Business Buyer Behavior & Product Issues
Business Buyer Behavior
• Resale to others
• Direct use in the production of other products• Consumed in the normal course of business
What are the three reasons businesses produce a product?
Business Buyer Behavior
The Buying Decision Process has five stages: • Problem Recognition
• Develop Product Specifications to Solve Problem• Search & Evaluation Alternative Products and
Suppliers• Select both Product & Supplier, the Order Product
• Evaluate Product and Supplier Performance
Business Buyer Behavior
What are the major Influences on the buying decision process?
Business Buyer Behavior
What are the major Influences on the buying decision process?
• Environmental
• Organizational• Interpersonal
• Individual
Business Buyer Behavior
• Producer
• Reseller• The Government
• Institutional
What are the four types of business markets?
Business Buyer Behavior
• Wide array of industries
• Highly concentrated• Raw Materials
• Components
Producer Markets
Business Buyer Behavior
• Distribution Channels
� Wholesalers� Retailers
• Touch the end-user• Highly sensitive to market demand
Reseller Markets
Business Buyer Behavior
• Federal, State, County and Local (city)
• Roughly 1/5 of total goods and services sold• Complex purchasing process
• Often bid basis
Government Markets
Business Buyer Behavior
• Education, Non-Profits, etc.
• Specialized or niche marketing• Highly cost-sensitive
Institutional Markets
Business Buyer Behavior
• Longer sales process, more complex
• Relationships more important, larger “jury”• Key Product Attributes include:
� Quality� Availability� Service� Price and Terms
Important Aspects of the B-to-B Transaction
Business Buyer Behavior
• Different purchasing procedures- Sampling - Inspection- Description - Negotiation
• Understanding the Demand- Derived - Inelastic- Joint - Fluctuating
Important Aspects of the B-to-B Transaction
Product Issues
A Product Life CycleP
rodu
ct c
ateg
ory
sale
s(r
eal d
olla
rs)
Pro
fit p
er u
nit
(rea
l dol
lars
)
Profit/unitSales
Life cycleextension
GrowthCompetitiveturbulence
Maturity Decline orextension
Time (years)
Introduction
Product Concepts
What is a Product?
• Goods• Services
• Ideas
Product Concepts
What are the major Product categories?
• Consumer Products• Business Products
Product Concepts
Consumer Products• Convenience Products• Shopping Products
• Specialty Products• Unsought Products
Product Concepts
Business Products• Installations• Accessory Equipment
• Raw Materials• Components
• Process Materials• Maintenance, Repair & Operating (MRO) items
Key Product Definitions
• Product Item – specific version of the product
• Product Line – a collection of closely related product items that can be considered a unit
• Product Mix – all the products that are sold • Width – the number of product lines offered• Depth – the average number of different
products offered in each product line
Generalized Product Life CycleP
rodu
ct c
ateg
ory
sale
s(r
eal d
olla
rs)
Pro
fit p
er u
nit
(rea
l dol
lars
)
Profit/unitSales
Life cycleextension
GrowthCompetitiveturbulence
Maturity Decline orextension
Time (years)
Introduction
Common Product Life-Cycle Curves
Unitsales
Unitsales
Unitsales
Unitsales
Time Time
Time Time
I. Growth-decline-plateau II. Cycle-recycle
IV. ClassicalIII. Innovative-maturity
Intr
o. Gro
wth
Mat
urity
Dec
line
Expected Characteristics and Responses by Major Life-Cycle Stages
Stagecharacteristics
Introduction Stage in Product Life Cycle
Market growth rate (constant dollars)
Technical change in product design
Segments
Competitors
Profitability
Moderate
High
Few
Small
Negative
Firm’s Normative Responses
Stimulate demand
Quality
Narrow
Skimming vs. penetrationSelective
High
Strategic marketing objectives
Product
Product line
Price
Channels
Communications
Expected Characteristics and Responses by Major Life-Cycle Stages
Stagecharacteristics
Growth Stage in Product Life Cycle
Market growth rate (constant dollars)
Technical change in product design
Segments
Competitors
Profitability
High
Moderate
Few to many
Large
High
Firm’s Normative Responses
Build share
Continue to improve quality
Broad
Reduce
Intensive
High
Strategic marketing objectives
Product
Product line
Price
Channels
Communications
Expected Characteristics and Responses by Major Life-Cycle Stages
Stagecharacteristics
Shakeout Stage in Product Life Cycle
Market growth rate (constant dollars)
Technical change in product design
Segments
Competitors
Profitability
Leveling off
Limited
Few to many
Decreasing
Low
Firm’s Normative Responses
Build share
Rationalize
Rationalize
Reduce
Intensive
High
Strategic marketing objectivesProduct
Product line
Price
Channels
Communications
Expected Characteristics and Responses by Major Life-Cycle Stages
Stagecharacteristics
Mature Stage in Product Life Cycle
Market growth rate (constant dollars)
Technical change in product design
Segments
Competitors
Profitability
Insignificant
Limited
Few to many
Limited
High for Market share
leaders
Firm’s Normative Responses
Hold share
Concentrate on featuresHold length of lineHold or cut selectively
Intensive
High to declining
Strategic marketing objectivesProduct
Product line
Price
Channels
Communications
Expected Characteristics and Responses by Major Life-Cycle Stages
Stagecharacteristics
Decline Stage in Product Life Cycle
Market growth rate (constant dollars)
Technical change in product design
Segments
Competitors
Profitability
Negative
Limited
Few
Few
Low
Firm’s Normative Responses
Harvest
No change
Cut length of lineReduce
Selective
Reduce
Strategic marketing objectivesProduct
Product line
Price
Channels
Communications
Product Development & Management
• Most new products fall into this category- Closely related - Serve a niche- Lower risk - Less expensive to develop
• Aggressive tactic to capture more market share
• Can also cause cannibalization of core product
Line Extensions
Product Development & Management
• Quality
• Functional• Aesthetic
Product Modifications
New Product Development
• Generate the ideas
• Screen for the good ones/eliminate the others• Conduct concept testing research
• Build the business case• Complete the product development analysis
• Test market the product• Go to commercialization
Product Differentiation
• Product Quality– Level
– Consistency
• Product Design & Features– Physical appearance (style)– Functional characteristics
• Product Support Services
Dimensions of Product Quality
• Performance
• Durability
• Conformance with specifications
• Features
• Reliability
• Serviceability
• Fit and finish
• Brand name
How well does the washing machine wash clothes?
How long will the lawn mower last? What is the incidence of product defects?
Does an airline flight offer a movie and dinner?
Will each visit to a restaurant result in consisten t quality?
What percentage of the time will a product perform satisfactorily?
Is the product easy to service?Is the service system efficient, competent, and
convenient?Does the product look and feel like a quality produ ct?
Is this a name that customers associate with qualit y?What is the brand’s image?
.
Product Differentiation
Features• Product attributes
• Less quantifiable• Often vague or
ambiguous
Benefits• Tangible
• Measurable• Clearly identifiable to
end-user• Results-oriented
• Specific consequence