A Global Perspective

Philip Kotler
Gary Armstrong
Swee Hoon Ang
6 Siew Meng Leong
Chin Tiong Tan
Oliver Yau Hon-Ming
Business Markets and PowerPoint slides adapted by

Business Buyer
Peggy Su

Behavior

Copyright © 2009 Pearson Education South Asia Pte Ltd 6-1

Learning Objectives
After studying this chapter, you should be able to:
1. Define the business market and explain how business
markets differ from consumer markets
2. Identify the major factors that influence business buyer
behavior
3. List and define the steps in the business buying-
decision process
4. Compare the institutional and government markets and
explain how institutional and government buyers make
their buying decisions

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Chapter Outline
1. Business Markets
2. Business Buyer Behavior
3. Institutional and Government Markets

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Business Markets
• Business buying process is the process
where business buyers determine which
products and services are needed to purchase
and then find, evaluate, and choose among
alternative brands.

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Business Markets
Business markets differ from consumer markets in:
• Market structure and demand
• Nature of the buying unit
• Types of decisions and the decision-making
process

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Business Markets
Market Structure and Demand
• Fewer and larger buyers
• Geographic concentration
• Derived demand
• Inelastic demand
• Fluctuating demand
• Buyer and seller dependency

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Business Markets
Market Structure and Demand
• Supplier development is the systematic
development of networks of supplier-partners
to ensure an appropriate and dependable
supply of products and materials that they will
use in making their own products or resell.

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Business Buyer Behavior
A Model of Business Buyer Behavior

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Business Buyer Behavior
Marketing Stimuli
• Similar to consumer buying, business buying
consists of the four Ps:
• Product
• Price
• Place
• Promotion

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Business Buyer Behavior
• Business buyer behavior refers to the buying
behavior of the organizations that buy goods
and services for use in production of other
products and services that are sold, rented, or
supplied to others.
• Also included are retailing and wholesaling
firms that acquire goods to resell or rent to
others for profit.

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Business Buyer Behavior
Marketing Stimuli
Additional stimuli include major economic forces:
• Political
• Economic
• Technological
• Cultural
• Competitive

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Business Buyer Behavior
Buyer Responses to Marketing Stimuli
• Product or service choice
• Supplier choice
• Order quantities
• Delivery
• Service
• Payment terms

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Business Buyer Behavior
Buyer Responses to Marketing Stimuli
• Marketers must understand what happens
within the organization and turn stimuli into
purchase responses.

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Business Buyer Behavior
Major Types of Buying Situations
• Straight rebuy
• Modified rebuy
• New task

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Business Buyer Behavior
Major Types of Buying Situations
• Straight rebuy is a routine purchase decision such
as a reorder without any modification.
• Modified rebuy is a purchase decision that
requires some research where the buyer wants to
modify the product specification, price, terms, or
suppliers.
• New task is a purchase decision that requires
thorough research such as a new product.

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Business Buyer Behavior
Major Types of Buying Situations
• Systems selling involves the purchase of a
packaged solution from a single seller.
• Two-step process of selling:
• Interlocking products
• System of production, inventory control,
distribution, and other services to meet the
buyer’s need for a smooth-running operation

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Business Buyer Behavior
Participants in the Business Buying Process
• The buying center is all of the individuals and
units that play a role in the purchase decision-
making process:
• Users
• Influencers
• Buyers
• Deciders
• Gatekeepers

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Business Buyer Behavior
Participants in the Business Buying Process
• Users are those that will use the product or
service.
• Influencers help define specifications and provide
information for evaluating alternatives.
• Buyers have formal authority to select the supplier
and arrange terms of purchase.
• Deciders have formal or informal power to select
and approve final suppliers.
• Gatekeepers control the flow of information.

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Business Buyer Behavior
Participants in the Business Buying Process
The buying center provides a major challenge:
• Who participates in the process
• Their relative authority
• What evaluation criteria each participant uses
• Informal participants

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Business Buyer Behavior
Participants in the Business Buying Process
• Economic factors
• Personal factors
• Environmental factors
• Organizational factors
• Interpersonal factors

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Business Buyer Behavior
Major Influences on Business Buyers

Economic factors: Personal factors:

• Price • Emotion
• Service

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Business Buyer Behavior
Major Influences on Business Buyers
Environmental factors:
• Demand for product • Technology
• Economic outlook • Culture
• Cost of money • Politics
• Resource availability • Competition

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Business Buyer Behavior
Major Influences on Business Buyers
Organizational factors:
• Objectives
• Policies
• Procedures
• Structure
• Systems

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Business Buyer Behavior
Major Influences on Business Buyers
Interpersonal factors:
• Motives
• Perceptions
• Preferences
• Age
• Income
• Education
• Attitude toward risk

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Business Buyer Behavior
The Buying Process
1. Problem recognition
2. General need description
3. Product specification
4. Value analysis
5. Supplier search
6. Proposal solicitation
7. Supplier selection
8. Order-routine specifications
9. Performance review
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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 determined 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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Business Buyer Behavior
E-Procurement and Buying on the Internet
Online purchasing
• Company buying sites
• Extranets

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Business Buyer Behavior
E-Procurement and Buying on the Internet
Advantages
• Access to new suppliers
• Lowers costs
• Speed in order processing and delivery
• Share information
• Sales
• Service and support

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Business Buyer Behavior
E-Procurement and Buying on the Internet
Disadvantages
• Can erode relationships as buyers search for
new suppliers
• Lack of security

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Institutional and Government
Markets
E-Procurement and Buying on the Internet
• Institutional markets consist of hospitals,
nursing homes, and prisons that provide goods
and services to people in their care.
• Characteristics
• Low budgets
• “Captive” audience

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Institutional and Government
Markets
• Government markets tend to favor domestic
suppliers and require suppliers to submit bids and
normally award to the lowest bidder
• Carefully monitored
• Affected by similar environmental factors
• Good credit
• Non-economic factors
• Minority suppliers
• Depressed suppliers
• Small businesses
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