Copyright © 2007 McGraw-Hill Ryerson Limited
Objectives To understand: The nature and scope of the B2B market. The components that make up the B2B market. The characteristics of the business market demand. The determinants of the business market demand. The buying motives, buying processes, and buying patterns in business markets.
Copyright © 2007 McGraw-Hill Ryerson Limited Nature and Scope of B2B Market The business (B2B) market consists of organizations that buy goods and services: To make other goods and services. To resell to business users or to consumers. To be used in the operations of the organizations.
Copyright © 2007 McGraw-Hill Ryerson Limited Nature and Scope of the B2B Market Huge in sales volume. Significant in terms of the number of firms involved. Largely behind the scenes.
Copyright © 2007 McGraw-Hill Ryerson Limited Components of the Business Market Manufacturers Resellers Government agencies Service companies Agriculture Not-for-profit organizations
Copyright © 2007 McGraw-Hill Ryerson Limited International Dimension 30% of Canada’s GDP is exported. A major portion conducted on a B2B basis. Continuing to rise due to use of Internet. It is important to understand the values, customs, and business practices and standards of the foreign-based customer.
Copyright © 2007 McGraw-Hill Ryerson Limited Characteristics of B2B Market Demand Derived from demand. Demand is inelastic. Demand is widely fluctuating. Buyers are well-informed.
Copyright © 2007 McGraw-Hill Ryerson Limited Determinants of B2B Demand The business market is quite different from the consumer market in a number of ways: Number and types of business users Purchasing power of business customers Buying motives and expectations Buying habits
Copyright © 2007 McGraw-Hill Ryerson Limited Business Buying Behaviour An important part of a strategy because: 1.Companies are making less and buying more. 2.Firms are under intense quality and time pressures. 3.Firms are concentrating their purchases with fewer suppliers and developing long term “partnering” relationships to get what they need.
Copyright © 2007 McGraw-Hill Ryerson Limited Buying-Decision Process in Business 1.Need recognition 2.Choice of involvement level 3.Identification of alternatives 4.Evaluation of alternatives 5.Purchase decision 6.Consumption experience
Copyright © 2007 McGraw-Hill Ryerson Limited Business Buying Motives Business buyers are motivated by both organizational and personal goals. Most B2B relationships are a combination of functional and emotional motives.
Copyright © 2007 McGraw-Hill Ryerson Limited Types of Buying Decisions New Task Buy Straight Rebuy Modified Rebuy
Copyright © 2007 McGraw-Hill Ryerson Limited Multiple Buying Influences One of the greatest challenges Determine which individuals in the organization play various buying roles. Users – those who will use the product/service Influencers – often set specifications to follow Deciders – make the actual decision to buy Gatekeepers – control the flow of information Buyers – actually process the purchasing order
Copyright © 2007 McGraw-Hill Ryerson Limited Business Buying Patterns Differs significantly from consumer behaviour. Direct purchase Internet purchase Nature of the relationship Frequency of purchase
Copyright © 2007 McGraw-Hill Ryerson Limited Business Buying Patterns Size of order Period of negotiation Demand for service Dependability of supply Leasing instead of buying
Copyright © 2007 McGraw-Hill Ryerson Limited Bases for B2B Segmentation Can use some of the same bases as used to segment B2C markets. Unique to B2B: Type of customer Size of customer Type of buying situation