Principles of Marketing - PowerPoint

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Principles of Marketing


  Business Markets and
 Business Buyer Behavior
Learning Objectives
After studying this chapter, you should be able to:
1.  Define the business market and explain how
    business markets differ from consumer markets
2.  Identify the major factors that influence business
    buyer behavior
3.  List and define the steps in the business buying-
    decision process
4.  Compare the institutional and government markets
    and explain how institutional and government
    buyers make their buying decisions


                                                6-2
Chapter Outline


1.   Business Markets
2.   Business Buyer Behavior
3.   Institutional and Government
     Markets



                                6-3
Business Markets


Business buying process is the process
  where business buyers determine which
  products and services are needed to
  purchase and then find, evaluate, and
  choose among alternative brands




                                     6-4
Business Markets


Differ from consumer markets in:
•   Market structure and demand
•   Nature of the buying unit
•   Types of decisions and the decision-
    making process



                                           6-5
Business Markets

          Market Structure and Demand

•    Fewer and larger buyers
•    Geographic concentration
•    Derived demand
    •  Inelastic demand
    •  Fluctuating demand
•    Buyer and seller dependency
                                        6-6
Business Markets

         Market Structure and Demand

Supplier development is the systematic
  development of networks of supplier-
  partners to ensure an appropriate and
  dependable supply of products and materials
  that they will use in making their own
  products or resell


                                       6-7
Business Buyer Behavior

                 Marketing Stimuli

    Similar to consumer buying, business buying
                 consists of the four Ps
•    Product
•    Price
•    Place
•    Promotion
                                          6-8
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
Business Buyer Behavior

               Marketing Stimuli

Additional stimuli include major economic forces
•  Political
•  Economic
•  Technological
•  Cultural
•  Competitive
                                         6-10
Business Buyer Behavior

      Buyer Responses to Marketing Stimuli

•   Product or service choice
•   Supplier choice
•   Order quantities
•   Delivery
•   Service
•   Payment terms
                                         6-11
Business Buyer Behavior

      Buyer Responses to Marketing Stimuli

Marketers must understand what happens
   within the organization and turn stimuli into
   purchase responses




                                          6-12
Business Buyer Behavior

        Major Types of Buying Situations

•   Straight rebuy
•   Modified rebuy
•   New task




                                           6-13
Business Buyer Behavior
         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

                                                6-14
Business Buyer Behavior

        Major Types of Buying Situations

Systems selling involves the purchase of a
   packaged solution from a single seller
Two-step process of selling:
•  Interlocking products
•  System of production, inventory control,
   distribution, and other services to meet the
   buyer’s need for a smooth-running operation
                                           6-15
Business Buyer Behavior
   Participants in the Business Buying Process

Buying center is all of the individuals and
  units that participate in the business
  decision-making process
• Users
• Influencers
• Buyers
• Deciders
• Gatekeepers
                                           6-16
Business Buyer Behavior

    Participants in the Business Buying Process

Users are those that will use the product or service
Influencers help define specifications and provide
    information for evaluating alternatives
Buyers have formal authority to select the supplier and
    arrange terms of purchase
Deciders have formal or informal power to select and
    approve final suppliers
Gatekeepers control the flow of information

                                                6-17
Business Buyer Behavior

   Participants in the Business Buying Process

Buying center provides a major challenge
•  Who participates in the process
•  Their relative authority
•  What evaluation criteria each participant
   uses
•  Informal participants
                                           6-18
Business Buyer Behavior

       Major Influences on Business Buyers

•   Economic factors
•   Personal factors
•   Environmental factors
•   Organizational factors
•   Interpersonal factors

                                             6-19
Business Buyer Behavior

    Major Influences on Business Buyers

Economic factors:       Personal factors:
•  Price                • Emotion

•  Service




                                            6-20
Business Buyer Behavior
     Major Influences on Business Buyers
               Environmental Factors


•   Demand for product      •   Technology
•   Economic outlook        •   Culture
•   Cost of money           •   Politics
•   Resource availability   •   Competition



                                              6-21
Business Buyer Behavior

      Major Influences on Business Buyers

Organizational factors
•  Objectives
•  Policies
•  Procedures
•  Structure
•  Systems
                                            6-22
Business Buyer Behavior
      Major Influences on Business Buyers
Interpersonal factors
•   Motives
•   Perceptions
•   Preferences
•   Age
•   Income
•   Education
•   Attitude toward risk
                                            6-23
Business Buyer Behavior

                 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
                                      6-24
Business Buyer Behavior


Problem recognition 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

                                                  6-25
Business Buyer Behavior
                The Buying Process

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

Product specification describes the technical criteria

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

                                                6-26
Business Buyer Behavior

              The Buying Process

Supplier search involves compiling a list of
   qualified suppliers

Proposal solicitation is the process of
   requesting proposals from qualified
   suppliers

                                          6-27
Business Buyer Behavior
                   The Buying Process

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

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


                                                  6-28
Business Buyer Behavior

             The Buying Process

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




                                       6-29
Business Buyer Behavior

 E-Procurement and Buying on the Internet

Online purchasing
•   Company buying sites
•   Extranets




                                        6-30
Business Buyer Behavior
   E-Procurement and Buying on the Internet

Advantages
•  Access to new suppliers
•  Lowers costs
•  Speed in order processing and delivery
•  Share information
•  Sales
•  Service and support

                                        6-31
Business Buyer Behavior

   E-Procurement and Buying on the Internet


Disadvantages
•   Can erode relationships as buyers search
    for new suppliers
•   Security



                                         6-32
Institutional and
Government Markets

Institutional markets consist of hospitals,
   nursing homes, and prisons that provide
   goods and services to people in their care
•  Characteristics
  •   Low budgets
  •   “Captive” audience




                                         6-33
Institutional and
Government Markets
Government markets tend to favor domestic
   suppliers and require suppliers to submit bids and
   normally award to the lowest bidder
•  Carefully monitored
•  Affected by similar environmental factors
•  Good credit
•  Non-economic factors
•  Minority suppliers
•  Depressed suppliers
•  Small businesses

                                               6-34
PowerPoint created by:
                       Ronald Heimler

           Dowling College, MBA
           Georgetown University, BS Business
            Administration
           Adjunct Professor, LIM College, NY
           Adjunct Professor, Long Island University,
            NY
           Lecturer, California Polytechnic State
            University, Pomona, CA
           President, Walter Heimler, Inc.