Business Markets and Business Buyer Behavior

Learning Goals
1. Define the business market and how it differs from consumer markets 2. List and define the steps in the business buying decision process 3. Compare the institutional and government markets and explain how they make their buying decisions

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Case Study UPS
Customer Needs
• Consumers need fast, friendly, low-cost package delivery • Business needs are more complex – Shipping part of complex logistics process including purchasing, inventory, order status, invoices, payments, returns

Services
• 360,000 people and 88,000 vehicles offer ground, air, freight worldwide • Helps customer navigate the complexities of international shipping • Offers a wide range of financial services • Provides consulting services to improve logistics operations
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These UPS ads target businesses as a supply chain solution

Marketing in Action

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Learning Goals
• Define the business market and how it differs from consumer markets • List and define the steps in the business buying decision process • Compare the institutional and government markets and explain how they make their buying decisions

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What is a Business Market?

•The Business Market

all the organizations that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to others or carry out organizational functions . • Business markets involve many 6-6 more Rupee and items to

Introduction
• B2B: a popular acronym for the business-to-business market • Business-to-business marketing: organizational purchase of goods and services to support production of other goods and services for daily company operations or for resale. • or to carry out organizational functions than marketing to Individuals or family units
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Definition
• Business Buyer Behavior:
– The buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. – Also included are retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them or others at a profit. – B2B occurs between businesses and other businesses rather than between businesses and consumers.

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Organizational Markets
• Industrial Market : Manufacturing construction , transportation etc. • Reseller market: All Individuals and Organizations that acquire goods for the purpose of reselling or renting them to others at a profit like Wholesalers, Retailers.

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Industrial Customers
• User Customer : One who buys Machine or an equipment to use in his business . He is one time buyer for his small enterprise • The OEM Customer : One who buys a product or component to incorporate into what he in turn makes and sells e.g. TV set manufacturer who purchases electronic components to put in sets he makes • Reselling Customers: Those who buy products from manufacturers to resell to users like dealers , distributors and retailers 6 - 10

Business Markets
Characteristics
• Marketing Structure and Demand • Nature of the Buying Unit • Types of Decisions and the Decision Process

• Compared to consumer markets:

– Business markets

– Business customers
• are more geographically concentrated

• have fewer but larger customers

– Demand is different
• Demand is derived • Demand is price inelastic
• Demand fluctuates more

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Business Markets
Characteristics
• Marketing Structure and Demand • Nature of the Buying Unit • Types of Decisions and the Decision Process • Compared to consumer purchases:
– Involve more buyers in the decision process – More professional purchasing effort

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Business Markets
Characteristics
• Marketing Structure and Demand • Nature of the Buying Unit • Types of Decisions and the Decision Process • Compared to consumer purchases
– More complex buying decisions – The buying process is more formalized

– Buyers and sellers work more closely together and build long-term relationships
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Business Buying Situations
New Task Buying
Involved Decision Making

Modified Rebuy

Straight Rebuy
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Classifying Business Buying Situations
• Recurring purchase decision in which a customer repurchases a good or service that has performed satisfactorily in the past
• e.g. Office Supplies , Bulk chemicals

Straight Rebuy

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Classifying Business Buying Situations
• Purchase decision in which a purchaser is willing to reevaluate available options for repurchasing a good or service
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Modified Rebuy

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Classifying Business Buying Situations
• First-time or unique purchase situation that requires considerable effort by the decision Makers.
• Product specifications , price limits , Delivery terms and times , service terms , Payment terms , order quantities , acceptable suppliers and the selected supplier . Awareness—Interest ---Trial--and Adoption E.g. Office building , new security system

New-Task Buying

• •

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Table 10.3: Business-to Business Marketing versus Consumer Goods Marketing: Some Distinguishing Characteristics

Strategies for Marketing to Both Business Purchasers and Final Users
Business-to-Business Marketing Consumer-Goods Marketing
Standardized form, service important but less than for business products List prices Emphasis on advertising Product passes through a number of intermediate links en route to consumer Comparatively infrequent contact, relationship of relatively short duration Individual or household 6 - 18 unit makes decision

Product

Relatively technical in nature, accompanying services very important

Price Promotion Distribution

Competitive bidding for unique items, list prices for standard items Emphasis on personal selling Relatively short, direct channels to market

Customer relations Decisionmaking

Relatively enduring and complex

Involvement of diverse group of organization members in decision

• Established in 1802 with gunpowder as its first product • In 1910 moved away from explosives with the first non-leather material, which was snatched up for upholstery and automobile parts • Today, the firm delivers science-based solutions that make real differences in people's lives around the world in areas such as food and nutrition, health care, apparel, safety and security, construction, electronics and transportation • Revenue of $27 billion
Marketing in Action
Click on logo for website 6 - 19

Business-to-Business Company DuPont Chemicals

Business-to-Business Company DuPont Chemicals
• Examples of B2B markets and products:
– Heath Care - Medical fabrics to provide comfort and safety to surgeons – Automobile – airbag fibers and engineering plastics for safety – Dental – filaments for toothbrushes – Glass – technology to reduce glare and noise, save energy, protect against breakage – Footwear – flexibility for rubber, strength of plastic – Farming – pesticides – Guitar manufacturers – DuPont product give the look of vintage lacquer
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Marketing in Action

Business Buyer Behavior
• Systems Selling
– Many business buyers prefer Buying a packaged solution to a problem from a single seller. – Often a key marketing strategy for businesses seeking to win and hold accounts. e.g M&M involved system suppliers thru well defined process for seating systems , breaking systems ,transmission systems ,air-conditioning systems for Scorpio for Indian market in 2002. Design parameters and target costs for each system were specified based on data including consumer research data. The system suppliers worked with the company to develop the most cost effective design for each system that met the company’s technical and quality standards as well as consumer specifications. 6 - 21 MRO ( Maintenance , Repair , Operating )

Participants in the Business Buying Process: The Buying Center
Gatekeepers Users

Deciders

Buying Center
Buyers

Influencers

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Business Buyer Behavior
• Buying Center
– The decision-making unit of a buying organization – Includes all individuals and units that participate in decision making – It includes several participants with different interests , authority , status and persuasiveness 6 - 23

Buying centre Influences
• Each member of buying centre is likely to give priority to very different decision criteria • Engineering personnel is concerned may be primarily with maximizing the actual performance of the product • Production personnel may be concerned with ease of use and reliability of supply • Financial personnel may focus on the economics of purchase
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Buying centre Influences
• Each buyer has a personal motivations, perceptions, preferences which are influenced by buyers age , income , education , job position , personality , attitude towards risk and culture ……… leads to different buying style • “Keep it simple” , “want the best” , “want everything done” , rigorous analysis done by young 6 - 25

• B2B marketers must identify people who play the various roles in a buying center, their needs/motives, and their relative influence • Must understand how these members interact with: – Each other – Other members of their own organizations, and – Outside vendors • Team selling, introducing other associates in addition to salespeople into selling situations to reach all members of a 6 customer’s buying center, can be effective- 26

MARKETING TO BUYING CENTERS: STRATEGIC IMPLICATIONS

Business centre Targeting
Business marketers have to figure out : Who are the major decision participants ? What Decisions do they influence? What is their level of influence ? What evaluation criteria do

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Business Buyer Behavior
A company sells non-woven surgical gowns to hospitals. • Participants in buying decisions include : • VP purchasing : whether hospital should buy disposable gowns or reusable gowns • The operating room administrator: Various competitors , products , and price and make choice, consider absorbency , antiseptic quality , design and cost and normally buys brand that needs functional requirements at the lowest cost 6 - 28

Learning Goals
• Define the business market and how it differs from consumer markets • List and define the steps in the business buying-decision process • Compare the institutional and government markets and explain how they make their buying decisions

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Learning Goals
• Define the business market and how it differs from consumer markets • List and define the steps in the business buying decision process • Compare the institutional and government markets and explain how they make their buying decisions

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Stages in the Business Buying Process
Figure 6.3
HP as “trusted Advisory” like Network computer system Catalog sites , auction sites , private exchanges – HP , IBM , Walmart

Xerox qualifies only suppliers who meet the ISO 9000 quality standards

CVA, Customer Value assessment methods like Conjoint Analysis, Benchmarking , Direct Survey , Importance ratings etc. e.g Mc Donald's approved Dynamix Diary that had technological capabilities

Buyer negotiates the final order listing the technical specifications The Qt.. Needed , the expected time of delivery, return policies , warranties and so on

Incentive systems and reward purchasing managers for good buying performance

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Business Buying on the Internet
– E-procurement is growing rapidly. – Online auctions and online trading exchanges (emarketplaces) account for much of the online purchasing activity. – E-procurement offers many benefits:
• Access to new suppliers • Lower purchasing costs
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Managing B2B Customer Relationship
• Pantaloons , Shopper’s Stop and Blue Star : Aligning supply system with Demand …. Have installed efficient supply chain management system.
6Automatic Replenishment system33

Shopper’s stop , Pantaloons & Blue star
• Automatic Replenishment system that tracks stock levels in each store and triggers replenishment from the warehouse based on current off takes • Shopper’s stop has been able to reduce stock levels by almost half from 4-5 weeks stock to 2 Weeks stock. • Pantaloons has improved its on time Delivery and has been able to reduce its mark down from 15 to 5 percent as a result of the efficiency improving initiatives • Blue star forecasting led model senses the actual Demand and then releases the 6 - 34 stock

Learning Goals
• Define the business market and how it differs from consumer markets • List and define the steps in the business buying decision process • Compare the institutional and government markets and explain how they make their buying decisions

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Components of the Business Market

Institutions

• Institutions: includes a wide variety of organizations, both public and private, such as hospitals, churches, colleges and universities, museums, and notfor-profit agencies. • They provide goods and services to people in their care.
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Institutional and Government Markets
• Institutional Markets
– Often characterized by low budgets. – Marketers may develop separate divisions and marketing mixes to service institutional markets.

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Components of the Business Market
• Government Organizations: Include domestic units of federal, state, local and foreign governments
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Government Organizations

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DEVELOPING EFFECTIVE B2B MARKETING STRATEGIES • Formalized
purchasing procedures
Challenges of Government and Institutional Markets

– Bids: written sales proposals from vendor – Specifications: written descriptions of needed goods or services

• Group purchasing is an important factor
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