Unit 5 Business Markets and Behavior 2

Chapter 7
Business Markets and

Buying Behavior
Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, posted to a publicly accessible website, in whole or in part.
Learning Objectives
By the end of this chapter, you should be able to:
7-1 Distinguish among the four types of business markets.
7-2 Define the North American Industry Classification System and describe how it can be used
to identify and analyze business markets.
7-3 Identify the major characteristics of business customers and transactions.
7-4 Describe the buying center, stages of the business buying decision process, and the factors
that affect this process.
7-5 Explore how the internet facilitates business buying and marketing.
7-1
Business Markets
Pride/Ferrell, Foundations of Marketing, 9th Edition. © 2022 Cengage. All Rights Reserved. May not be scanned,
copied or duplicated, posted to a publicly accessible website, in whole or in part.
7-1 Business Markets (1 of 6)
• A business market (also called a business-to-business market or B2B market)
consists of individuals, organizations, or groups that purchase a specific kind
of product for one of three purposes:
1. Resale
2. Direct use in producing other products
3. Use in general daily operations
• Marketing to businesses employs the same concepts as to Consumer markets:
1. defining target markets;
2. understanding buyer behavior;
3. developing effective marketing mixes (4 P’s); and
4. be aware of the external operating environment (PESTEL)
7-1 Business Markets (2 of 6)
• For most business marketers, the goal is to understand customer needs and
provide a value-added exchange that shifts from attracting customers to
keeping customers and developing relationships.
• There are four categories of business markets:
Governmen
Producer Reseller Institutional
t
7-1 Business Markets (3 of 6) Producer Reseller Government Institutional
1. Producer Markets
• Individuals and business organizations that purchase products to make profits
by:
– using them to produce other products or
– using them in their operations
• Includes buyers of raw materials, as well as purchasers of semi-finished and finished items,
used to produce other products
2. Reseller Markets
• Intermediaries that buy finished goods and resell for a profit
– Intermediaries consist of wholesalers and retailers.
7-1 Business Markets (5 of 6) Producer Reseller Government Institutional
3. Government Markets
• Federal, state, county, or local governments that buy goods and services to
support their internal operations and provide products to their constituencies.
4. Institutional Markets
• Organizations with charitable, educational, community, or other nonbusiness
goals
Some Fraternities Charitable Private

Churches
Hospitals and Sororities Organizations Colleges
7-2
Industrial Classification Systems
7-2 Industrial Classification Systems (1 of 2)
• Industry Classification Systems are used to help Segment markets and identify
Target markets just as in Consumer markets
• An example is the North American Industry Classification System (NAICS)
– An industry classification system that generates comparable statistics among
the United States, Canada, and Mexico
– Is based on types of production activities performed
– Is similar to the International Standard Industrial Classification (ISIC) system used in
Europe and many other parts of the world
– NAICS divides industrial activity into 20 sectors with 1,170 industry classifications.
7-3
Dimensions of Business Customers and
Business Transactions
Figure 7.1 Dimensions of Marketing to
Business Customers
7-3 Dimensions of Business Customers
and Business Transactions (1 of 9)
1. Characteristics of Transactions with Business Customers

• Transactions between businesses differ from consumer sales in several ways:
– Orders by business customers tend to be much larger than individual consumer sales.
– Discussions and negotiations associated with business purchases can require
considerable marketing time and selling effort.
– Suppliers need to identify and promote their competencies to position their products so as
to indicate how they provide customer value.
2. Attributes of Business Customers

• Business customers differ from consumers in their purchasing behavior because
they are generally better informed about the products they purchase.
– They typically demand detailed information about a product’s functional features and
technical specifications to ensure that it meets their needs.
• Personal goals may influence business buying behavior.

– Most purchasing agents seek the psychological satisfaction that comes with organizational
advancement and financial rewards.
• Today, many suppliers and their customers build and maintain mutually
beneficial relationships, sometimes called partnerships.
3. Primary Concerns of Business Customers
• When making purchasing decisions, business customers take into account:
1. Price: Influences operating costs and costs of goods sold, which affects selling price, profit margin,
and ultimately the ability to compete
2. Product quality: Most business customers try to maintain a specific level of quality in the
products they buy.
3. Service: Typical services business customers desire from suppliers are market information,
inventory maintenance, on-time delivery, and repair services.
4. Ethics and social responsibility: Sustainability is rising as a consideration amongst buyers
5. Costs of developing and maintaining relationships with suppliers
Methods of Business Buying

• Most business purchasers use one of the following purchase methods:
Description Inspection Sampling Negotiation
• Used when products • Used when products • Used when • Used commonly for
are standardized have unique products are one-time projects
and graded characteristics and homogeneous and • Examples:
according to certain may vary with regard examining the entire Buildings, capital
characteristics such to condition lot is not physically equipment, and
as size, shape, • Examples: Industrial or economically special projects
weight, and color equipment, used feasible
• Examples: vehicles, and • Example: Grain
Commodities and buildings
raw materials
Types of Business Purchases

• Most business purchases are one of three types, each subject to different
influences and requiring business marketers to modify their selling
approaches appropriately:
1. New-task purchase – An organization’s initial purchase of an item to be used to
perform a new job or solve a new problem
2. Straight rebuy purchase – A routine purchase of the same products under
approximately the same terms of sale by a business buyer
3. Modified rebuy purchase – A new-task purchase that is changed on subsequent orders
or when the requirements of a straight rebuy purchase are modified
7-3 Dimensions of Business Customers and
Business Transactions (7 of 9)
Demand for Business Products

• Demand for business products (also called industrial demand) can be
characterized as one of the following:
Derived Inelastic Joint Fluctuating
Demand for business When the buyer is not Where the use of two Price changes lead to
products that stems sensitive to price or or more items in surprising
from demand for when there are no combination to \ changes
temporary
consumer products ready substitutes. produce a product in demand
7-4
Business Buying Decisions
7-4 Business Buying Decisions (1 of 6)
• Business (organizational) buying behavior – The purchase behavior of producers,
government units, institutions, and resellers
The Buying Center
• The people within an organization who make business purchase decisions
• The structure of an organization’s buying centers are affected by:
– Organization’s size and market position
– Volume and types of products being purchased
– Firm’s overall managerial philosophy on who should make purchase decisions
• The size of a buying center is influenced by:

– Stage of the buying decision process
– Type of purchase: (New task/Straight rebuy/Modified rebuy)
Figure 7.2 Business (Organizational) Buying
Decision Process and Factors That May Influence It
7-4 Business Buying Decisions
(3 of 6)
Stages of the Business Buying Decision Process
• Stage 1: Recognize problem
– One or more individuals recognize that a problem or need exists.
– Problem recognition may arise under a variety of circumstances:
o When machines malfunction
o When an existing product is modified
o When a new product is introduced
• Stage 2: Develop product specifications to solve problem

– The development of product specifications requires that buying center participants assess
the problem or need and determine what is necessary to resolve or satisfy it.
– Users & influencers provide information and advice for developing product specifications.
– By assessing and describing needs, the organization should be able to establish product
specifications.
7-4 Business Buying Decisions (4 of
6)
• Stage 3: Search for and evaluate possible products and suppliers
– Search activities may involve:
o Looking in company files and trade directories
o Websites
o Contacting suppliers for information
o Soliciting proposals from known vendors
o Examining various online and print publications
– Value analysis – An evaluation of each component of a potential purchase
o Examines quality, design, materials, and possibly item reduction or deletion to acquire the
product in the most cost-effective way
– Vendor analysis – A formal, systematic evaluation of current and potential vendors
o Examines price, product quality, delivery service, product availability, and overall reliability
7-4 Business Buying Decisions (5
of 6)
• Stage 4: Select product and supplier and order product
– The results of deliberations and assessments in the third stage are used to select the
product to be purchased and the supplier.
– Multiple sourcing – An organization’s decision to use several suppliers
– Sole sourcing – An organization’s decision to use only one supplier
– The actual product is ordered in this stage, and specific details regarding terms, credit
arrangements, delivery dates and methods, and technical assistance are finalized.
• Stage 5: Evaluate product and supplier performance
– Members of the buying center evaluate the supplier’s and product’s performance by
comparing it with specifications
7-4 Business Buying Decisions (6 of 6)
Influences on the Business Buying Decision Process
Environmental Organizational Interpersonal Individual
• Competitive and • The company’s • The • Age

economic factors objectives relationships • Education level
• Political forces • Purchasing among people in • Personality
• Legal and policies the buying center • Tenure and
regulatory forces • Resources • Trust is crucial position in the
• Technological • The size and • Interpersonal organization
changes composition of dynamics and • Experience in the
• Sociocultural the buying center varying industry
issues communication
• PESTEL-C abilities may
complicate
processes
7-5
Reliance on the Internet and Other Technology
7-5 Reliance on the Internet and Other Technology
• Whereas in the past, an organization seeking a type of product might contact product suppliers,
speak with someone on the sales force, and request a catalog or brochure, business customers
today first turn to the internet to search for information and find sources.
– The internet allows buyers to research potential solutions, talk with peers about their experiences
with those products, read blogs, consult webinars and watch YouTube videos, examine
specifications, and find reviews of potential products long before beginning a formal buying process.
• B2B e-commerce sites – Online marketplaces where buyers and sellers from around the world
can exchange information, goods, services, ideas, and payments
– Variously known as trading exchanges, B2B exchanges, and ehubs
– May be independent or private
– May operate as online auctions
Recap of Last Time
– Businesses have 3 reasons to buy:

– for Resale, for Direct use in producing other
products & for Use in general daily operations
– There are 4 categories of markets:

– Producer; Resellers; Government & other
Institutions
– Dimensions of Marketing to Business customers:
– Methods of Business Buying

Recap of Today
•Types of Demand
•Buying centre: Role of the centre and the players

– users, influencers, buyers, deciders, gatekeepers
•Factors That May Influence decision process

Unit 5 Business Markets and Behavior 2

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Chapter 7

Business Markets and

Some Fraternities Charitable Private

1. Characteristics of Transactions with Business Customers

2. Attributes of Business Customers

• Personal goals may influence business buying behavior.

Methods of Business Buying

Types of Business Purchases

Demand for Business Products

Derived Inelastic Joint Fluctuating

• The size of a buying center is influenced by:

• Stage 2: Develop product specifications to solve problem

Influences on the Business Buying Decision Process

Environmental Organizational Interpersonal Individual

• Competitive and • The company’s • The • Age

– Businesses have 3 reasons to buy:

– There are 4 categories of markets:

– Dimensions of Marketing to Business customers:

– Methods of Business Buying

•Buying centre: Role of the centre and the players

•Factors That May Influence decision process

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