PART

3:Analyzing
Business
Markets
Connecting with
Customers:

Analyzing
Business
Markets
By: RYAN C. ROSEL
Marketing Management
Prof. Neil B. Gamus
02/08/2020
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In This Chapter, We Will Address the Following
Questions:

1. What is the business market, and how does it differ

from the consumer market?
2. What buying situations do organizational buyers face?
3. Who participates in the business-to-business buying
process?
4. How do business buyers make their decisions?
5. How can companies build strong relationships with
business customers?
6. How do institutional buyers and government agencies
do their buying?
 I.
What is Organizational Buying?
and how does it differ from the
Consumer Market?
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

BUSINESS MARKET
• group of profit making organizations that buy
goods and services for business use
• consists of industries, distributors and
retailers
• has rational buying with and experiences an
inelastic demand
Business Markets versus the Consumer Market
Challenges faced by Business Marketers
1. Understanding deep customer needs in new ways;
2. Identifying new opportunities for organic business growth;
3. Improving value management techniques and tools;
4. Calculating better marketing performance and accountability metrics;
5. Competing and growing in global markets.;
6. Countering the threat of product and service commoditization by
bringing innovative offerings to market faster and moving to more
competitive business models; and
7. Convincing C-level executives to embrace the marketing concept and
support robust marketing programs.
Business Markets versus the Consumer Market
characteristics of Business Markets
• Fewer, larger buyers
• Close supplier–customer relationship
• Professional purchasing
• Multiple buying influences
• Multiple sales calls
• Derived demand
• Inelastic demand
• Fluctuating demand
• Direct purchasing
Business Markets versus the Consumer Market
Consumer Market Business Market
Every costumer has equal value and represents a There are a small number of big customers that
small percentage of revenue account for a large percentage of revenue
Sales are made remotely, the manufacturer doesn’t Sales are made personally, the manufacturer gets to
meet the customer know costumer
Products are the same for all customers. The serviceProduct are customize for different customers are
element is low highly valued
Purchases are made for personal use –image is Purchases are made for others to use –images is
important for its own sake important where it adds value to the customer
The purchaser is normally the user The purchaser is normally the integrator; someone
down the supply chain is the user.
Cost are restricted to purchase the cost Purchase cost may be a small part of the total cost
of use
The purchase event is not the subject to tender and The purchase event is conducted professionally
negotiation includes tender and negotiation
The exchange is one off transaction. There is no The exchange is often one of strategic intent. There
long-time view (financial services differ) is the potential for long term value.
 II.
What Buying Situations do
organizational buyers face?
Buying situations

Straight
rebuy
➡️ Reorder supplies (e.g., Office supplies, bulk chemicals)
at a routine basis and chooses from list of suppliers

The buyer want modified products specs, prices,

modifiedr
ebuy
➡️ delivery requirements from previous orders

new task ➡️Purchaser buys a product for the first time

 Systems Buying and Selling
systems buying
• buying a complete solution to a problem or
need rather than a number of component parts
For example, an organization may purchase an
entire accounting system from one supplier rather
than computers from one supplier, software from
another, staff training from another, and so on.

systems selling
• selling a complete solution to a problem or
need rather than one or more of the
component parts.
For example, a swimming pool manufacturer might
also sell landscaping, filtration equipment, pool
chemicals, etc
 III.
Who participates in the
business-to-business buying
process?
Participants in the Business Buying Process

the buying center

• consists of “all those individuals and groups who participate in the
purchasing decision-making process, who share some common goals and
the risks arising from the decisions”.
Participants in the Business Buying Process
Initiators users influencers deciders
those those who will those who those who
requesting the use the product influence the decide on
product or service buying products reqs &
decisions suppliers

approvers buyers gatekeepers

those those who have those who
authorizing authority to prevent
actions of select supplier & information from
buyers arrange reaching
purchase terms members of
buying center
 IV.
How do business buyers make
their decisions?
Stages in the Buying Process
Stages in the Buying Process

STAGE 1: PROBLEM
RECOGNITION
• The process starts when the company
recognizes a problem or a need that can be
met by acquiring a good or service.
• Can be triggered by internal or external
stimuli.
Stages in the Buying Process

STAGE 2 and 3: General

Need Description and
Product Specification
• The buyer determines the needed
item’s general characteristics and
required quantity
• Business marketers can help by
describing how their products meet or
even exceed the buyer’s needs
Stages in the Buying Process
stage 4: SUPPLIER SEARCH
• Buyer tries to identify the most appropriate
suppliers through trade directories, contacts with
other companies, trade advertisements, trade
shows, and the Internet.
1. Catalog sites
2. Vertical markets.
3. “Pure Play” auction sites.
4. Spot (or exchange) markets.
5. Private exchanges
6. Barter markets.
7. Buying alliances
Stages in the Buying Process
stage 5: proposal solicitation
• Buyer invites qualified suppliers to submit
proposals
• After evaluating the proposals, the buyer will
invite a few suppliers to make formal
presentations.
• Oral presentations must inspire confidence
and position the company’s capabilities and
resources so they stand out from the
competition.
 Stages in the Buying Process
stage 6: supplier
selection
• The buyer specifies and
ranks desired supplier
attributes, often using a
supplier-evaluation model
 Stages in the Buying Process
stage 6: supplier selection
• To develop compelling value propositions, business marketers need to
better understand how business buyers arrive at their valuations.
Researching Customer Value
1. Internal engineering assessment
2. Field value-in-use assessment
3. Focus-group value assessment
4. Direct survey questions
5. Conjoint analysis
6. Benchmarks
7. Compositional approach
8. Importance ratings
Stages in the Buying Process
stage 6: order
routine specification
• After selecting suppliers,
the buyer negotiates the
final order, listing the
technical specifications,
the quantity needed, the
expected time of delivery,
return policies, warranties,
and so on.
Stages in the Buying Process
stage 7: performance review
• The buyer reviews the performance of
chosen supplier(s) using one of three
methods:
1. The buyer may contact the end users and
ask for their evaluations
2. The buyer may rate the supplier on
several criteria using a weighted score
method
3. The buyer might aggregate the cost of
poor performance to come up with
adjusted costs of purchase including
price
Stages in the Buying Process
the Buygrid Framework
 V.
How can companies build strong
relationships with business
customers?
Managing Business-to-Business Customer Relationships
To improve effectiveness and efficiency, business
suppliers and customers are exploring different ways to
manage their relationships. Closer relationships are
driven in part by supply chain management, early
supplier involvement, and purchasing alliances.
Cultivating the right relationships with business is
paramount for any holistic marketing program.

the benefits of vertical coordination

• Create more value for both buying partners and sellers
partners
• Establishing Corporate Trust and Credibility
Managing Business-to-Business Customer Relationships
the benefits of vertical coordination
Corporate credibility depends on three factors:
1. Corporate expertise
2. Corporate trustworthiness
3. Corporate likability
Managing Business-to-Business Customer Relationships
categories of buyer-supplier relationships
Managing Business-to-Business Customer Relationships
categories of buyer-supplier relationships
1. Basic buying and selling—These are simple, routine exchanges with
moderate levels of cooperation and information exchange.
2. Bare bones—These relationships require more adaptation by the seller
and less cooperation and information exchange.
3. Contractual transaction—These exchanges are defined by formal
contract and generally have low levels of trust, cooperation, and
interaction.
4. Customer supply—In this traditional custom supply situation,
competition rather than cooperation is the dominant form of governance.
Managing Business-to-Business Customer Relationships
categories of buyer-supplier relationships
5. Cooperative systems—The partners in cooperative systems
are united in operational ways, but neither demonstrates
structural commitment through legal means or adaptation.
6. Collaborative—In collaborative exchanges, much trust and
commitment lead to true partnership.
7. Mutually adaptive—Buyers and sellers make many
relationship-specific adaptations, but without necessarily
achieving strong trust or cooperation.
8. Customer is king—In this close, cooperative relationship,
the seller adapts to meet the customer’s needs without
expecting much adaptation or change in exchange.
 VI.
How do institutional buyers and
government agencies do their
buying?
Institutional and Government Markets
• The Institutional market consists of schools, nursing
home, prisons and other institutions that provide goods
and services to people in their care
• Buyers for government organizations tend to require a
great deal of paperwork from their vendors and to favor
open bidding and domestic companies
• Suppliers must be prepared to adapt their offers to the
special needs and procedures in institutions and
government
Thank you.