Based on Kotler Business Markets and Business Buyer Behavior Principles of Marketing

ASB 1.Business Markets 2.Business Buyer Behavior 3.Institutional and Government Markets 6-3

ASB Business Markets 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 6-4

ASB Business Markets All organisations that buy goods and services used in the production of goods and services that are sold, rented or supplied to others.

ASB (A) What are the types/classifications of Industrial/Business customers? IM/2-2/10

ASB Business Markets Differ from consumer markets in: Market structure and demand Nature of the buying unit Types of decisions and the decision- making process 6-5

ASB Electrical Equipment India

ASB Business Markets - Market Structure and Demand Fewer and larger buyers Geographic concentration Closer relationship. Customisation ‘ Professional ’ / Rational Purchasing Buying influences / DMU / Buying Centre Several Sales calls. Personal Selling / Direct Purchasing. Derived demand Inelastic demand Fluctuating demand Buyer and seller dependency Delivery period

ASB

Business Markets Market Structure and Demand 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

ASB (B) How are Industrial Products / Services Classified? Classification into 3 Groups shown below. IM/2-3/10

ASB Business Buyer Behavior Marketing Stimuli Similar to consumer buying, business buying consists of the four Ps Product Price Place Promotion

ASB 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. Also included are retailing and wholesaling firms that acquire goods to resell or rent to others for profit. Business Buyer Behavior

ASB Business Buyer Behavior Marketing Stimuli Additional stimuli include major economic forces Political Economic Technological Cultural Competitive

ASB Business Buyer Behavior Buyer Responses to Marketing Stimuli Product or service choice Supplier choice Order quantities Delivery Service Payment terms

ASB Business Buyer Behavior Buyer Responses to Marketing Stimuli Marketers must understand what happens within the organization and turn stimuli into purchase responses

ASB Business Buyer Behavior Major Types of Buying Situations Straight rebuy Modified rebuy New task

ASB Business Buyer Behavior Major Types of Buying Situations Straight rebuy is a routine purchase decision such as a reorder without any modification Modified rebuy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers New task is a purchase decision that requires thorough research such as a new product

ASB Business Buyer Behavior Major Types of Buying Situations 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

ASB Business Buyer Behavior Participants in the Business Buying Process Buying center is all of the individuals and units that participate in the business decision-making process Users Influencers Buyers Deciders Gatekeepers

ASB Business Buyer Behavior Participants in the Business Buying Process Initiators. Identify the need or indent for it. Users are those that will use the product or service Influencers help define specifications and provide information for evaluating alternatives. Consultants. Approvers. Authorizers 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.

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

ASB Business Buyer Behavior Major Influences on Business Buyers Economic factors Personal factors Environmental factors Organizational factors Interpersonal factors

ASB Business Buyer Behavior Economic factors: Price Service Major Influences on Business Buyers Personal factors: Emotion

ASB Business Buyer Behavior Demand for product Economic outlook Cost of money Resource availability Technology Culture Politics Competition Major Influences on Business Buyers Environmental Factors

ASB Business Buyer Behavior Major Influences on Business Buyers Organizational factors Objectives Policies Procedures Structure Systems 6-22

ASB Business Buyer Behavior Interpersonal factors Motives Perceptions Preferences Age Income Education Attitude toward risk Major Influences on Business Buyers

ASB Purchasing orientation Buying orientation. Short term, lowest price, commoditizaton, multisourcing. Procurement orientation: quality improvement, cost reduction, close co- ordination with all dept and suppliers. Supply chain management orientation. Strategic, value added, long-term relationship. Optimisation over chain.

ASB Business Buyer Behavior Stages in The Buying Process 1.Problem recognition 2.General need description 3.Product specification 4.Value analysis 5.Supplier search 6.Proposal solicitation 7.Supplier selection 8.Order-routine specifications 9.Performance review 6-24

ASB Business Buyer Behavior 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 6-25

ASB Business Buyer Behavior The 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 determined if they can be redesigned, standardized, or made with less costly methods of production 6-26

ASB Business Buyer Behavior The Buying Process Supplier search involves compiling a list of qualified suppliers Proposal solicitation is the process of requesting proposals from qualified suppliers. RFQ / RFP 6-27

ASB Business Buyer Behavior The Buying Process 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 6-28

ASB Business Buyer Behavior The Buying Process Performance review involves a critique of supplier performance to the purchase terms. Evaluation. 6-29

ASB Business Buyer Behavior Online purchasing Company buying sites Extranets VMI Reverse auction 6-30 E-Procurement and Buying on the Internet

ASB Business Buyer Behavior E-Procurement and Buying on the Internet Advantages Access to new suppliers Lowers costs Speed in order processing and delivery Share information Sales Service and support 6-31

ASB Business Buyer Behavior E-Procurement and Buying on the Internet Disadvantages Can erode relationships as buyers search for new suppliers Security 6-32

ASB Government buying PSU, depts Rate contract, DGS&D Tenders –Open –Closed –Two bid – tech and commercial –LD clauses –Payment terms

ASB SCM JIT

ASB Organising for Industrial Sales Geographic Product Customer Combination

ASB Profile of an Industrial Marketer Product / Tech knowledge Good relationship at all levels Operate independently Take direction from many