chapter 4 B2B buying behaviour

4-2 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 learning objectives Understand the nature and structure of B2B buying Appreciate the differences between B2B buying and consumer buying Analyze the buying process and the reasons why purchasing varies across different buying situations Link B2B buying with the development of marketing strategy

4-3 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B Marketing Defined B2B marketing is the management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers

4-4 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Flybe chose Embraer to supply its new aircraft

4-5 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B and Consumer Markets_1 B2B customers Purchase products to meet specific business needs Emphasize economic benefits Use formal, lengthy purchasing policies and processes Consumer customers Purchase products to meet individual or family needs Emphasize psychological benefits Buy on impulse or with minimal processes

4-6 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B and Consumer Markets_2 B2B customers Involve large groups in purchasing decisions Buy large quantities infrequently Want a customised product package Consumer customers Purchase as individuals or as a family unit Buy small quantities frequently Are content with standardised product packages

4-7 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B and Consumer Markets_3 B2B customers Experience major problems if supply fails Find switching suppliers difficult Negotiate on price Consumer customers Experience minor irritation is supply fails Find switching suppliers easy Accept stated price

4-8 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B and Consumer Markets_4 B2B customers Purchase direct from suppliers Justify an emphasis on personal selling Consumer customers Purchase from intermediaries Justify an emphasis on mass media

4-9 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Types of B2B Customers Commercial enterprises Government bodies Institutions

4-10 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Figure 4.2 A Clothing Manufacturer and its Suppliers Suppliers of raw materials and components Suppliers of manufacturing equipment Suppliers of labour Suppliers of other equipment and supplies Suppliers of services Manufacturer

4-11 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Characteristics of B2B Markets Nature of demandStructure of demand Complexity of buying process Buyer-seller relationships

4-12 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Derived Demand Goodyear’s RunOnFlat Tyres are featured on BMWs, Ferraris, Corvettes, Maseratis, and Mercedes Source: © Goodyear Dunlop Tyres Europe B.V.

4-13 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Joint Demand Demand for Samsung’s Solid State Disk (SSD) is tightly coupled with the demand for computers and other devices with memory chips

4-14 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Inelastic Demand Elasticity of demand refers to the extent to which the quantity of a product demanded changes when its price changes; If a product has inelastic demand, demand does not change due to price changes

4-15 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Should a company purchase from multiple suppliers? Supplier categories at Phillips: Supplier-partners Preferred suppliers Commercial suppliers

4-16 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Advantages of Single Sourcing Improved communications Increased responsiveness Shared design of quality control systems Elimination of supplier switching costs Improvement in product cost effectiveness Reduced prices through larger volume Reduced prices through reduced supplier costs Enhanced ability to implement JIT systems

4-17 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Disadvantages of Single Sourcing Increased costs through lack of competitive pressure Increased supply vulnerability Reduced market intelligence and flexibility Improved supplier appraisal capacity

4-18 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Advantages and Disadvantages of Multiple Sourcing Advantages Increased competitive pressure Improved supply continuity Improved market intelligence Improved supplier appraisal effectiveness Disadvantages Perceived lack of commitment Increased costs Less supplier investment Reduced willingness to adapt Higher operating costs

4-19 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Purchase Significance New Task Routine re-buy Modified re-buy

4-20 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buying Decision-Making Process Precipitation Supplier selection Commitment Product specification

4-21 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Roles in the Buying Process Purchasing - handle relationships with suppliers Production/operations - meeting targets for the end product in both quantity and quality terms Engineering - the specification and design Research and Development (R&D) – look for new solutions to problems Finance - devolve budgets to appropriate managers Marketing - outputs of the production process

4-22 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buyer-Seller Contact in B2B Markets (Unit Production Model) Production engineering Quality Sales Design Purchasing Design Production engineering Quality etc. SupplierBuyer Source: Adapted from Johanson (1982), copyright 1982 © John Wiley & Sons Limited. Reproduced with permission.

4-23 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buyer-Seller Contact (Mass Production Model) Production engineering Design Sales Quality etc. Purchasing Source: Adapted from Johanson (1982), copyright 1982 © John Wiley & Sons Limited. Reproduced with permission.

4-24 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Figure 4.7 Commodity Positioning Matrix

4-25 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buying Centres Initiator Influencer Decider Purchaser User Influencer Decider Buyer Gatekeeper Consumer B2B

4-26 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buying Criteria: Economic Influences Appropriate prices Quality consistency Product specification Supply reliability and continuity Customer service

4-27 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Buying Criteria: Non-Economic Influences Prestige FriendshipCareer security Other personal needs Trust

4-28 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Approaches to Supplier Handling Adversarial Multiple suppliers Regular price quotes Adversarial negotiations Sporadic communication Little cooperation Quality and time scales to meet lowest expectations Emphasis on lowest unit price Collaborative Few suppliers Long-term relationship Partnerships Frequent, planned communication Integrated operations Quality and time scales ‘designed in’ Emphasis on lowest overall cost

4-29 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Relationship Life Cycle Awareness Exploration Expansion Commitment Dissolution

4-30 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_1 Activities directed towards marketing by one organisation to another are called _____. B2B marketing A group of individuals that contribute towards or take direct responsibility for organisational purchasing decisions is called a _____. Buying centre Another term for buying centre is _____. Decision making unit

4-31 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_2 What form of demand for products or components in B2B markets depends on consumer demand further down the chain? Derived demand What form of demand for one product or component in a B2B market is dependent on the supply or availability of another? Joint demand

4-32 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_3 A _____ occurs when goods and services are purchased relatively infrequently by organisations that reevaluate their choices before making a repeat purchase decision. Modified re-buy _____ is the sourcing of a particular B2B product from more than one supplier simultaneously. Multiple sourcing

4-33 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_4 _____ occurs when products are purchased infrequently by organisations, and involve a high level of formalised information collection and analysis before a purchasing decision is made. New task purchasing The criteria to which an organisational purchase must conform in terms of quality, design, compatibility, performance, price, etc is called _____. Product specification

4-34 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_5 _____ refers to an organisation's preferences, systems, and procedures for purchasing. Purchasing policy The evolution of buyer-seller relationships in B2B markets, through stages including awareness, exploration, expansion, commitment and dissolution is called the _____. Relationship lifecycle

4-35 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_6 A _____ occurs when products are purchased frequently by organisations from established suppliers, with little or no formal decision-making involved in the repeat purchase. Routine re-buy The sourcing of a particular B2B product from only one supplier is called _____. Single sourcing