MARKETING MANAGEMENT

14th edition

7
Analyzing
Business Markets
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.

For instance: Buying

procedures and behaviors of
Corporate or Institutional
purchase and Government
purchases.
What is Business Market?
Business market consists of all the organizations that
acquire goods and services used in the production of other
products and services that are sold, rented or supplied to
others.
The major industries making up the business market are
agriculture, constructions, manufacturing, transport,
communication, public utilities, banking, insurance, and
other services.
Characteristics of Business Markets
Characteristics of Business Markets (Cont.)…
Fewer, Larger Buyers

Fewer, larger buyers: The number of the buyers is

less in the corporate category but the volume of
individual buyer’s purchase is very high. So the
ultimate the sales volume of seller is very high.
Example: Business 2 Business Marketing – Dunlop
Tires to Automobile manufacturers, Aircraft Engines
to BOEING, or other etc.
Characteristics of Business Markets (Cont.)…
Professional Purchasing
Professional purchasing: Business goods are often
purchased some trained purchasing agents and they must follow
purchasing policies and procedures of their principal company.

Example: Like Buying Houses for the Garments Sector. They

follow the sequence –
Requesting for quotation
Receiving proposals
Evaluating offerings
Issuing purchase orders
Receiving products
Evaluating seller’s performance
6-6
Characteristics of Business Markets (Cont.)…
Several Buying Influences

Several buying influences:

Buying committees consists of
different functional managers,
technical experts and even senior
management in purchase of major
goods. So they try to influence the
purchase.

Example: People from different

departments try to influence the
buying process to serve their
interest. And some special
interest groups outside the
company can also interfere in
business buying.
Characteristics of Business Markets (Cont.)…
Several Buying Influences
Characteristics of Business Markets (Cont.)…
Geographically Concentrated Buyers
Geographically concentrated buyers: Sometimes business
buyers are located in some selective areas. So it is effective to
target those selected areas to sell business products.
Example: Motijheel is a prominent location for corporate offices,
again Dhanmondi & Banani areas are for private universities. So it
is profitable for marketers to send their sales representatives to
the respective areas.
Characteristics of Business Markets (Cont.)…
Close Supplier-Customer Relationships

Close supplier-customer relationships: Because of smaller

customer base, continuous communication and the importance of
the customers; suppliers maintain very close relationship with
them. And business buyers often select suppliers who also buy
product from them.

Example: Paper manufacturer buys

chemicals from such a chemical
company that buys a considerable
amount of its paper (so its a win-
win situation).
 Characteristics of Business Markets (Cont.)…
Multiple Sales Calls
Multiple sales calls: Several sales
calls (offer, communication & influence)
and time is needed to satisfy all the
possible queries of the business
customers from bottom to top level of
buyer.
Example: In case of selling furniture,
Otobi would have had to visit AIUB first
to introduce their products, and if the
management was interested in a
purchase, Otobi would have to come
again with quotations, catalogs, and
other relevant details, and a final time to
take the order.
Characteristics of Business Markets (Cont.)…
Direct Purchasing
Direct purchasing: Usually business customers purchase
products directly from manufacturers without using the
intermediaries.
Example: Developer companies (Asset, Sheltech) purchase
building materials like steel, cement and others directly from the
manufacturers like Abul Khair Group, Basundhra Group etc.

6-12
Characteristics of Business Markets (Cont.)…
Derived Demand

Derived demand: The demand for

business goods is ultimately resulted
from the demand of consumer goods.
So economic condition, consumer
spending, interest rate are important.

Example: TOYOTA buys steel

because consumers buy Toyota cars.
If consumer demand for cars drops,
so will the demand for steel and all
other products used to make cars.
6-13
Characteristics of Business Markets (Cont.)…
Inelastic Demand

Inelastic demand: Sometimes demand

of some business goods & services are not
highly affected by price changes.
Consumer will show similar type of
demand all most all the time. That is why
marketers of those products will demand
one standard quantity of raw materials
always.
Example: Demand for Raw materials of
salt and medicine manufacturers. No
matter how the final price
(Increase/decrease) of products is;
Consumer will use these products
according to their regular need. So the
manufacturers need a consistent level
supply all the time. 6-14
Characteristics of Business Markets (Cont.)…
Fluctuating Demand

Fluctuating demand: Though

business buyers demand products
according to consumer’s need; but
sometimes the demand for business
goods and services tends to become
unstable than the demand of
consumer goods & services.

Example: 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.
Business Buyer Behavior
Participants in the Business Buying Process
The Buying center is all of the individuals and
units that participate in the business buying
decision-making process such as:
• Initiators
• Users
• Influencers
• Deciders
• Approvers
• Buyers
• Gatekeepers
 Initiators

 Users
 Influencers

 Deciders
 Approvers

 Buyers
 Gatekeepers
Stages in the Business Buying Decision Process

General
Problem Product
Need
Recognition Specification
Description

Supplier
Search

Proposal
Solicitation

Order
Performance Supplier
Routine
Review Selection
Specification
Stages in the Business Buying Decision Process
Problem recognition occurs when someone in the
company recognizes a problem or need for a
business product or services.
 Internal sources:
• Need for new product or production equipment from
the internal operations of the organization.
 External sources:
• Idea from some external activities like
trade show, advertising campaign or
competitors activities.
Stages in the Business Buying Decision Process
General need description describes the
characteristics and quantity of the needed item.
- For standard items the process is simple, but for complex
items, the buyer will work with others – engineers,
users to define characteristics like utility, reliability,
durability or price.

Product specification describes all the technical

criteria and details of the product. The company can
assign a product-value analysis team to the project
to determine the cost and the standard of that
product.
Stages in the Business Buying Decision Process
Supplier search involves searching for the most appropriate
suppliers through trade directories, contacts with other
companies, trade advertisements and trade shows. Company may
collect information about the multiple suppliers.

Proposal solicitation is the process of requesting proposals from

qualified suppliers. After evaluating the proposals, finally the
buyer will invite a few suppliers to make formal presentation or
discussion.

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.
Stages in the Business Buying Decision Process
Order-routine specifications After selecting supplier(s),
buyer place the final order to the supplier by listing all the
technical specifications, quantity needed, the expected
time of delivery, return policies, warranties, payment
mode and so on.

Performance review involves a evaluation of supplier’s

performance to the purchase terms.
- This is the most important stage for future sales development
and relationship. Because performance review may lead
the buyer
to continue, modify or end a supplier
relationship.
END of CHAPTER - 7