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Objectives

•Be able to define the business market and explain how business markets differ from consumer markets.

•Know the major factors that influence business buyer behavior.

•Understand the steps in the business buying decision process.

•Understand institutional and government markets and how buyers in these markets make their buying decisions.

Please Open The Following Figures In Different Windows and Leave Them Open:

Animated Figure 7-2 Animated Figure 7-3 .

Case Study
Gulfstream Aerospace
•Sells jets exclusively for corporate use •300 – 500 customers worldwide •Rational, objective, and human factors influence business buyer’s decisions	•Multiple people are involved in the decision •Buying influences include the CEO, pilot, board members, even spouses •Company has been highly successful

Definition

•Business Buyer Behavior:

§The buying behavior of organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.

Business Markets

•Characteristics of Business Markets

§Sales in the business market far exceed sales in consumer markets.
§Business markets differ from consumer markets in many ways.
vMarketing structure and demand
vNature of the buying unit
vTypes of decisions and the decision process

Business Markets
Characteristics •Marketing Structure and Demand •Nature of the Buying Unit •Types of Decisions and the Decision Process	•Compared to consumer markets: §Business markets have fewer but larger customers §Business customers are more geographically concentrated §Demand is different Demand is derived *Demand is price inelastic* **Demand fluctuates more, and changes more quickly**

Business Markets
Characteristics •Marketing Structure and Demand •Nature of the Buying Unit •Types of Decisions and the Decision Process	•Compared to consumer purchases: §Business purchases involve more buyers in the decision process. §Purchasing efforts are undertaken by professional buyers.

Business Markets
Characteristics •Marketing Structure and Demand •Nature of the Buying Unit •Types of Decisions and the Decision Process	•Compared to consumer purchases: §Business buyers face more complex buying decisions. §The buying process is more formalized. §Buyers and sellers work more closely together and build long-term relationships.

Business Buyer Behavior

•Major Types of Buying Situations
§Straight rebuy
Reordering without modification
§Modified rebuy
Requires modification to prior purchase
§New task
First-time purchase

•Systems Selling:

§Buying a packaged solution to a problem from a single seller.

Convenience is a major benefit

§Often a key marketing strategy for businesses seeking to win and hold accounts.

Business Buyer Behavior
Participants in the Business Buying Process
•Users •Buyers	•Influencers •Deciders
Gatekeepers

Major Influences on Business Buyers
Key Factors •Environmental • Organizational • Interpersonal • Individual	•Economic trends •Supply conditions •Technological change •Regulatory and political environments •Competitive developments •Culture and customs

Major Influences on Business Buyers
Key Factors •Environmental • Organizational • Interpersonal • Individual	•Objectives •Policies •Procedures •Organizational structure •Systems

Major Influences on Business Buyers
Key Factors •Environmental • Organizational • Interpersonal • Individual	•Authority •Status •Empathy •Persuasiveness

Major Influences on Business Buyers
Key Factors •Environmental • Organizational • Interpersonal • Individual	•Authority •Age •Education •Job position •Personality •Risk attitudes

Business Buying Process

•Eight Stages:

§Stage 1: Problem Recognition
§Stage 2: General Need Description
§Stage 3: Product Specification

Value analysis helps to reduce costs

§Stage 4: Supplier Search

Supplier development

Business Buying Process

•Eight Stages:

§Stage 5: Proposal Solicitation
§Stage 6: Supplier Selection
§Stage 7: Order-Routine Specification

Blanket contracts are often used for maintenance, repair and operating items.

§Stage 8: Performance Review

Business Buying Process

•Business Buying on the Internet

§E-procurement is growing rapidly.
§Reverse auctions account for much of the online purchasing activity.
§E-procurement offers many benefits:
Access to new suppliers
Lower purchasing costs
Quicker order processing and delivery

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.

§Often characterized by low budgets and captive patrons.
§Marketers may develop separate divisions and marketing mixes to service institutional markets.

Institutional and Government Markets

Government Markets

Governmental units – federal, state, and local – that purchase or rent goods and services for carrying out the main functions of government.

§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
v Small businesses
v 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.

Chapter 7: Business Markets and Business Buyer Behavior

Chapter 7: Business Markets and Business Buyer Behavior

Chapter 7: Business Markets and Business Buyer Behavior