Chapter 6 Business Markets and Business Buyer Behavior

Chapter 6 Business Markets and Business Buyer Behavior 1

What is a Business Market? A business market comprises all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. The business market is huge and involves many more dollars and goods than do consumer markets. 2

Characteristics of Business Marketing Structure and Demand Contain fewer, but larger buyers Customers are more geographically concentrated Buyer demand is derived from final consumer demand Demand is often more inelastic Demand often fluctuates more, and more quickly 3

Characteristics of Business Markets Nature of the Buying Unit n n Business purchases involve more buyers. Business buying involves a more professional purchasing effort. 4

Characteristics of Business Markets Business buyers usually face more complex buying decisions. Types of Decisions and the Decision Process Business buying process is more formalized. In business buying, buyers and sellers work more closely together. 5

Model of Business Buyer Behavior (Fig. 6. 1) The Environment Marketing Stimuli: • Product • Price • Place • Promotion Other Stimuli: • Economic • Technological • Political • Cultural • Competitive The Buying Organization The buying center Buying decision process (Interpersonal and individual influences) (Organizational Influences) Buyer Responses Product or service choice Supplier Choice Order Quantities Delivery terms and times Service terms Payment 6

Discussion Connections Although business markets are similar in many ways to consumer markets, there also significant differences. What similarities and differences might Office Depot (www. officedepot. com) encounter in selling to the business market versus the consumer market for the following products (a) a personal computer, (b) a desk chair. 7

Major Types of Buying Situations Involved Decision Making New Task Buying Modified Rebuy Straight Rebuy 8

Participants in the Business Buying Process Users Ethical Decision. Making Unit of a Buying Roles Include Organization is Called Its Attitudes Buying of Center. Influencers Unexpected Situational Factors Buyers Others Gatekeepers Deciders 9

Major Influences on Business Buyer Behavior (Fig. 6. 2) Environmental Economic developments Supply Conditions Technological change Political and regulatory developments Organizational Objectives Policies Procedures Organizational Structure Systems Interpersonal Authority Status Empathy Individual Age Education Job Position Personality Risk Attitudes Buyers Persuasiveness Competitive Developments Culture and customs 10

The Business Buying Process Stage 1. Problem Recognition Stage 2. General Need Description Stage 3. Product Specification Stage 4. Supplier Search Stage 5. Proposal Solicitation Stage 6. Supplier Selection Stage 7. Order-Routine Specif Stage 8. Performance Review 11

Business Buying on the Internet Business buyers may purchase electronically by: n n Electronic data interchange links (EDI) The Internet Connecting to customers to: n n Share marketing information, Sell products & services, Provide customer support, and’ Maintain on-going relationships. 12

Benefits and Problems Created by Buying on the Internet Benefits: n n n Shave transaction costs Reduce time between order and delivery Create more efficient purchasing systems Forge more intimate relationships Level the playing field Problems: n n n Cut purchasing jobs Erode supplier-buyer loyalty Create potential security disasters 13

Institutional and Government Markets Institutional Markets Low Budgets Captive Patrons Government Markets Public Review Negotiated Contracts Red Tape is Common Noneconomic Criteria Some Buying Online 14

Review of Concept Connections Define the business market and explain how business markets differ from consumer markets. Identify the major factors that influence business buyer behavior. List and define the steps in the business buying decision process. Compare the institutional and government markets and explain how institutional and government buyers make their buying decisions. 15