Business versus Consumer Markets

1 Characteristic Business Market Demand Organizational

Consumer Market
Individual Smaller Many Dispersed More Indirect More Personal Single Simpler No Lesser Advertising

Volume # of Customers Location Distribution Nature of Buy Buy Influence Negotiations Reciprocity Leasing Promotion

Larger Fewer Concentrated More Direct More Professional Multiple More Complex Yes Greater Personal Selling

 Consumer vs.

organizational buyer Behavior

 Attributes of Business Customers 10 | Better informed about products purchased 3 Demand more detailed product information Personal goals (in support of organizational goals) may influence buying behavior

Dimensions of Marketing to Business Customers

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Organizational Buying Situations

New-task purchase first-time purchase of

complex and expensive product or service Modified rebuy requires modification to existing purchase decision and may open the door for new suppliers Straight rebuy reorder item purchased many times in the past

Business (Organizational) Buying Decision Process and Factors That May Influence It 10 |
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FIGURE 10.1

 Primary Concerns of Business Customers 10 | Price of goods affecting ability to compete 6 Return on investment in product Price of product compared to the benefits it provides Quality of the product in meeting specifications Quality of services offered by suppliers in support of their products

Dimensions of Marketing to Business Customers

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Buying Process Participants

Initiators perceive problems/opportunities requiring new

product or service

Users use or work with product or service Influencers provide information for evaluating products or

suppliers

Gatekeepers control flow of information Buyers contact selling organization and place order

Deciders final authority to purchase

Controllers determine budget

Dimensions of Marketing to Business Customers (contd)

10 | 8

Methods of Business Buying Description

Products standardized by certain characteristics Products with particular characteristics Product is homogenous and a single specimen can be evaluated as representative of the entire product Sellers are asked to bid on specified product characteristics and purchasers negotiate with successful bidders

Inspection

Sampling

Negotiation

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Dimensions of Marketing to Business Customers (contd)

10 | 9

Demand for Business Products Derived demand

Demand for industrial products that stems from demand for consumer products Demand that is not significantly altered by a price increase or decrease Demand involving the use of two or more items in combination to produce a product Demand that varies directly as consumer demand varies

Inelastic demand

Joint demand

Fluctuating demand

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Derived Demand
means the demand is derived (or caused by, or linked to) demand for a consumer item - demand for lithium is derived from the demand for lithium batteries, which is in turn derived from the demand for cell phones

- demand for wood pulp is derived from the demand for paper, which is derived from the increase in people printing on paper

Joint Demand
means the demand is related to the demand for other industrial things eg. The demand for printer cartridges is linked to the demand for printer paper
for services, the demand for Netscape 4.05 - is linked to the demand for an ISP account

Business Buying Decisions

10 | 12

Business (Organizational) Buying Behavior The purchase behavior of producers, government units, institutions, and resellers Buying Center The people within an organization who make business purchase decisions
Usersactually use the products Influencershelp develop the specifications and evaluate alternative products Buyersselect suppliers and negotiate terms of purchase Decidersactually choose the products Gatekeeperscontrol the flow of information to others in the buying center

The Buying Center

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External Factors

Internal Factors Technology Accounting Management Marketing Legal Production/Mfg. Finance Service

Steps in the Buying Decision Process

14

1. Problem recognition 2. General need description 3. Product specification 4. Supplier/Source search 5. Proposal Solicitation 6. Selection 7. Make the transaction routine 8. Evaluate performance

Intricacies of the Buying Decision Process

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Individual roles and personal needs

Relationships and loyalty Three kinds of needs: 1. Need for product benefits 2. Individual needs w/in buying center 3. Buying center members personal needs

Interaction creates fluidity (people w/in the buying center interact)

The buying process is simultaneous, not sequential

Cluster of stakeholders values

Buying Motives
A buying motive is an aroused need, drive, or

desire that stimulates behavior to satisfy the aroused need Its helpful to discover the dominant buying motive or DBM Four basic motive typesemotional, rational, patronage, and product

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Emotional and Rational Motives

Emotional Acts due to passion or sentiment Emotional appeals common If two products are identical, the salesperson who connects has the advantage Rational Acts on reason or judgment Relatively free of emotion Salespeople gather, interpret, and disseminate customerspecific information

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8-17

Patronage and Product Motives

Patronage Buy from a particular firm Past experience positive Relevant elements: superior service, product selection, competent sales staff Product Buyer believes one product is superior to others Preferences for: specific brands, quality, price, design/engineering

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Stage 1: Problem Recognition

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New Task

A buying situation that has not been previously faced by the organization. Significantly steep learning curve, organization seeks many sources of information.

Modified Rebuy

A buying situation that is somewhat similar to past problems/solutions Examines alternatives within a limited scope, involves fewer people than a new task situation and more than a straight rebuy.

Straight Rebuy

A routine buying situation with established solutions. Abbreviated steps in the process, fewer people in the buying center, less time to completion.

Stage 2: Vendor Selection

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RFQ = Request for Quotation Usually associated with that which can be thoroughly and quantitatively defined RFP = Request for Proposal Usually defined by a set of specifications that have more flexibility regarding the final form of the offering For government purchases, RFP/RFQ are often

published in a specified outlet.

Stage 3: Solution Delivery

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Often takes longer than definition and selection

combined. Stage ends when delivery is complete and approved by the buyer. Involves merging the logistics of the buyer with the logistics of the customer.

Stage 4: End Game

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Buying organizations frequently formally evaluate

purchase outcomes in terms of areas like

Market share Position Market ownership Profitability

Individual buying center members also may

evaluate the purchase, the purchase process, and the supplier.

The Buying Process: Key Terms

10 | 23

Value Analysis An evaluation of each component of a potential purchase. Vendor Analysis A formal systematic evaluation of current and potential vendors

Multiple Sourcing An organizations decision to use several suppliers

Sole Sourcing An organizations decision to use only one source

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Business (Organizational) Buying Decision Process and Factors That May Influence It 10 |
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FIGURE 10.1