analysing business markets

Analyzing Business Markets and Buyer Behavior

Analyzing Business Markets and Buyer Behavior

Presentation by: Sheldon Zion Banji Nayankumar Dhariwal Krishnaprasad M.N

ObjectivesUnderstand the nature of the business market and how it differs from the consumer market.Learn how institutions and government agencies buy.Identify the different buying situations faced by organizational buyers.

ObjectivesIdentify the participants in the business buying process and the various influences impacting business buying decisions.Understand how business buyers make their decisions.

Contd..

Differences Between B2B and B2CMarket Features:Specific LocationsRelatively fewer & large buyers

Product Attributes:Technically ComplexCustomised

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Differences Between B2B and B2CService Aspects:High importance of :

Timely delivery

Good Service

Availability

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Differences Between B2B and B2CBuyer BehaviourInvolvement of various functional areasPurchase decisions-Objective, performance basisTechnical importanceStable interpersonal relationshipsDecision making- Observable stages & distinctHigh switching costs

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Differences Between B2B and B2CDistribution Channels:ShorterFewer IntermediariesMore DirectPromotion & Advertising:More emphasis on personal sellingTrade journals, Business magazines & direct mailTrade shows, Trade fairs & Technical seminarsInternet

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Differences Between B2B and B2CPricing:Competitive biddingNegotiated pricesList prices for standard products

Demand Characteristics:Derived DemandJoint DemandCross elasticity of Demand

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Differences Between B2B and B2C

Organizational BuyingOrganizational buying is:

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.

Organizational BuyingCompared to Consumer Markets, Business Markets have . . .Fewer buyersLarger buyersGeographically concentrated buyersClose relationships with their supplier-customersContd..

Fluctuating demandDerived demandInelastic demandProfessional purchasingMultiple buying influencesMultiple sales callsDirect purchasingReciprocityLeasingOther Business Market Characteristics

Groups in Business MarketThe Business Market Includes For-Profit Companies and Two Specialized Groups:The institutional market:Schools, hospitals, prisons, etc. with captive audiencesCost and quality standards drive purchases

The government market:Bidding process awards contracts

Systems Buying and SellingSystems BuyingA single provider provides the total package for the buyers needsMay involve turnkey solutions

Systems SellingManufacturers sell entire systemsSupplier provides all MRO items

Buying Situations

New Task Buying

Straight Rebuy

Involves Decision Making

Modified Rebuy

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Buying Situations

Straight rebuyModified rebuyNew task

Purchasing a product or service for the first time

High level of involvement and time commitment; multiple influences

Example: selecting a new model of aircraft to expand a fleet.

Buying Situations


Specifications, prices, delivery terms or other aspects require modification

Moderate level of involvement and time commitment

Example: desktop computers

Buying Situations


Routine reorders from approved vendor list.

Low involvement, minimal time commitment.

Example: copier paper

The Buying Center InitiatorsUsersInfluencersDecidersApproversBuyersGatekeepers (who are they?)

Other issues:Key buying influencers (small sellers)Multilevel in-depth selling and system selling (large sellers)How can we determine who is in the buying center?? Decisions? Influence? Criteria??

Participants in the Business Buying Process

Influences on Business BuyersMajor Influences

EnvironmentalOrganizationalInterpersonalIndividual

Demand levelEconomic outlookInterest ratesTechnological changePolitics/regulationsCompetitionConcerns for social responsibility



ObjectivesPoliciesProceduresOrganizational structuresSystems



InterestsAuthorityStatusEmpathyPersuasiveness



AgeIncomeEducationJob positionPersonalityRisk attitudesCulture

Targeting Firms and Buying Centers:Do not lump small & midsize businesses together.Do keep it simple.Do use internet.Do not forget about direct contact.Do provide support after the sale.

Targeting within the Business Center:

The Purchasing Process: Stages in the Buying Process25Stage 1. Problem RecognitionStage 2. General Need Description: bill of materials/PVAStage 3. Product SpecificationStage 4. Supplier Search: extranet, alliances, co. sitesStage 5. Proposal Solicitation: RFP or RFQStage 6. Supplier Selection: vendor analysisStage 7. Order-Routine Specification: blanket?Stage 8. Performance Review

Purchasing ProcessRoutine Product Low value and cost and little risk.

Leverage Product High value and cost and little risk.

Strategic Product High value and cost and high risk.

Bottleneck Product Low value and cost and some risk.

27Methods of e-ProcurementWebsites organized using vertical hubs

Websites organized using functional hubs.

Direct extranet links to major suppliers

Methods of e - ProcurementBuying alliances

Company buying sites

Contd.

Forms of Electronic Marketplaces

Catalog sitesVertical marketsPure play auction sitesSpot marketsPrivate exchangesBarter marketsBuying alliances

30B2G E CommerceKorea Online E Procurement System- KONEPSBidding,Contract,Delivery inspection,Payment of proceeds

31B2G E Commerce

32KONEPS35,000 public organizations 150,000 supplying companies Online visit by 140,000 persons/dayDaily exchange of 100,000 electronic documents.93% of the public bidding Public Service Award from the UN

34An Example of Vendor Rating(price quoted is adjusted by quality, delivery, and service ratings)AttributesRating ScaleImportanceWeightsPoor(1)Fair(2)Good(3)Excellent(4)Price.30xSupplier reputation.20xProduct reliability.30xService reliability.10xSupplier Flexibility.10xTotal score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5

Customer Relationships

Create more value, establish trust.

Advertising agencies and clients: Market growthInformation asymmetryBarriers to entryDependence asymmetryEconomies of scale

Corporate credibility depends on expertise, trustworthiness and likabilityMarket growth for mass-production techniques benefits from mass-media advertisingInformation asymmetry == partnership would generate more profits than if the partner was to invade another firms area, ad agencies have knowledge that clients would have difficulty obtainingBarriers to entry: difficult to enter businessDependence asymmetry: One partner can influence or control the others conduct. Advertising agencies control media accessEconomies of scale : provide same market information to many clients

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Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism.


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Buyer-Supplier relationship: Alternatives, importance of supply, supply complexity and supply market dynamism.


These relationships have risks and opportunities

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Institutional markets

Institutional, Govt. Markets

HospitalsSchoolsPrisons

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Government markets

Institutional, Govt. MarketsSuppliers bid, contracts go to lowest bids

Spending subject to public review

Can be nationalistic

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SummaryThinkBUYDecideOrganizational buying

Decision making processBusiness market

Few large buyers

Buying center

Decision making unit

Organizational buying = Decision making processEstablish need, then identify/evaluate/choose supplierBusiness market = Few large buyersDemand from business market is derived from consumer market and fluctuates with business cycleBuying center = Decision making unitCharacterized by envtl., organizational, interpersonal and individual factors

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SummaryThinkBUYDecideBuying process

Eight Buy phasesBusiness marketers

Strong bonds,values

Inst., Govt markets

Customer, Supplier

Buying process => 8 buyphaseProblem recognition, need description, product specification, supplier search, solicitation, selection, order-routine specification, performance review

Institutional markets provide goods/services to people, clientele have no control over service. Govt. organizations = require a lot of paperwork, cost conscious due to public scrutiny Suppliers need 41

Thank You