Ch 6 -1 Copyright © 2011 Pearson Education

Principles of Marketing,
Arab World Edition
Philip Kotler, Gary Armstrong, Anwar Habib, Ahmed
Tolba
Presentation prepared by Annelie Moukaddem Baalbaki

CHAPTER SIX
Business Markets and Business
Buyer Behavior

Lecturer: Insert your name here

Ch 6 -2 Copyright © 2011 Pearson Education

 Chapter Learning Outcomes
Topic Outline

6.1 Business Markets

6.2 Business Buyer Behavior
6.3 The Business Buying Process
6.4 E-Procurement: Buying on the Internet
6.5 Institutional and Government Markets

Ch 6 -3 Copyright © 2011 Pearson Education

 Business Markets
Business Buyer Behavior and Business Buying Process

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.

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.

Ch 6 -4 Copyright © 2011 Pearson Education

 A business market comprises all the

organizations that buy G/S to use in the

production of other P/S, or for the purpose

of reselling or renting them to others at a

profit

5 © Pearson Education 2011

 Business Markets

6 © Pearson Education 2011

 Differences between consumer &
business markets
Market structure and demand
• Business marketer: Fewer but larger buyers
• Business markets geographically concentrated
• Business D is derived from D of consumer goods.
• Many business markets have inelastic D, it is not
affected much by price changes
• Business
markets have more fluctuating D that
change more quickly than D for consumer D
7 © Pearson Education 2011
 Differences between consumer & business
markets
Nature of the buying unit
• Business purchase involves more decision
participants & a more professional purchasing
effort.
• Businessbuying is done by trained purchasing
agents who spend working lives learning how to
buy better.
• More complex purchase, more people will
participate in decision-making process.

8 © Pearson Education 2011

 Differences between consumer & business
markets
Types of decisions and the decision process
• Businessbuyers face more complex buying decisions
than do consumer.
• Purchases involve large sums of money, complex
technical & eco considerations, & interactions among
many people at many levels of buyer’s organization.
• Businessbuying process tends to be more formalized
than consumer buying process.
• Buyer
& seller are more dependent on each other -
Supplier development

9 © Pearson Education 2011

 Business Markets
Market Structure and Demand

Ch 6 -10 Copyright © 2011 Pearson Education

 Business Buyer Behavior

The Model of Business Buyer Behavior

11 © Pearson Education 2011

 Business Markets
Types of Decisions and the Decision Process

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.

Ch 6 -12 Copyright © 2011 Pearson Education

Business Buyer Behavior

Ch 6 -13 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Major Types of Buying Situations

Straight rebuy is a routine purchase decision such as

reorder without any modification. It is usually handled
on a routine basis by the purchasing department
Modified rebuy: Buyer wants to modify P specifications,
prices,or suppliers. It involves more decision
participants than does the straight rebuy.
New task: it requires research such as a new product.
greater cost or risk, larger decision participants &
greater efforts to collect information will be.

Ch 6 -14 Copyright © 2011 Pearson Education

 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

Ch 6 -15 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Participants in the Business Buying Process

Buying center is all of the individuals and units

that participate in the business decision-
making process
– Users
– Influencers
– Buyers
– Deciders
– Gatekeepers

Ch 6 -16 Copyright © 2011 Pearson Education

Business Buyer Behavior

Participants in the Business Buying Process

Buying center provides a major challenge

Who participates in the process
• Their relative authority
• What evaluation criteria each participant uses
• Informal participants
 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.

Ch 6 -18 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Major Influences on Business Buyers

Ch 6 -19 Copyright © 2011 Pearson Education

Major influences on business buyers

When suppliers’ offers are very similar,

business buyers have little basis for strictly
rational choice. They can buy from any
supplier, buyers can allow personal factors
to play a role in decisions.
When competing products differ greatly,
business buyers are more accountable for
their choice and tend to pay more attention
to economic factors.

Ch 6 -20 Copyright © 2011 Pearson Education

Major influences on business buyers
• Environmental factor is shortages in key
materials. Many companies are now more willing
to buy and hold larger inventories of scarce
materials to ensure adequate supply.
• Eachparticipant in business buying-decision
process brings in personal motives, perceptions,
& preferences.
• These individual factors are affected by personal
characteristics such as age, income, education,
professional identification, personality, &
attitudes toward risk.
 Business Buyer Behavior
Major Influences on Business Buyers
Environmental Factors

Ch 6 -22 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Major Influences on Business Buyers
Organizational Factors

Ch 6 -23 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Major Influences on Business Buyers
Interpersonal Factors

Ch 6 -24 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Major Influences on Business Buyers
Individual Factors

Ch 6 -25 Copyright © 2011 Pearson Education

 The Business Buying Process

Ch 6 -26 Copyright © 2011 Pearson Education

 The Business Buying Process
Problem Recognition

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

Ch 6 -27 Copyright © 2011 Pearson Education

 The Business Buying Process
General Need Description and Product Specifications

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.

Ch 6 -28 Copyright © 2011 Pearson Education

 The Business Buying Process
Supplier Search and Proposal Solicitation

Supplier search involves compiling a list of qualified

suppliers.

Proposal solicitation is the process of requesting proposals

from qualified suppliers.

Ch 6 -29 Copyright © 2011 Pearson Education

 Business Buyer Behavior
Supplier Selection and Order Routine Specifications

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.

Ch 6 -30 Copyright © 2011 Pearson Education

 The Business Buying Process
Performance Review

Performance review involves a critique of supplier

performance to the purchase terms.
It may lead the buyer to continue, modify, or drop the
arrangement.

Ch 6 -31 Copyright © 2011 Pearson Education

 E-Procurement: Buying on The Internet
E-Procurement

• Online purchasing (reverse auctions or trading exchanges)

• Company-buying sites
• Extranets

Ch 6 -32 Copyright © 2011 Pearson Education

 The Business Buying Process
E-Procurement

Advantages Disadvantages

• Access to new suppliers • Can erode relationships

• Lowers costs as buyers search for new
• Speeds order processing suppliers
and delivery • Security
• Shares information
• Sales
• Service and support

Ch 6 -33 Copyright © 2011 Pearson Education

 Institutional and Government Markets
Institutional markets

Institutional markets consist of hospitals, nursing homes,

and prisons that provide goods and services to people
in their care.
Characteristics
• Low budgets
• “Captive” audience

Ch 6 -34 Copyright © 2011 Pearson Education

 Institutional and Government Markets
Government markets

Government markets tend to favor domestic suppliers and

require suppliers to submit bids and normally award to the
lowest bidder.
Noneconomic criteria play a role:
• Depressed business firms and areas
• Small business firms
• Minority-owned firms
• Business firms that avoid race, gender or age discrimination

Ch 6 -35 Copyright © 2011 Pearson Education

 This work is protected by local and international copyright laws and is provided solely for
the use of instructors in teaching their courses and assessing student learning.
Dissemination or sale of any part of this work (including on the World Wide Web) will
destroy the integrity of the work and is not permitted. The work and materials from this site
should never be made available to students except by instructors using the accompanying
text in their classes. All recipients of this work are expected to abide by these restrictions
and to honor the intended pedagogical purposes and the needs of other instructors who rely
on these materials.

Ch 6 -36 Copyright © 2011 Pearson Education