principles of marketing A Global Perspective Philip Kotler Gary Armstrong by tehseenhassan

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									                    A Global Perspective
                                   Philip Kotler
                                Gary Armstrong
                                Swee Hoon Ang
6                             Siew Meng Leong
                                 Chin Tiong Tan
                           Oliver Yau Hon-Ming
    Business Markets and
       Business Buyer
          Behavior


                                                   6-1
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
1. Business Markets




                      6-4
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.
•   Business markets differ from consumer markets in:
    – Market structure and demand
    – Nature of the buying unit
    – Types of decisions & the decision-making process




                                                         6-5
Business Markets

Market Structure and Demand

•   Fewer and larger buyers

•   Geographic concentration

•   Derived demand – It ultimately derives from the
    demand of consumer goods
    –   Inelastic demand (not affected much by price changes)
    –   Fluctuating demand (change more & more quickly)


                                                                6-6
Example: Derived Demand Simplified
 You make headlamp assemblies for autos – Auto company’s demand
   for headlamp is affected by the consumers’ demand for cars.




Consumers want
more cars               Automobile
                                                   Need more of
                        manufacturers need
                                                   your company’s
                        more components
                                                   headlamp
                        and steel
                                                   assemblies


 Consumers stop
 buying cars              Automobile
                          manufacturers stop        You can’t sell
                          making cars               headlamp
                                                    assemblies


                                                                     6-7
Business Markets
Nature of the Buying Unit
• A business purchase involves more decision
   participants (buying center or DMU) & a more
   professional purchasing effort.

•   Many companies upgrade purchasing functions to
    “supply management” or “supplier development”




                                                     6-8
Business Markets
Types of Decisions & the Decision Process
• Business buyers usually face more complex buying
   decisions
    • More formalized
    • Buyer and seller dependency


•   Supplier development - 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.
                                                          6-9
2. Business Buyer Behavior




                             6-10
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; for facilitating their daily
      operations.

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




                                                               6-11
Business Buyer Behavior
A Model of Business Buyer Behavior




                                     6-12
Business Buyer Behavior
Marketing Stimuli

Similar to consumer buying, business buying consists of
   the four Ps:
• Product
• Price
• Place
• Promotion



                                                      6-13
Business Buyer Behavior
Other Stimuli

Additional stimuli include major economic forces:
• Political
• Economic
• Technological
• Cultural
• Competitive



                                                    6-14
Business Buyer Behavior
Buyer Responses to Marketing Stimuli

•   Product or service choice
•   Supplier choice
•   Order quantities
•   Delivery
•   Service
•   Payment terms



                                       6-15
Business Buyer Behavior
Black box of business buying

Marketers must understand what happens within the
  organization to turn stimuli into purchase
  responses.
   •   Major Types of Buying Situations
   •   Participants in the Business Buying Process
   •   Major Influences on Business Buyers
   •   The Business Buying Process
   •   E-Procurement


                                                     6-16
Business Buyer Behavior
Major Types of Buying Situations

•   Straight rebuy
•   Modified rebuy
•   New task




                                   6-17
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.




                                                              6-18
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




                                                          6-19
Business Buyer Behavior
Participants in the Business Buying Process

•   The buying center is all of the individuals and units
    that play a role in the purchase decision-making
    process:
    •   Users
    •   Influencers
    •   Buyers
    •   Deciders
    •   Gatekeepers

                                                            6-20
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.



                                                          6-21
Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
    user – is most likely to make each of the following statements?

•    “This bonding agent better be good, because I have to put this product
     together.”
•    “I specified this bonding agent on another job, and it worked for them.”
•    “Without an appointment, no sales rep gets in to see Mr. Johnson.”
•    “I don’t see any reason why we can’t use this bonding agent on the next
     job.”
•    “Okay, it is a deal – we’ll buy it.”
•    “I’ll place the order first thing tomorrow.”



                                                                              6-22
Match Game
Which buying center participant – a buyer, decider, gatekeeper, influencer, or
    user – is most likely to make each of the following statements?

•    “This bonding agent better be good, because I have to put this product
     together.” - user
•    “I specified this bonding agent on another job, and it worked for them.” -
     influencer
•    “Without an appointment, no sales rep gets in to see Mr. Johnson.” -
     gatekeeper
•    “I don’t see any reason why we can’t use this bonding agent on the next
     job.” - influencer
•    “Okay, it is a deal – we’ll buy it.” - decider
•    “I’ll place the order first thing tomorrow.” - buyer

                                                                              6-23
Business Buyer Behavior
Participants in the Business Buying Process

The buying center provides a major challenge:
• Who participates in the process
• Their relative authority
• What evaluation criteria each participant uses
• Informal participants




                                                   6-24
Business Buyer Behavior
Major Influences on Business
   Buyer Behavior
• Economic factors
• Personal factors
• Environmental factors
• Organizational factors
• Interpersonal factors




                               6-25
Major Influences on Business
Buyer Behavior




                               6-26
Business Buyer Behavior

        The Buying Process




                             6-27
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




                                                       6-28
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.




                                                            6-29
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.




                                                         6-30
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.


                                                           6-31
Business Buyer Behavior
The Buying Process

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




                                                     6-32
Buygrid Framework: Major Stages (Buyphases) of the Industrial Buying Process in Relation
to Major Buying Situations (Buyclasses)


                                                                Buyclasses

                                                    New          Modified      Straight

                                                    Task          Rebuy         Rebuy

                   1. Problem recognition            Yes          Maybe          Yes

                   2. General need description       Yes          Maybe          No

                   3. Product specification          Yes           Yes           No

   Buyphases       4. Supplier search                Yes          Maybe          No

                   5. Proposal solicitation          Yes          Maybe          No

                   6. Supplier selection             Yes          Maybe          No

                   7. Order-routine specification    Yes          Maybe          No

                   8. Performance review             Yes           Yes           Yes




                                                                                       6-33
An Example of Vendor (Supplier) Analysis


Attributes                                                        Rating Scale

                                     Importance            Poor       Fair       Good   Excellent
                                      Weights               (1)       (2)         (3)      (4)
Price                                    .30                                               x

Supplier reputation                      .20                                      x

Product reliability                      .30                                               x

Service reliability                      .10                           x

Supplier Flexibility                     .10                                      x

Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5




                                                                                                6-34
Business Buyer Behavior
E-Procurement and Buying on the Internet

75% of business buyers indicated that they use the
   Internet to make at least some of their purchases.

Online purchasing
• Company buying sites
• Extranets



                                                        6-35
The e-hub Plastics.com home page offers buyers and
sellers of plastics a marketplace plus news and
information




                                                     6-36
Covisint’s Web site offers both services and
information




                                               6-37
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 track
• Service and support



                                           6-38
Business Buyer Behavior
E-Procurement and Buying on the Internet

Disadvantages
• Can erode relationships as buyers search for new
   suppliers
• Lack of security




                                                     6-39
Business Buyer Behavior
– E-Procurement

 Much online purchasing takes place through online
  auctions and e-market-places:

  An intranet is an internal corporate computer
   network that uses Internet technology to link
   company departments, employees, and databases

  An extranet allows outsiders to the organization to
   access its intranet

  A private exchange links invited groups of suppliers
   and partners over the Web
                                                          6-40
Business Buyer Behavior
- E-Procurement
Security
 Authentication - making sure only authorized
  individuals are allowed to access a site

 Firewalls - combination of hardware and software
  that ensures only authorized individuals gain entry

 Encryption - scrambling a message so that only
  another individual has the right “key” for deciphering
  it

                                                        6-41
3. Institutional & Government
           Markets




                                6-42
Institutional and Government Markets
Institutional markets consist of schools, hospitals,
    nursing homes, prisons and other institutions that
    provide goods and services to people in their care.

•   Characteristics
    •   Low budgets
    •   “Captive” audience




                                                          6-43
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 by outside publics – require
        considerable paperwork
    •   Affected by similar environmental factors
    •   Good credit
    •   Non-economic factors – tend to favor
        •   Minority suppliers
        •   Depressed suppliers
        •   Small businesses


                                                           6-44
Video Case: Eaton
Discussion Questions:
1. What is Eaton’s value proposition?
2. To which decision makers does Eaton market its
   products and services?
3. How does Eaton add value to its products &
   services?




                                                    6-45

								
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