business markets & business buyer behaviour

Chapter No. O6BUSINESS MARKETS &

BUSINESS BUYER BEHAVIOR.

Learning Outcome:

Business Markets.

Business Buyer Behavior.

The Business Buying Process.

Institutional & Government Markets.

Market:

“ A market is an area or a place where buyers and sellers

negotiate for the exchange of a well defined commodity.”

Business Market:

A marketplace where organizations purchase raw material, natural resources and component of other product for resale.

OR It is a market in which buyer purchase product and services for resale

purposes.

Consumer Market :It is a market in

which buyer purchase product and services for Personal Consumption.

Business Market:It is a market in

which buyer purchase product and services for resale purposes.

Difference Between Consumer Market And Business Market

•We Discussed Only Business Market.

Characteristics Of Business Market:

There Are 3 main characteristics of Business Market which are:

1) Market structure and demand.

2) Nature of the buying unit.

3) Types of decision and the decision process.

Market structure and demand:

Business markets contains fewer but larger buyers.

Business buyer demand is derived from final consumer demand.

Demand in many business markets is more inelastic.

Demand in business markets fluctuates more and more quickly.

Nature of the buying unit:

Business purchases involves more buyers.

Business buying involves a more professional purchasing effort.

Types of decision and the decision process:

Business buyers usually face more complex buying decisions.

The business buying process is more formalized.

In business buying, buyers and sellers work more closely together and build close long term relationships.

Business Buyer Behavior

Definition of Business buyer behavior

General Model of business buyer behavior

Major types of buying situations

Definition of Business buyer behavior

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. Also included are retailing and wholesaling firms that acquire goods to resell or rent to others for profit.

6-9

General Model of business buyer behavior

The Marketing stimuli

The Other stimuli

The Buying organization

Responses of Buying organization

The Marketing stimuli

• Price

• Place

• Product

• Promotion

The Other stimuli

Additional stimuli include major economic forcesPolitical

• Political

• Economic

• Technological

• Cultural

• Competitive

The Buying organization

Within a buying organization the buying activity consist of two major parts ;

I. The buying decision process

II. The buying center

Responses of Buying organization

• Product or service choice

• Supplier choice

• Order quantities

• Delivery

• Service

• Payment terms

Major types of buying situations

• Straight rebuy

• Modified rebuy

• New task

Major Types of Buying Situations

Straight rebuy is a routine purchase decision such as a reorder without any modification

Modified rebuy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers

New task is a purchase decision that requires thorough research such as a new product

Participants in Business Buying Process:

Buying Center: All the individual and units that play a role in the purchase decision

making process.

This group includes:

Actual user of the product and services,

Those who make the buying decision,

Those who influence the buying decision,

Those who do the actual buying,

And, those who control the buying information.

Participants:

There are five participant in the business buying process.

1. Users: Member of the buying organization who will actually use the purchased product or service

2. Influencers: People in an organization’s buying center who affect the buying decision

3. Buyers: People in an organization’s buying center who make an actual purchase

4. Deciders: People in an organization’s buying center who have formal or informal power to select or approve the final suppliers.

5. Gatekeepers: People in an organization’s buying center who control the flow of information to others.

Buying process for:

Simple purchases: These are routine purchases and one person may assume all buying center roles.

Complex purchases: The buying center includes more than one person.

Major Influences on Business Buyers

Influences are the forces that affect the decisions of business buying processes.These may be economic factors or personal emotions.

Influencing Factors:

These factors affect the decisions of business buyers.

1. Environmental Factors

2. Organizational Factors

3. Interpersonal Factors

4. Individual Factors

1.Environmental FactorsEnvironmental Factors

o The economy

o Competition

o Technology

o Supply Conditions

o Politics

o Culture

o Custom

• Current and Expected economic environment,

• Competitive developments or advantages in the environment,

• Advancement in Technology,

• Supply of raw material,

• Cultures and customs strongly influence business buyer reactions to marketer’s behavior and strategies, especially in international marketing environment.

2.Organizational FactorsOrganizational Factors

o Objectives

o Strategies

o Structure

o Systems

o Procedures

Every organization has it’s own:

objectives,

strategies,

structure,

systems,

and, procedures, and marketers must understand

these well.

3.Interpersonal Factors

Interpersonal factors

o Influence

o Expertise

o Authority

o Dynamics

In buying center there are many participants who influence each other.

The influence may be due to special expertise, authority or have special relationship with other important participants.

4.Individual FactorsIndividual factors

o Age

o Education

o Job position

o Motives

o Personality

o Preferences

o Buying style

Every individual has his own perceptions, preferences, personality and attitudes towards risk taking.

These individual factors affect buying process.

Business Buyer

Organizational factors

Individual factors

Interpersonal factors

Environmental factors

The Buying Process

1. Problem recognition

2. General need description

3. Product specification

4. Value analysis

5. Supplier search

6. Proposal solicitation

7. Supplier selection

8. Order-routine specifications

9. Performance review

1.Problem recognition

It 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.

2.General need description describes the characteristics and quantity of the needed item.

3.Product specification describes the technical criteria.

4.Value analysis is an approach to cost reduction where components are studied to determined if they can be redesigned, standardized, or made with less costly methods of production.

5.Supplier search involves compiling a list of qualified suppliers.

6.Proposal solicitation is the process of requesting proposals from qualified suppliers.

7.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.

8.Order-routine specifications is the final order with the chosen supplier and lists all of the specifications and terms of the purchase.

9.Performance review involves a critique of supplier performance to the purchase terms.

Institutional and Government Markets

Institutional Markets:

Consist of:

churches, schools, prisons, hospitals, nursing homes and other institutions,

that provide goods and services to people in their care.

Institutional Markets:

Often characterized by low budgets and captive patrons.

Marketers may develop separate divisions and marketing mixes to service institutional markets.

Government Markets:

Governmental units which may be,

federal,

state, or,

local,

that purchase or rent goods and services for carrying out the main functions of government.

Government Markets:

More than 82,000 buying units.

Require suppliers to submit bids.

Favor domestic suppliers.

Extensive paperwork is required from suppliers.

Government buyers often favor:

Depressed business firms and areas

Small businesses

Minority-owned businesses

Firms which practice non-discriminatory practices

Most firms that sell to government buyers are not marketing oriented.

Some companies have separate government marketing departments.

Much of government buying has migrated online.