supplier on these attributes to identify the most attractive one. Stage 7: Order-Routine Specification After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the delivery schedule, and so on. Stage 8: Performance Review

In the final stage of the buying process, the buyer periodically reviews the performance of the chosen supplier(s).

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