B2B Buying Behaviour Lecture 4

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 4-2 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 4-3 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

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

B2B and Consumer Markets 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 4-5 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

B2B and Consumer Markets B2B customers Experience major problems if supply fails Find switching suppliers difficult Negotiate on price Consumer customers Experience minor irritation if supply fails Find switching suppliers easy Accept stated price 4-6 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

B2B and Consumer Markets B2B customers Purchase direct from suppliers Justify an emphasis on personal selling Consumer customers Purchase from intermediaries Justify an emphasis on mass media 4-7 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Types of B2B Customers Commercial enterprises Government bodies Institutions 4-8 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Characteristics of B2B Markets Nature of demand Structure of demand Complexity of buying process Buyer-seller relationships 4-9 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. http://eu.goodyear.com 4-10 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 4-11 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 4-12 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 4-13 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 4-14 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Advantages and Disadvantages of Multiple Sourcing 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 4-15 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Purchase Significance New Task Modified re-buy Routine re-buy 4-16 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Question for discussion From the supplier’s point of view, how might the marketing approaches aimed at a customer making a new task purchase differ from those aimed at a routine re-buy customer?

Buying Decision-Making Process Precipitation Product specification Supplier selection Commitment 4-18 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Buying Centres Consumer B2B Initiator User Influencer Influencer Decider Decider Purchaser Buyer User Gatekeeper 4-19 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Buying Criteria: Economic Influences Appropriate prices Product specification Quality consistency Supply reliability and continuity Customer service 4-20 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 4-21 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Relationship Life Cycle Awareness Exploration Expansion Commitment Dissolution 4-22 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Buying Criteria: Non-Economic Influences Prestige Career security Friendship Other personal needs Trust 4-23 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Question for discussion You are the purchasing manager of a large organisation with an enormous annual spend. Most of your contracts are awarded by tender. What would your attitude be to the following offers from potential suppliers, and to what extent would they influence your decision-making: a bottle of whiskey at Christmas? an invitation to lunch to discuss your requirements? an offer of the free use of the supplier’s managing director’s Spanish villa for two weeks? (d) £1500?