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CHAPTER 5

Industrial Markets
France: if you do not speak French, apologize for your
lack of knowledge. The French are quite proud of their
language and believe that everyone should feel
privileged to speak it.
Germany: Germans are sticklers for titles. Try to
introduce people using their full, correct title, no matter
how long it is.
Japan: Most Japanese businesspeople know what will
be discussed at a meeting, how everyone feels about it,
and how it will affect their business before they even get
there
Korea: Koreans do not like foreigners to assume that
their culture is the same as Japan.
Business vs. Consumer Marketing
Fruit
Producers
Business Marketing Business Marketing Consumer Marketing
Fruit is grown
& harvested
Fruit is processed into
various forms
You
Brachs
(jelly beans)
Winn-Dixie
(jams, jellies, etc.)
Kelloggs
(Pop Tarts)
Processed fruit is
included as ingredients
in foods
CISCO Targets Businesses
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.
Characteristics of Business Markets
Fewer, larger buyers
Close supplier-
customer
relationships
Professional
purchasing
Multiple buying
influences

Multiple sales calls
Derived demand
Inelastic demand
Fluctuating demand
Geographically
concentrated buyers
Direct purchasing

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Example: Derived Demand Simplified
You make headlamp assemblies for autos Auto companys demand
for headlamp is affected by the consumers demand for cars.
Consumers want
more cars
Automobile
manufacturers need
more components
and steel
Need more of
your companys
headlamp
assemblies
Consumers stop
buying cars
Automobile
manufacturers stop
making cars
You cant sell
headlamp
assemblies
Fluctuating demand : the demand for
many business goods and services tends
to be more volatile than the demand for
consumer goods and services. A given
percentage increase in consumer demand
can lead to a much larger percentage
increase in the demand for plant and
equipment necessary to produce the
additional output. It is called the
acceleration effect.
ORGANIZATIONAL BUYING
Business vs. Consumer Market:
Mrk.Characteristics Consumer Business
Number of buyers Many Few
Size of Buyers Small Large
Supplier Relations No Close
Concentration No. Yes
Demand Unpredictable Derived
Demand Elastic Inelastic
ORGANIZATIONAL BUYING (CONT.)
Mrk.Characteristics Consumer Business
Demand Normal Fluctuating
Professional Purchasing No Yes
Purchasing Middlemen Direct
Buying Influence No Yes
Reciprocity No Yes
Leasing Some Heavy
A Model of Business Buyer Behavior

Buying Situation
Straight rebuy
Modified rebuy
New task
Organizational Buying
Buying Situations

Straight rebuy
Modified rebuy
New task

Routine reorders from
approved vendor list
Low involvement,
minimal time
commitment
Example: copier
paper

Organizational Buying
Buying Situations

Straight rebuy
Modified rebuy
New task

Specifications,
prices, delivery terms
or other aspects
require modification
Moderate level of
involvement and time
commitment
Example: desktop
computers
Organizational Buying
Buying Situations

Straight rebuy
Modified rebuy
New task

Purchasing a product
or service for the first
time
High level of
involvement and time
commitment; multiple
influences
Example: selecting a
web site design firm
or consultant
How the buying situation affects buying
center behavior
Examples of purchasing situations
Routine task
Low risk
New task
High risk
Straight rebuy Modified rebuy New task
Systems Buying and Selling
Turnkey solution
desired;
bids solicited
Prime
contractors
Second-tier
contractors
System
subcomponents
assembled
Participants in the Business
Buying Process
Buying center: All the individuals and
units that participate in the business
buying-decision process
The buying center is not a fixed or formally
identified unit
It is a set of buying roles assumed by different
people for different purchases

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The Buying Center
Initiators
Users
Influencers
Deciders
Approvers
Buyers
Gatekeepers
The buying center:
Initiator: those who request that something to be
purchased
Users: those who will use the product or service
Influencers: people who influence the buying decisions.
Deciders: people 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.
Gatekeepers: people who have power to prevent sellers or
information from reaching members of the buying centre.
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Match Game
Which buying center participant a buyer, decider, gatekeeper, influencer, or
user is most likely to make each of the following statements?

This bonding agent better be good, because I have to put this product
together.

I specified this bonding agent on another job, and it worked for them.

Without an appointment, no sales rep gets in to see Mr. Johnson.

I dont see any reason why we cant use this bonding agent on the next
job.

Okay, it is a deal well buy it.

Ill place the order first thing tomorrow.

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Match Game
Which buying center participant a buyer, decider, gatekeeper, influencer, or
user is most likely to make each of the following statements?

This bonding agent better be good, because I have to put this product
together. - user

I specified this bonding agent on another job, and it worked for them. -
influencer

Without an appointment, no sales rep gets in to see Mr. Johnson. -
gatekeeper

I dont see any reason why we cant use this bonding agent on the next
job. - influencer

Okay, it is a deal well buy it. - decider

Ill place the order first thing tomorrow. - buyer
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Business Buyer Behavior
The Buying Process
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Business Buyer Behavior
Problem recognition occurs when someone in the
company recognizes a problem or need.
Internal stimuli
Need for new product or production equipment
External stimuli
Idea from a trade show or advertising
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Business Buyer Behavior
The Buying Process

General need description describes the characteristics and
quantity of the needed item.
Product specification describes the technical criteria.
Value analysis is an approach to cost reduction where
components are studied to determine if they can be
redesigned, standardized, or made with less costly
methods of production.
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Business Buyer Behavior
The Buying Process

Supplier search involves compiling a list of qualified
suppliers.

Proposal solicitation is the process of requesting
proposals from qualified suppliers.
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Business Buyer Behavior
The Buying Process

Supplier selection is the process when the buying
center creates a list of desired supplier attributes
and negotiates with preferred suppliers for
favorable terms and conditions.
Order-routine specifications is the final order with the
chosen supplier and lists all of the specifications
and terms of the purchase.
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Business Buyer Behavior
The Buying Process

Performance review involves a critique of supplier
performance to the purchase terms.
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Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in
Relation to Major Buying Situations (Buyclasses)
Buyclasses
New Modified Straight
Task Rebuy Rebuy
1. Problem recognition Yes Maybe Yes
2. General need description Yes Maybe No
3. Product specification Yes Yes No
Buyphases 4. Supplier search Yes Maybe No
5. Proposal solicitation Yes Maybe No
6. Supplier selection Yes Maybe No
7. Order-routine specification Yes Maybe No
8. Performance review Yes Yes Yes
What is Opportunism?
Opportunism is some form of
cheating or undersupply relative to
an implicit or explicit contract.