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Business Markets andBusiness Markets and

Business Buyer BehaviorBusiness Buyer Behavior

Chapter 7Chapter 7


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7 - 1

Objectives Be able to define the businessBe able to define the business

market and explain how businessmarket and explain how businessmarkets differ from consumermarkets differ from consumer

markets.markets.

Know the major factors thatKnow the major factors thatinfluence business buyer behavior.influence business buyer behavior.


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Objectives Understand the steps in theUnderstand the steps in the

business buying decisionbusiness buying decisionprocess.process.

Understand institutional andUnderstand institutional and

government markets and howgovernment markets and howbuyers in these markets makebuyers in these markets make

their buying decisions.their buying decisions.


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Sells jetsSells jetsexclusively forexclusively for

corporate usecorporate use

300300 500500

customerscustomersworldwideworldwide

Rational,Rational,

objective, andobjective, and

human factorshuman factors

Multiple people areMultiple people areinvolved in theinvolved in the

decisiondecision

Buying influencesBuying influences

include the CEO,include the CEO,pilot, boardpilot, board

members, evenmembers, even

spousesspouses

Company has beenCompany has been

Gulfstream AerospaceGulfstream Aerospace

Case Study


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Definition

Business BuyerBehavior:Business BuyerBehavior:

The buying behavior ofThe buying behavior oforganizations that buy goods andorganizations that buy goods and

services for use in the production ofservices for use in the production of

other products and services or forother products and services or forthe purpose of reselling or rentingthe purpose of reselling or renting

them to others at a profit.them to others at a profit.


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Characteristics ofBusinessCharacteristics ofBusiness

MarketsMarkets Sales in the business market far exceedSales in the business market far exceed

sales in consumer markets.sales in consumer markets.

Business markets differ from consumerBusiness markets differ from consumermarkets in many ways.markets in many ways.

Marketing structure and demandMarketing structure and demand

Nature of the buying unitNature of the buying unit

Types of decisions and the decision processTypes of decisions and the decision process

Business Markets


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Business Markets

Marketing StructureMarketing Structure

and Demandand Demand

Nature of theNature of the

Buying UnitBuying Unit Types of DecisionsTypes of Decisions

and the Decisionand the Decision

ProcessProcess

Compared toCompared to

consumer markets:consumer markets: Business marketsBusiness markets

have fewer but largerhave fewer but larger

customerscustomers

Business customersBusiness customers

are more geographicallyare more geographically

concentratedconcentrated

Demand is differentDemand is different

Demand is derivedDemand is derived

Demand is price inelasticDemand is price inelastic

Demand fluctuates more,Demand fluctuates more,

and changes moreand changes more quicklyquickly

CharacteristicCharacteristic

ss


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Business Markets






ProcessProcess


consumer purchases:consumer purchases:

Business purchasesBusiness purchases

involve more buyersinvolve more buyers

in the decisionin the decision

process.process.

Purchasing efforts arePurchasing efforts areundertaken byundertaken by

professional buyers.professional buyers.


ss


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Business Markets






ProcessProcess


consumer purchases:consumer purchases:

Business buyers faceBusiness buyers face

more complex buyingmore complex buying

decisions.decisions.

The buying process isThe buying process is

more formalized.more formalized. Buyers and sellersBuyers and sellers

work more closelywork more closely

together and buildtogether and build

longlong--term relationships.term relationships.


ss


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MajorTypes ofBuying SituationsMajorTypes ofBuying Situations

Straight rebuyStraight rebuy Reordering without modificationReordering without modification

Modified rebuyModified rebuy

Requires modification to priorRequires modification to priorpurchasepurchase

New taskNew task

First

First--time purchasetime purchase

BusinessBuyerBehavior


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Systems Selling:Systems Selling:

Buying a packaged solution to aBuying a packaged solution to a

problem from a single seller.problem from a single seller.

Convenience is a major benefitConvenience is a major benefit

Often a key marketing strategy forOften a key marketing strategy forbusinesses seeking to win and holdbusinesses seeking to win and hold

accounts.accounts.



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Participants in theParticipants in the

Business Buying ProcessBusiness Buying Process


UsersUsers

BuyersBuyers

InfluencersInfluencers

DecidersDeciders GatekeepersGatekeepers


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Major Influenceson

BusinessBuyers

EnvironmentalEnvironmental

OrganizationalOrganizational

InterpersonalInterpersonal

IndividualIndividual

Economic trendsEconomic trends

Supply conditionsSupply conditions

Technological changeTechnological change

Regulatory andRegulatory andpolitical environmentspolitical environments

CompetitiveCompetitivedevelopmentsdevelopments

Culture and customsCulture and customs

Key FactorsKey Factors


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Major Influenceson

BusinessBuyers





ObjectivesObjectives

PoliciesPolicies

ProceduresProcedures

OrganizationalOrganizationalstructurestructure

SystemsSystems



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Major Influenceson

BusinessBuyers





AuthorityAuthority

StatusStatus

EmpathyEmpathy

PersuasivenessPersuasiveness



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Major Influenceson

BusinessBuyers





AuthorityAuthority

AgeAge

EducationEducation

Job positionJob position

PersonalityPersonality

Risk attitudesRisk attitudes



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Eight Stages:Eight Stages:

Stage 1: Problem RecognitionStage 1: Problem Recognition

Stage 2: General Need DescriptionStage 2: General Need Description

Stage 3: Product SpecificationStage 3: Product Specification

Value analysis helps to reduce costsValue analysis helps to reduce costs

Stage 4: SupplierSearchStage 4: SupplierSearch

Supplier developmentSupplier development

BusinessBuying Process


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Eight Stages:Eight Stages:

Stage 5: Proposal SolicitationStage 5: Proposal Solicitation

Stage 6: SupplierSelectionStage 6: SupplierSelection

Stage 7: OrderStage 7: Order--Routine SpecificationRoutine Specification

Blanket contracts are often used forBlanket contracts are often used for

maintenance, repair and operatingmaintenance, repair and operating

items.items.

Stage 8: Performance ReviewStage 8: Performance Review



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Business Buying on the InternetBusiness Buying on the Internet

EE--procurement is growing rapidly.procurement is growing rapidly.

Reverse auctions account for much of theReverse auctions account for much of the

online purchasing activity.online purchasing activity.

EE--procurement offers many benefits:procurement offers many benefits: Access to new suppliersAccess to new suppliers

Lower purchasing costsLower purchasing costs

Quicker order processing and deliveryQuicker order processing and delivery



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Institutional MarketsInstitutional Markets Consist of churches, schools,Consist of churches, schools,

prisons, hospitals, nursing homesprisons, hospitals, nursing homes

and other institutions that provideand other institutions that providegoods and services to people in theirgoods and services to people in their

care.care.

Institutionaland

Government Markets


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Institutional MarketsInstitutional Markets Often characterized by low budgetsOften characterized by low budgets

and captive patrons.and captive patrons.

Marketers may develop separateMarketers may develop separatedivisions and marketing mixes todivisions and marketing mixes to

service institutional markets.service institutional markets.

Institutionaland

Government Markets


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Government MarketsGovernment Markets Governmental unitsGovernmental units federal, state,federal, state,

and localand local that purchase or rentthat purchase or rent

goods and services for carrying outgoods and services for carrying outthe main functions of government.the main functions of government.

Institutionaland

Government Markets


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Government MarketsGovernment MarketsMore than 82,000 buying units.More than 82,000 buying units.

Require suppliers to submit bids.Require suppliers to submit bids.

Favor domestic suppliers.Favor domestic suppliers. Extensive paperwork is requiredExtensive paperwork is required

from suppliers.from suppliers.

Institutionaland

Government Markets


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Government MarketsGovernment Markets Government buyers often favor:Government buyers often favor:

Depressed business firms and areasDepressed business firms and areas

Small businessesSmall businesses MinorityMinority--owned businessesowned businesses

Firms which practice nonFirms which practice non--

discriminatory practicesdiscriminatory practices

Institutionaland

Government Markets


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Government MarketsGovernment MarketsMost firms that sell to governmentMost firms that sell to government

buyers are not marketing oriented.buyers are not marketing oriented.

Some companies have separateSome companies have separategovernment marketing departments.government marketing departments.

Much of government buying hasMuch of government buying has

migrated online.migrated online.

Institutionaland

Government Markets

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