Ch 6 -0 Copyright © 2011 Pearson Education

Principles of Marketing, Arab World Edition Philip Kotler, Gary Armstrong, Anwar Habib, Ahmed Tolba Presentation prepared by Annelie Moukaddem Baalbaki CHAPTER SIX Business Markets and Business Buyer Behavior Lecturer: Insert your name here Ch 6 -1Copyright © 2011 Pearson Education

Chapter Learning Outcomes 6.1 Business Markets 6.2 Business Buyer Behavior 6.3 The Business Buying Process 6.4 E-Procurement: Buying on the Internet 6.5 Institutional and Government Markets Ch 6 -2 Copyright © 2011 Pearson Education Topic Outline

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. 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 Business Buyer Behavior and Business Buying Process Ch 6 -3 Copyright © 2011 Pearson Education

A business market comprises all the organizations that buy G/S to use in the production of other P/S, or for the purpose of reselling or renting them to others at a profit 4© Pearson Education 2011

Business Markets 5© Pearson Education 2011

Differences between consumer & business markets Market structure and demand Business marketer: Fewer but larger buyers Business markets geographically concentrated Business D is derived from D of consumer goods. Many business markets have inelastic D, it is not affected much by price changes Business markets have more fluctuating D that change more quickly than D for consumer D 6© Pearson Education 2011

Differences between consumer & business markets Nature of the buying unit Business purchase involves more decision participants & a more professional purchasing effort. Business buying is done by trained purchasing agents who spend working lives learning how to buy better. More complex purchase, more people will participate in decision-making process. 7© Pearson Education 2011

Differences between consumer & business markets Types of decisions and the decision process Business buyers face more complex buying decisions than do consumer. Purchases involve large sums of money, complex technical & eco considerations, & interactions among many people at many levels of buyer’s organization. Business buying process tends to be more formalized than consumer buying process. Buyer & seller are more dependent on each other - Supplier development 8© Pearson Education 2011

Business Markets Market Structure and Demand Fewer and larger buyersGeographic concentrationDerived demand Inelastic demand Fluctuating demand Buyer and seller dependency Ch 6 -9 Copyright © 2011 Pearson Education

Business Buyer Behavior 10© Pearson Education 2011 The Model of Business Buyer Behavior

Business Markets Types of Decisions and the Decision Process Supplier development is 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. Ch Copyright © 2011 Pearson Education

Business Buyer Behavior Ch Copyright © 2011 Pearson Education

Business Buyer Behavior Straight rebuy is a routine purchase decision such as reorder without any modification. It is usually handled on a routine basis by the purchasing department Modified rebuy: Buyer wants to modify P specifications, prices,or suppliers. It involves more decision participants than does the straight rebuy. New task: it requires research such as a new product. greater cost or risk, larger decision participants & greater efforts to collect information will be. Major Types of Buying Situations Ch Copyright © 2011 Pearson Education

Business Buyer Behavior 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 Major Types of Buying Situations Ch Copyright © 2011 Pearson Education

Business Buyer Behavior Buying center is all of the individuals and units that participate in the business decision- making process – Users – Influencers – Buyers – Deciders – Gatekeepers Participants in the Business Buying Process Ch Copyright © 2011 Pearson Education

Business Buyer Behavior Buying center provides a major challenge Who participates in the process Their relative authority What evaluation criteria each participant uses Informal participants Participants in the Business Buying Process

Business Buyer Behavior 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. Participants in the Business Buying Process Ch Copyright © 2011 Pearson Education

Business Buyer Behavior Major Influences on Business Buyers Economic Factors PriceService Personal Factors Emotion Ch Copyright © 2011 Pearson Education

Major influences on business buyers Ch Copyright © 2011 Pearson Education When suppliers’ offers are very similar, business buyers have little basis for strictly rational choice. They can buy from any supplier, buyers can allow personal factors to play a role in decisions. When competing products differ greatly, business buyers are more accountable for their choice and tend to pay more attention to economic factors.

Major influences on business buyers Environmental factor is shortages in key materials. Many companies are now more willing to buy and hold larger inventories of scarce materials to ensure adequate supply. Each participant in business buying-decision process brings in personal motives, perceptions, & preferences. These individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, & attitudes toward risk.

Business Buyer Behavior Demand for product Economic outlook Cost of money Resource availability TechnologyCulture PoliticsCompetition Major Influences on Business Buyers Environmental Factors Ch Copyright © 2011 Pearson Education

Business Buyer Behavior ObjectivesPoliciesProceduresStructureSystems Major Influences on Business Buyers Organizational Factors Ch Copyright © 2011 Pearson Education

Business Buyer Behavior AuthorityStatus EmpathyPersuasiveness Major Influences on Business Buyers Interpersonal Factors Ch Copyright © 2011 Pearson Education

Business Buyer Behavior MotivesPerceptionsPreferences AgeIncomeEducation Attitude toward risk Major Influences on Business Buyers Individual Factors Ch Copyright © 2011 Pearson Education

The Business Buying Process Ch Copyright © 2011 Pearson Education

The Business Buying Process 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 Problem Recognition Ch Copyright © 2011 Pearson Education

The Business 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 determine if they can be redesigned, standardized, or made with less costly methods of production. General Need Description and Product Specifications Ch Copyright © 2011 Pearson Education

The Business Buying Process Supplier search involves compiling a list of qualified suppliers. Proposal solicitation is the process of requesting proposals from qualified suppliers. Supplier Search and Proposal Solicitation Ch Copyright © 2011 Pearson Education

Business Buyer Behavior 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. Supplier Selection and Order Routine Specifications Ch Copyright © 2011 Pearson Education

The Business Buying Process Performance review involves a critique of supplier performance to the purchase terms. It may lead the buyer to continue, modify, or drop the arrangement. Performance Review Ch Copyright © 2011 Pearson Education

E-Procurement: Buying on The Internet Online purchasing (reverse auctions or trading exchanges) Company-buying sites Extranets E-Procurement Ch Copyright © 2011 Pearson Education

The Business Buying Process E-Procurement AdvantagesDisadvantages Access to new suppliers Lowers costs Speeds order processing and delivery Shares information Sales Service and support Can erode relationships as buyers search for new suppliers Security Ch Copyright © 2011 Pearson Education

Institutional and Government Markets Institutional markets consist of hospitals, nursing homes, and prisons that provide goods and services to people in their care. Characteristics Low budgets “Captive” audience Institutional markets Ch Copyright © 2011 Pearson Education

Institutional and Government Markets Government markets tend to favor domestic suppliers and require suppliers to submit bids and normally award to the lowest bidder. Noneconomic criteria play a role: Depressed business firms and areas Small business firms Minority-owned firms Business firms that avoid race, gender or age discrimination Government markets Ch Copyright © 2011 Pearson Education

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