Chapter 6Business Markets

And Buying Behavior

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Objectives

• Become familiar with various types of business markets

• Identify major characteristics of business customers and transactions

• Understand several attributes of demand for business products

• Become familiar with major components of a buying center

• Describe industrial classification systems and explain how they can be used to identify and analyze business markets

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Business Market

Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations (B2B).

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B2B Success

• Long-term mutually profitable relationships

• Co-develop products

• Timely exchanges at competitive prices

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Categories OfBusiness Markets

1. Producer

2. Reseller

3. Government

4. Institutional

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Producer Market

Individuals and business organizations that purchase products to make profits by using them to produce other products or using them in their operations.

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Number of EstablishmentsIn Industry Groups

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Reseller Markets

Intermediaries that buy finished goods and resell them for profit.

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Factors Considered When Making Business Purchase Decisions

Level of demand Space required relative to potential profit Ease of placing orders Availability of technical assistance Training programs from producers Competes or complements

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Government Markets

Federal, state, county, or local governments that buy goods and services to support their internal operations and provide products to their constituencies.

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Institutional Markets

Organizations with charitable, educational, community, or other nonbusiness goals.

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DimensionsOf Marketing B2B

• Characteristics of transactions

• Attributes of customers

• Customer primary concerns

• Methods of buying

• Types of purchases

• Demand

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B2B Transaction Characteristics

• Larger

• Expensive

• Frequent replenishing

• Long-term agreement

• Discussions/negotiations

• Several decisionmakers

• Reciprocity

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Reciprocity

An arrangement unique to business marketing in which two organizations agree to buy from each other.

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B2B Customer Attributes

• Require detailed information– Product features

– Technical specifications

• Personal goals influence decision

• Agents seek psychological satisfaction– Advancement

– Financial rewards

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B2B CustomersPrimary Concerns

• Price

• Quality

• Service

• Relationship

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Methods Of B2B Buying

• Description

• Inspection

• Sampling

• Negotiation

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Types Of B2B Purchases

• New-Task

• Straight Rebuy

• Modified Rebuy

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New-Task Purchase

An initial purchase by an organization of an item to be used to perform a new job or solve a new problem.

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Straight Rebuy Purchase

A routine purchase of the same products by a business buyer.

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Modified Rebuy Purchase

A new-task purchase that is changed on subsequent orders or when the requirement of a straight rebuy purchase are modified.

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Business Product Demand

• Derived

• Inelastic

• Joint

• Fluctuating

US Economic Outlook

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Derived Demand

Demand for industrial products that stems from demand for consumer products.

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Inelastic Demand

Demand that is not significantly altered by a price increase or decrease.

Prices for Manufactured Goods

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Joint Demand

Demand involving the use of two or more items in combination to produce a product.

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Fluctuating Demand

When demand for a business product is derived by consumer demand, causing it to fluctuate enormously

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Business Buying Decisions

• Buying Behavior

• Buying Center

• Stages of Process

• Influences

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Business (Organizational)Buying Behavior

The purchase behavior of producers, government units, institutions, and resellers.

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Buying Center

The people within an organization who make business purchase decisions.

Purchasing Agent

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Business Buying Decision Process And Factors That May Influence It

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Value Analysis

An evaluation of each component of a potential purchase.

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Vendor Analysis

A formal, systematic evaluation of current and potential vendors.

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Multiple Sourcing

An organization’s decision to use several suppliers.

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Sole Sourcing

An organization’s decision to use only one supplier.

Buyers select the sole source option when...

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Using IndustrialClassification Systems

• Identifying Potential Business Customers

• Estimating Purchase Potential

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North American IndustryClassification System (NAICS)

An industry classification system that generates comparable statistics among the United States, Canada, and Mexico.

North AmericanIndustry Classification System

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SIC/NAICS For Manufacturers Of Magnetic And Optical Media

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Input-Output Data

Information that identifies what types of industries purchase the products of a particular industry.